China’s Anti-Money Laundering Law: Defining and Combating Money Laundering Activities
Background
On October 31, 2006, the Chinese government adopted the “Anti-Money Laundering Law of the People’s Republic of China” during the 24th Meeting of the Standing Committee of the Tenth National People’s Congress. The new law, which was passed by President Hu Jingtao, aims to prevent money laundering activities, maintain financial order, and suppress money laundering and related crimes in China.
Key Provisions of the Anti-Money Laundering Law
Defining Money Laundering
According to Article 2 of the law, money laundering refers to activities taken to conceal or disguise the true source and nature of criminal proceeds or income derived from such proceeds. These activities can include:
- Drug-related crimes
- Criminal syndicate activities
- Terrorism
- Smuggling
- Embezzlement
- Financial fraud
Responsibilities for Financial Institutions
Article 3 requires financial institutions and designated non-financial institutions to take preventive and monitoring measures, establish sound customer identification programs, record customer identity information, and report large-value and suspicious transactions.
Supervision and Regulation on Anti-Money Laundering
The Competent Authority, which is the overarching organ responsible for administering China’s anti-money laundering regime at the national level, is tasked with supervising and inspecting financial institutions on their fulfillment of anti-money laundering obligations. The Competent Authority collaborates with other relevant authorities and judicial agencies in carrying out these responsibilities.
Confidentiality and Protection of Information
Customer identification materials and transaction information obtained by financial institutions and relevant authorities must be kept confidential. These materials and information cannot be used for purposes other than anti-money laundering administrative investigations.
Reporting Suspicious Transactions
Financial institutions and individuals are protected by law when reporting large-value or suspicious transactions. They can also report any money laundering activity to the Competent Authority and its dispatched institutions or public security agencies.
Penalties for Non-compliance
Failure to comply with anti-money laundering regulations may result in administrative sanctions for employees of the Competent Authority and other relevant authorities. Financial institutions can face fines, corrective measures, and disciplinary sanctions for failing to establish anti-money laundering programs or refusing anti-money laundering investigations.
Significance of the Anti-Money Laundering Law in China
The implementation of the Anti-Money Laundering Law in China is a significant step to prevent and combat money laundering and related crimes in the country. These new regulations will help strengthen China’s financial system and contribute to the global fight against money laundering and financing of terrorism.