Financial Crime World

China’s Anti-Money Laundering Law: Key Provisions

======================================================

The Chinese government has introduced a new anti-money laundering (AML) law to combat financial crimes and prevent the misuse of financial systems. The law aims to strengthen cooperation between financial institutions and regulatory bodies in preventing money laundering and terrorist financing.

Sealing and Keeping Documents

In cases where documents or information are sealed and kept by investigators, the working staff of the financial institution involved shall be present during the check-up process. A list of the sealed documents shall be prepared in duplicate and signed or stamped by both the investigators and the financial institution’s staff. One copy shall be kept at the financial institution, while the other shall accompany the files for future reference.

Requirements

  • The working staff of the financial institution involved must be present during the check-up process
  • A list of sealed documents must be prepared in duplicate
  • Both the investigators and the financial institution’s staff must sign or stamp the list

Investigations and Temporary Freezing

In cases where suspected money laundering cannot be cleared through investigation, the investigators shall immediately file a report to the relevant investigation authority. If clients request to transfer capital from accounts involved in an investigation, the account may be temporarily frozen pending further investigation.

Procedures

  • Investigators must file a report to the relevant investigation authority
  • The account may be temporarily frozen if the client requests to transfer capital
  • Further investigation is required before unfreezing the account

Penalties for Violations

Financial institutions found guilty of violating AML regulations may face fines ranging from RMB200,000 to RMB500,000 and imprisonment. Directors and senior managers responsible for such violations may also be fined between RMB10,000 and RMB50,000. In extreme cases, financial institutions may have their licenses suspended or revoked.

Penalties

  • Fines: RMB200,000 to RMB500,000
  • Imprisonment
  • Directors and senior managers may face fines: RMB10,000 to RMB50,000
  • License suspension or revocation in extreme cases

Scope of Financial Institutions

The AML law applies to policy banks, commercial banks, credit cooperatives, postal savings agencies, trust and investment firms, securities companies, futures brokers, insurance firms, and other institutions identified by the anti-money laundering authority under the State Council as conducting financial business.

Covered Institutions

  • Policy banks
  • Commercial banks
  • Credit cooperatives
  • Postal savings agencies
  • Trust and investment firms
  • Securities companies
  • Futures brokers
  • Insurance firms
  • Other institutions conducting financial business

Effective Date

The AML law shall enter into force on January 1, 2007. The Chinese government is committed to combating money laundering and terrorist financing, and this new law marks an important step in that direction.

Implementation Timeline

  • January 1, 2007: Effective date of the AML law