China’s New Anti-Money Laundering Law: Tackling Financial Crimes and Cryptocurrencies
China is strengthening its legal framework against financial crimes by revising its anti-money laundering (AML) law to address the risks posed by cryptocurrencies and other digital assets. This comes as China faces greater international scrutiny and aligns its practices with global standards.
Revising China’s AML Law
At the ongoing session of the Standing Committee of the National People’s Congress, a draft revision of China’s AML law is being reviewed. The need to update the law arises from the realities of the country and new international demands as loopholes could previously exist in the regulation of digital currencies and non-financial institutions.
Extending Scope of AML Law Coverage
The changes will enhance the safety of China’s financial system and national financial security by:
- Extending the coverage of money laundering channels to include digital currencies and non-financial institutions.
- Protecting regions like Hong Kong where the legal usage and development of cryptocurrency remain essential elements.
Strengthening Compliance with International Demands
With the fifth review by the Financial Action Task Force (FATF) looming, the proposed revision will strengthen China’s stance against money laundering and the financing of terrorism.
The Chinese AML law, implemented in 2007, has undergone previous assessments with some weaknesses identified. To address these issues, the Chinese government had previously taken measures, such as acknowledging the risk of money laundering and releasing a draft of the revised AML law for public consultation in 2021.
Challenges Ahead
Despite the progress made, the fifth FATF review will pose significant challenges to China and its financial industry. Financial institutions are encouraged to:
- Heighten their awareness of fulfilling obligations.
- Examine potential weaknesses and upgrade their operations during the review period.
International Collaboration and Cooperation
Cooperation with other countries, particularly in Southeast Asia, where illegal financial activities thrive, is essential in cracking down on transnational crimes. The importance of international collaboration and cooperation to effectively combat financial crimes cannot be overstated.
Key Provisions of the Revised AML Law
The draft version of the revised AML law encompasses 62 articles and covers various aspects. Financial institutions will be required to:
- Establish internal controls.
- Identify customers and save their identity information and transaction records.
- Cooperate with a newly set up monitoring and analysis organ to identify signs of suspicious transactions and potential illicit activities.
Enforcement and Previous Action
Enforcement of anti-money laundering rules is already stringent in mainland China, with domestic financial institutions reporting to the Central Bank in compliance with FATF recommendations. The revised AML law will bolster the supervision and management of AML operations, clarify obligations, and advance provisions.