China to Investigate Doubtful Transactions, May Not Violate Client Information
New Regulations Aim to Prevent Money Laundering and Maintain Financial Stability
BEIJING - China’s central bank and its branch institutions are set to investigate doubtful transactions in financial institutions, a move aimed at preventing money laundering and maintaining financial stability.
Anti-Money Laundering Law Provisions
According to Article 16 of the Anti-Money Laundering Law, financial institutions are required to report any suspicious transactions to the relevant authorities. The law also prohibits the unauthorized disclosure of client information.
- Financial institutions must report suspicious transactions to the relevant authorities.
- Unauthorized disclosure of client information is prohibited.
Investigation and Sanctions
Under the new regulations, investigators will be authorized to conduct on-site inspections and investigations, as well as impose temporary freezing measures on accounts involved in suspected money laundering activities. Article 23 states that if an investigation reveals a doubt about money laundering, the case must be reported immediately to the relevant authorities.
- Investigators may conduct on-site inspections and investigations.
- Temporary freezing measures may be imposed on accounts involved in suspected money laundering activities.
- Cases of suspected money laundering must be reported immediately to the relevant authorities.
Administrative Sanctions
Article 24 outlines the administrative sanctions that may be imposed on staff members of the People’s Bank of China or its branch institutions who violate their duties in anti-money laundering work. These sanctions include:
- Violating inspection or investigation procedures
- Divulging state secrets, commercial secrets, or personal privacy
- Imposing unauthorized administrative punishments on relevant institutions or personnel
Penalties for Financial Institutions
Financial institutions that violate these regulations may be subject to penalties under Articles 31 and 32 of the Anti-Money Laundering Law of the People’s Bank of China. The China Banking Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC), or China Insurance Regulatory Commission (CIRC) may also impose disciplinary measures on violators, including:
- Ordering financial institutions to stop business for rectification
- Revoking their business licenses
- Disqualifying directors and senior managers from assuming their positions
- Imposing disciplinary sanctions
Effective Date and Impact
The new regulations, which take effect on January 1, 2007, aim to strengthen the country’s anti-money laundering efforts and maintain financial stability. The old Provisions on Anti-Money Laundering through Financial Institutions, promulgated by the People’s Bank of China in 2003, will be abolished simultaneously.
The move is seen as a major step forward in China’s efforts to combat money laundering and terrorist financing, and to maintain its position as one of the world’s leading economies.