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China Introduces Anti-Telecoms Fraud Law to Combat Money Laundering and Illegal Activities
Background
Beijing, China - In a bid to combat rampant telecommunication fraud activities in recent years, the Chinese government has introduced the Anti-Telecoms and Online Fraud Law. The law came into effect on December 1, 2022, requiring non-financial institutions such as telecom business operators and internet service providers to perform customer identification, transaction monitoring, and reporting obligations similar to those of financial institutions under anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
Key Provisions
The new law aims to regulate banking and non-banking financial institutions, as well as non-financial entities involved in telecommunication and online activities. Telecom business operators and internet service providers are now required to:
- Identify customers
- Monitor transactions
- Report suspicious activity
These obligations are similar to those imposed on financial institutions under China’s AML/CTF regime.
Legal Liabilities
The Anti-Telecoms Fraud Law also imposes legal liabilities on entities and individuals who fail to comply with the regulations. In severe cases, these liabilities may even entail criminal punishment.
China’s AML Enforcement in 2022
In January 2022, the Chinese government launched a three-year action plan to combat money laundering crimes from 2022 to 2024. The plan aims to improve the risk prevention and control system for illegal and criminal money laundering activities.
- Official statistics show that the number of cases prosecuted by procuratorial organs across China relating to money laundering crimes increased by 117% year-on-year in 2021.
- In 2022, procuratorial organs nationwide prosecuted 2,585 individuals for money laundering crimes, a significant increase from previous years.
- In the first half of 2023, the People’s Bank of China and its branches imposed AML fines on 194 accountable institutions and responsible persons, totaling approximately 1.95 billion yuan.
New Regulation for KYC
A new regulation for Know Your Customer (KYC) was originally planned to come into effect in March 2022 but has been suspended. The regulation aimed to improve customer identification and verification procedures. However, market feedback indicates that there are concerns over its implementation, including the potential for increased regulatory burden on businesses.
Conclusion
The Chinese government’s move to strengthen AML/CTF regulations is a significant step towards combating money laundering and illegal activities in the country. As the Anti-Telecoms Fraud Law takes effect, non-financial institutions must ensure compliance with the new regulations to avoid legal liabilities.