China Set to Tighten Grip on Financial Crime Prevention
Revised Anti-Money Laundering Law Aimed at Bolstering Crackdown on Illegal Activities
BEIJING - China is poised to strengthen its financial crime prevention measures by reviewing a revised anti-money-laundering law. The draft revision, currently under review by the Standing Committee of the National People’s Congress, aims to expand the scope of money laundering channels to include digital currencies and bitcoin, as well as non-financial institutions that could have previously allowed for loopholes in the system.
Enhancing Financial System Safety and National Security
The planned revision is expected to enhance the safety of China’s financial system and national financial security, according to Dong Jinyue, principal economist at BBVA Research. “Hong Kong’s position as a cryptocurrency hub in Asia should also be protected,” he added.
Fifth Review by Financial Action Task Force (FATF)
The revised law comes ahead of a fifth review by the FATF, an international organization that sets standards to combat money laundering and the financing of terrorism. China narrowly passed its fourth round of assessments in 2019, with some financial institutions found to have weak obligations in controlling money laundering.
Key Provisions of the Revised Law
- Financial institutions will be required to establish and enhance internal control mechanisms for money laundering.
- Institutions will need to conduct due diligence on customers and save identity information and transaction records.
- A new organ will be set up to monitor and analyze large sums and suspicious transactions for potential signs of illicit activity.
Risk-Centric Principle
The revision is based on a “risk-centric” principle, aiming to protect national security, coordinate development and safety, and perfect the anti-money-laundering system. However, experts warn that the fifth review will be challenging for China and its financial industry, and that the country will need to cooperate closely with other countries to crack down on cross-border crimes.
Implementation Timeline
The revised law is expected to come into effect in 2025, when the FATF’s field work begins. In the meantime, Chinese financial institutions are advised to “raise consciousness” on fulfilling their obligations and use the review period to examine weak links and upgrade their operations.