Title: China’s Financial Regulators Guard Against Money Laundering and Terrorist Financing: A Decade of Progress

In the last ten years, China’s financial regulators have taken significant steps to prevent money laundering (ML) and terrorist financing (TF) activities following the adoption of the Anti-Money Laundering Law in 2006. This period, marked by international and domestic change, has demonstrated China’s late-mover advantages in the fight against ML/TF.

China’s Initiatives in Anti-ML/TF

China’s regulatory framework is built on stricter requirements, greater efforts, and quicker development. Over the past decade, China has formed a well-established AML/CFT supervisory and management system, transforming itself into a global pace-setter:

• Stronger Regulations: The People’s Bank of China (PBC) has issued a series of regulations to define ML obligations for financial institutions and outline measures for customer identification, large-value transactions reporting (LVTR), suspicious transactions reporting (STR), customer due diligence (CDD), and transaction record-keeping.
• Coordinated Mechanisms: In a “risk-based” regulatory philosophy, the PBC has established robust regulatory and investigation mechanisms and clarified the division of responsibilities for effective and efficient handling of ML/TF cases.
• Multidisciplinary Cooperation: Collaboration between administrative bodies, judicial agencies, and financial regulators is essential in eradicating the breeding grounds for ML/TF. China’s AML mechanism, headed by the PBC, includes more than 20 Central Ministries and Agencies.

Institutional Improvements

Financial institutions have significantly improved their ML prevention and control capabilities due to regulatory initiatives:

• Evaluation and Rating System: An evaluation and rating system for institutions’ capacity for ML risk control.
• Regular Risk Assessments: Continual improvement of due diligence measures.
• Resource Allocation: resource allocation towards ML prevention and control efforts.

International Acknowledgments

China’s advancements in anti-ML/TF have been recognized by international organizations such as the Financial Action Task Force (FATF). China successfully completed the FATF third round of AML/CFT mutual assessment in 2012.

Ongoing Challenges and Responses

Despite considerable progress, China faces ongoing challenges in dealing with cross-border ML and public-related economic crimes. The Chinese financial regulators’ responses include:

• International Cooperation: Strengthening international cooperation to maintain a robust defense against ML/TF threats.
• Research and Development: Continual research into different types of ML crimes.