Millions in Fines Handed Out for Noncompliance with New Anti-Money Laundering and Counter-Terrorism Financing Measures
The People’s Bank of China (PBOC) has recently issued new measures to combat money laundering and counter-terrorism financing, which have resulted in millions of yuan in fines being handed out to financial institutions that failed to comply with the regulations.
Background on New Measures
According to reports, PBOC had solicited comments on the draft measures, but ultimately rejected a proposal to include private equity fund managers under the scope of the regulations. Instead, PBOC has emphasized the importance of internal control and risk management for financial institutions, requiring them to establish a centralized anti-money laundering (AML) and counter-terrorism financing (CTF) mechanism.
Key Requirements
The new measures specify requirements for duties, staff, and information submission to build a safer and sounder risk control system. Financial institutions are required to:
- Establish a risk self-assessment mechanism at the head office level
- Set up an AML/CTF mechanism that is compatible with their IT systems
- Appoint sufficient AML/CTF personnel based on their scale of operations, risk status, and business development trends
- Perform customer due diligence, keep customer identification data and transaction records, and report large-value transactions and suspicious transactions
Supervision Powers
PBOC has also upgraded its supervision powers, allowing it to use a variety of measures to carry out AML/CTF supervision and administration. These measures include:
- Evaluating the establishment and implementation of AML/CTF systems
- Conducting on-site assessments of AML/CTF risks
- Meeting with directors and senior managers
- Conducting supervisory visits
Recent Cases
In recent cases, financial institutions that failed to comply with the regulations have been slapped with hefty fines. According to reports, PBOC has imposed fines of millions of yuan in each case, highlighting the importance of compliance with these new measures.
Conclusion and Recommendations
The new measures are intended to strengthen the AML/CTF system and reduce the risk of money laundering and terrorist financing in China’s financial sector. Financial institutions that fail to comply with the regulations may face severe consequences, including fines and even criminal prosecution.
In light of these developments, it is essential for financial institutions to ensure that they are fully compliant with the new measures and to review their internal controls and risk management systems to identify areas for improvement.