Financial Crime World

China Cracks Down on Financial Crimes with New Anti-Money Laundering Law

Strengthening Efforts Against Financial Crime and Aligning with Global Standards

China is revamping its anti-money laundering law to enhance the safety of its financial system and national security. The move comes ahead of a fifth review by the Financial Action Task Force (FATF), an international organization that sets standards for combating money laundering and terrorist financing.

Expanding Coverage and Enhancing Transparency

The draft revision of the law will expand coverage to include digital currencies such as bitcoin and non-financial institutions, which could have previously allowed for loopholes in the system. Analysts say the changes will improve transparency regarding legal arrangements and strengthen the overall anti-money laundering framework.

  • The new law will require financial institutions to establish internal control mechanisms for money laundering
  • Conduct due diligence on customers
  • Save their identity information and transaction records

Protecting Hong Kong’s Position as a Cryptocurrency Hub

Hong Kong’s position as a cryptocurrency hub in Asia is expected to be protected under the new law. As long as cryptocurrency is not used for illegal activities, Hong Kong’s legal usage and development will be sustained.

Improving Compliance Management and Regulatory Technology

The central bank has warned of a high risk of money laundering in China and Southeast Asia, emphasizing the need to address weak points in compliance management and improve regulatory technology to handle complex financial crimes. A new organ will be set up to monitor and analyze large sums and suspicious transactions for potential signs of illicit activity.

Enforcement and Supervision

Enforcement of anti-money laundering rules is already tough in China, with financial institutions stepping up their reporting to the central bank in recent years. The new law will also bolster supervision and management of anti-money laundering operations and clarify the scope of non-financial institutions that must comply.

Challenges Ahead for Chinese Financial Institutions

Chinese financial institutions will need to “raise consciousness” on fulfilling their obligations and use the review period to examine weak links and upgrade their operations before the FATF’s field work begins in 2025. The country will also need to cooperate closely with other countries to crack down on cross-border crimes, particularly in Southeast Asia, one of the world’s hotspots for illegal financial activities.

Timeline

  • 2007: China introduces its anti-money laundering law
  • 2019: China narrowly passes its fourth review by the FATF
  • 2025: The FATF’s fifth review is expected to take place

Experts Weigh In

  • Chen Zhiwu, chair professor of finance at the University of Hong Kong: “Enforcement of anti-money laundering rules is already tough in China. The new law will also bolster supervision and management of anti-money laundering operations.”
  • Qian Hang, a partner at Oliver Wyman: “Chinese financial institutions will need to ‘raise consciousness’ on fulfilling their obligations and use the review period to examine weak links and upgrade their operations.”