Financial Crime World

China Enacts Tough Anti-Money Laundering Law to Combat Financial Crime

Beijing - China has enacted a new anti-money laundering (AML) law aimed at combating financial crime and preventing the misuse of its financial system. The law, which comes into effect on January 1, 2007, sets out strict guidelines for financial institutions to detect and prevent money laundering activities.

Sealing and Keeping Documents

The law requires investigators and financial institution staff to conduct joint checks on documents and information suspected of being involved in money laundering. Any documents or information that are likely to be transferred, concealed, altered or damaged will be:

  • Sealed
  • Kept safely
  • A list of the documents and information will be prepared in duplicate and signed or stamped by both parties

Freezing Accounts

In cases where clients request to transfer capital from accounts under investigation, the anti-money laundering authority may impose temporary freezing measures on the accounts. The investigation authority will then decide whether to:

  • Continue the freezing
  • Lift it

Penalties for Non-Compliance

Financial institutions that fail to implement anti-money laundering duties, including:

  • Client ID identification
  • Keeping client information and trading records
  • Reporting large amount trading or suspicious trading
  • Refusing or hindering investigations

may be fined up to RMB5 million. Directors and senior managers who are directly responsible for the violations may also face fines between RMB50,000 and RMB500,000.

Criminal Liability

Violations of the law that constitute crimes will be subject to criminal liability investigation according to law.

Scope of Application

The law applies to all financial institutions, including:

  • Policy banks
  • Commercial banks
  • Credit cooperatives
  • Postal savings agencies
  • Trust and investment firms
  • Securities companies
  • Futures brokers
  • Insurance firms
  • Other institutions identified by the anti-money laundering authority under the State Council

Implementation

Detailed measures on the scope of specific non-financial institutions required to implement anti-money laundering duties, their implementation obligations in anti-money laundering, and supervision and regulation will be jointly drafted by:

  • The anti-money laundering authority under the State Council
  • Other related departments of the State Council