Financial Crime World

China’s Crackdown on Money Laundering: Legal Authorities, Reporting Requirements, and Penalties

In its ongoing battle against financial crime, the Chinese authorities have been strengthening their efforts to prosecute money laundering offenses. This article sheds light on the legal framework, reporting requirements, and penalties for money laundering in China.

1.1. Prosecution of Money Laundering

  • The People’s Procuratorate is China’s legal authority to prosecute money laundering crimes at all levels.

1.2. Money Laundering Offenses and Predicate Crimes

  • Money laundering is a criminal offense under Article 191 of the PRC Criminal Law.
  • Requires the prosecutor to prove proceeds derived from predicate offenses and the offender’s attempts to conceal their source.
  • Predicate offenses include activities related to drugs, organized crime, terrorism, smuggling, corruption, financial fraud, and tax evasion.

1.3. Jurisdiction and Extraterritorial Application

  • Chinese authorities have extraterritorial jurisdiction over money laundering committed by Chinese citizens abroad, foreigners committing offenses against Chinese citizens or the PRC, and offenses covered by international treaties or conventions.
  • Foreign crime proceeds are punishable under the same principles.

1.4. Criminal Investigations and Prosecution

  • Public security authorities investigate money laundering crimes.
  • People’s Procuratorate is responsible for prosecution.
  • Both institutions and individuals could face criminal liability.

1.5. Maximum Penalties and Statute of Limitations

  • Maximum penalties for individuals include a 10-year fixed-term imprisonment and a criminal fine without an upper limit.
  • Institutions face criminal fines without an upper limit, along with the confiscation of illegal proceeds and gains, with individuals subject to imprisonment or additional criminal fines.
  • Statute of limitations for money laundering crimes is 15 years.

1.6. Confiscation and Forfeiture

  • Confiscation decisions are made by courts.
  • All illegally obtained proceeds and gains are subject to confiscation.
  • Prosecutor can hand cases to another relevant administrative authority for further handling.

2. Anti-Money Laundering Regulations and Enforcement

2.1. Anti-Money Laundering Authorities and Requirements

  • The PRC Anti-Money Laundering Law, the PRC Counter-Terrorism Law, and the PRC Anti-Telecom and Online Fraud Law set out AML requirements.
  • People’s Bank of China (PBOC), China Banking and Insurance Regulatory Commission (CBIRC), and China Securities Regulatory Commission (CSRC) published regulations and rules guiding AML compliance.

2.2. Self-Regulatory Bodies and Enforcement

  • Self-regulatory organizations like National Internet Finance Association of China (NIFA) issue AML guidelines.
  • Responsible for their members’ compliance and enforcement.

2.3. National versus Provincial Offenses

  • China’s Criminal Law is the only criminal code and shall be applicable and enforceable throughout the country.

2.4. Enforcement Agencies and Assessment Criteria

  • PBOC is the primary regulatory authority.
  • CBIRC and CSRC assist in implementing regulations and enforcing administrative sanctions.
  • Measures on Management of Anti-Money Laundering Classification and Rating of Corporate Financial Institutions outline assessment criteria.

2.5. Financial Intelligence Unit (FIU)

  • China Anti-Money Laundering Monitoring and Analysis Center, run by PBOC, is China’s FIU.
  • Responsible for analyzing information reported by AML Reporting Entities.

2.6. Statute of Limitations and Penalties

  • Competent authorities have a two-year statute of limitations to bring administrative enforcement actions against AML violators, extendable to five years for severe cases.
  • Administrative penalties include fines and revocation of permits or qualifications.

2.7. Other Types of Sanctions

  • AML Reporting Entities can face orders to correct violations.
  • Individuals can receive disciplinary sanctions such as warnings.

2.8. Criminal versus Administrative Sanctions

  • Depending on severity, individuals and institutions can face both criminal and administrative penalties for AML offenses.

2.9. Appeal Process and Transparency

  • There is a process for appeal against administrative decisions.
  • Resolutions are largely publicly available.
  • Financial institutions have challenged penalty assessments in administrative and judicial proceedings.