China’s Anti-Money Laundering Law: Defining the Fight Against Illicit Finance

The People’s Republic of China has implemented a new Anti-Money Laundering (AML) Law, effective January 1, 2007, to bolster its efforts in preventing and combating money laundering activities. This law outlines the responsibilities of financial institutions, the supervision and administration of AML, and the legal liabilities for non-compliance.

General Principles (Chapter I)

Preventing Money Laundering: Aims to prevent money laundering activities, safeguard financial order, and investigate related crimes (Article 1)
Definition of Money Laundering: Includes activities related to drug trafficking, organized crimes, terrorism, smuggling, corruption, financial fraud, and other crimes
Institutions Covered: Financial institutions and certain non-financial institutions are required to perform AML obligations

AML Authority and Supervision

China’s AML Authority: Supervises and administers national AML efforts under the State Council
Regular Inspections: Financial institutions are subject to regular inspections to ensure compliance with AML regulations
Cooperation: Provides cooperation to related departments, institutions, and judicial authorities to facilitate AML efforts

Confidentiality and Protection

Client Identity: Confidentiality and protection for client identity and trading information are essential components
Records: Records must be kept confidential and used only for AML purposes
Reports: Reports of large and suspicious transactions must be submitted to the AML authority for analysis

Institutional Controls and Identification

Internal Control System: Financial institutions must develop and improve their internal control system regarding AML
Special Unit: A special unit or an internal unit responsible for AML must be established
Client Identification: Clients must be identified through valid personal identification certificates or other identification documents

Systems for Record-Keeping and Reporting

Client ID Information: Financial institutions must maintain systems for keeping client ID information
Trading Records: Trading records must also be maintained
Reporting Large and Suspicious Transactions: Financial institutions must implement systems for reporting large and suspicious transactions

Dispute Resolution and Further Verification

Disputes: In the event of disputes over identification, clients or financial institutions can ask for supplementation or correction
Further Verification: Account information, trading records, and other related information can be consulted during investigations
Documents and Information: Documents and information may be sealed and kept safely

International Cooperation

Combating Money Laundering: China’s AML law also covers international cooperation for combating money laundering and related crimes
Representing the Chinese Government: The AML authority represents the Chinese government in cooperating with foreign governments and international organizations
Exchanging Information: Exchanging information and materials is permitted
Requesting Judicial Assistance: Requesting judicial assistance when needed is allowed

Consequences of Non-Compliance

Administrative Sanctions: Administrative sanctions can be imposed on the AML authority and other responsible departments and agencies for non-compliance
Financial Institutions: Violations by financial institutions can result in fines and disciplinary punishments
Severe Penalties: In cases where money laundering occurs, severe penalties can be imposed on institutions and their directly responsible officers

In conclusion, China’s new Anti-Money Laundering Law strengthens the country’s efforts to prevent and combat money laundering activities. By detailing the responsibilities of financial institutions, the supervision and administration of AML, and the legal liabilities for non-compliance, this legislation sets the groundwork for more effective countermeasures against illicit finance.