Financial Crime World

China Strengthens Anti-Money Laundering Laws: New Draft to Address Cryptocurrency Risks and Align with Global Standards

China is taking steps to strengthen its anti-money laundering (AML) laws in response to global standards and the Risks associated with cryptocurrencies. Here are the key points of the draft legislation currently under review:

Broadening the Scope of Money Laundering Offenses

  • China’s revised AML laws will cover digital currencies and non-financial institutions.
  • These measures aim to root the AML law in China’s specific needs while incorporating international demands.
  • The changes will strengthen China’s financial system and national security by closing potential loopholes and enhancing oversight.

Addressing Global Standards

  • The Financial Action Task Force (FATF) has highlighted the need for improvement in China’s internal control mechanisms and transparency.
  • China is responding to these recommendations by improving its regulatory technology and addressing complex financial crimes.

Key Provisions of the Draft Legislation

The new AML law comprises 62 articles organized into seven chapters:

  1. General Provisions
  2. Application and Administration
  3. Customer Due Diligence
  4. Internal Control Mechanisms for Money Laundering
  5. Record-Keeping and Reporting
  6. Investigation and Penalties
  7. Supplementary Provisions

The draft legislation requires financial institutions to:

  • Establish robust internal control mechanisms for money laundering
  • Conduct customer due diligence
  • Preserve identity information and transaction records

A new entity will be established to monitor and analyze large sum and suspicious transactions for potential signs of illicit activity.

Challenges Ahead

Addressing the risk of money laundering locally and in Southeast Asia, a hotspot for illicit financial activities, remains a challenge for China and its financial industry. Close collaboration between China and other countries is essential to effectively combat cross-border crimes.

Enforcement and Compliance

  • Domestic financial institutions have reported stricter enforcement of AML rules in the mainland.
  • The impending revision is expected to further enhance the supervision and management of anti-money laundering operations.
  • The new legislation will clarify obligations for non-financial institutions and advance provisions to support greater overall effectiveness.