China Cracks Down on Financial Crime: New Anti-Money Laundering Law Takes Effect

Beijing’s Significant Move Against Financial Crime

China has enacted a new anti-money laundering law in a bid to strengthen its efforts against financial crime. Adopted on October 31, 2006, the law took effect on January 1, 2007.

President Hu Jingtao’s Signature

President Hu Jingtao signed the order for the adoption of the Anti-Money Laundering Law of the People’s Republic of China. The new law aims to:

• Prevent money laundering activities and related crimes
• Maintain financial order
• Support the global war on terror by making it harder for funds to be used for terrorist activities

Key Provisions of the New Legislation

This six-chapter, 33-article law outlines the responsibilities of various parties in China’s anti-money laundering regime. It covers:

1. Customer identification
2. Transaction reporting
3. International cooperation

Financial Institutions’ Obligations

Financial institutions, including banks, insurance companies, and securities firms, must:

• Establish anti-money laundering programs
• Identify and record customers’ identity information
• Report large-value and suspicious transactions

Competent Authority’s Role

The Competent Authority: the overarching organ responsible for supervising and enforcing the anti-money laundering regime at the national level, mandates all relevant authorities and institutions under the State Council to carry out their anti-money laundering responsibilities.

Protection for Reporting Suspected Money Laundering Activities

Institutions and their employees are encouraged to report large-value or suspicious transactions. Individuals have the right to report such activities to the Competent Authority and its dispatched institutions or public security agencies without fear of retaliation.

Confidentiality and Information Sharing

Financial institutions must keep customer identification materials and transaction information confidential. The Competent Authority is granted the authority to monitor funds, issue anti-money laundering regulations, and inspect financial institutions for compliance. It may share information with relevant authorities and institutions within the State Council to enhance its ability to combat money laundering activities.

Disciplinary Sanctions

In cases where financial institutions fail to comply with their anti-money laundering obligations, disciplinary sanctions may be imposed. These include fines, orders to take corrective measures, and the suspension or revocation of licenses for the most serious cases.

Commitment to International Cooperation and Transparency

The Anti-Money Laundering Law of the People’s Republic of China represents China’s dedication to combating financial crimes and complying with international standards. It is a crucial step towards making China’s financial system more transparent and less welcoming to criminal activities.