Financial Crime World

China Prepares for Clampdown on Financial Crimes with New Anti-Money Laundering Law

China’s lawmakers are revamping the country’s law on money laundering to strengthen its crackdown on illegal activities and address cryptocurrency-related risks, amidst stricter international scrutiny. The draft revision of the law is currently under review by the Standing Committee of the National People’s Congress.

Expanding Coverage and Enhancing Safety

The new version will expand the coverage of money laundering channels to include digital currencies and bitcoin, as well as non-financial institutions. According to analysts, these changes will enhance the safety of China’s financial system and national financial security.

  • The expanded coverage aims to plug loopholes in the system and prevent illegal activities from exploiting vulnerabilities.
  • The new law will require financial institutions to establish and enhance internal control mechanisms for money laundering, carry out due diligence with customers, and save their identity information and transaction records.

Protecting Hong Kong’s Position as Cryptocurrency Hub

Hong Kong’s position as the cryptocurrency hub in Asia is expected to be protected by the new law. Experts say that as long as cryptocurrency is not used as a way to launder money or support other illegal activities in Hong Kong, its position should be sustained.

  • The planned revision comes ahead of a fifth review by the Financial Action Task Force (FATF), an international organization that sets standards to combat money laundering and the financing of terrorism.
  • China’s anti-money-laundering law went into effect in 2007, but the country narrowly passed the fourth round of assessments in 2019, with some financial institutions having weak obligations in controlling money laundering.

Addressing Weak Points and Improving Regulatory Technology

The central bank has warned that the risk of money laundering remains high in China and Southeast Asia, emphasizing the need to address weak points in compliance management and improve regulatory technology to handle complex financial crimes and the burgeoning fintech sector.

  • A new organ will be set up to monitor and analyze large sums and suspicious transactions for potential signs of illicit activity.
  • Experts say that the enforcement of anti-money-laundering rules is already tough on the mainland, but the new law will bolster supervision and management of anti-money-laundering operations, advance provisions of obligations, and clarify the scope of non-financial institutions that must comply.

The Fifth Review by FATF

The fifth review by FATF is expected to be challenging for China, with a focus on effectiveness and results. Chinese financial institutions are being urged to raise awareness about fulfilling their obligations and use the review period to examine weak links and upgrade their operations before the task force’s field work begins in 2025.

  • Cooperation between China and other countries will be crucial in cracking down on cross-border crimes, particularly in Southeast Asia, which is one of the world’s hotspots for illegal financial activities.
  • The new law aims to enhance international cooperation and information sharing to combat money laundering and terrorist financing.