Financial Crime World

Title: China Cracks Down on Money Laundering: A Look at the Country’s Best Practices and Regulations

Money laundering: A Transnational Threat with Local Implications

  • Money laundering continues to pose a significant threat to China’s financial integrity
  • China addresses challenges related to terrorism financing, drug trafficking, smuggling, bribery, financial fraud, forgery, and tax evasion
  • Individuals involved in tax evasion funneled through overseas companies can still face consequences

Combat Money Laundering and Protect Fiscal Order

  • China’s AML law aims to safeguard fiscal order and combat related crimes
  • FATF recommendations suggest addressing laundering of crime proceeds and expanding national risk assessment

Key Regulations and Best Practices in China

1. Anti-Money Laundering Law of the People’s Republic of China

  • Provides responsibilities and obligations for various entities in preventing money laundering activities
  • Enacted in 2007 and amended in 2020

2. Regulations on Reporting Large Cash Transactions and Suspicious Transactions

  • Require financial institutions to report large cash transactions and suspicious transactions
  • Enforced by the People’s Bank of China (PBOC)

3. Guidelines and Circulars

  • Issue by regulatory authorities like the PBOC and the China Banking and Insurance Regulatory Commission (CBIRC)
  • Provide further guidance on AML compliance

Addressing New Threats and Fortifying the Regulatory Framework

  • China has taken significant steps since 2006 to strengthen AML regime
  • Enacted “Measures on the Management of Freezing Assets Related to Financing Terrorism” in 2014 to address emerging threats

Regulatory Bodies in China

  • People’s Bank of China (PBC)
  • China Banking and Insurance Regulatory Commission (CBIRC)
  • China Securities Regulatory Commission (CSRC)
  • Ministry of Public Security
  • State Administrator of Foreign Exchange Administration

Consequences of Non-Compliance

  • Administrative fines of up to 5 million RMB for non-compliant organizations
  • Persistent violators risk having financial permits revoked
  • Individuals and organizations may face fines up to 500,000 RMB

Key Obligations under China’s AML Regulations

  • Establishing Internal Control Systems
  • Customer Identification
  • No Anonymous Transactions
  • Protection of Identity Materials
  • Reporting Suspicious Transactions
  • Record Keeping
  • Dedicated AML Department
  • AML Training
  • Agent Transactions

Conclusion

  • China’s robust legislative framework and commitment to tackling money laundering requires compliance from financial institutions and non-financial entities
  • Adapting to the evolving nature of money laundering is essential for maintaining the integrity of the Chinese financial system