Financial Crime World

New AML Regulations Taking Effect in China: Financial Institutions Brace for Stricter Oversight

The People’s Bank of China (PBOC), the central banking authority in China, has issued new provisions on anti-money laundering (AML) through financial institutions. These regulations go into effect on January 1, 2007, with the aim of strengthening China’s efforts against money laundering and terrorism financing.

Regulations & Their Scope

Presented by PBOC Governor Zhou Xiaochuan on November 14, 2006, the Provisions on Anti-money Laundering through Financial Institutions apply to:

  1. Commercial banks
  2. Urban and rural credit cooperatives
  3. Postal savings agencies
  4. Policy banks
  5. Securities companies
  6. Futures brokerage companies
  7. Fund management companies
  8. Insurance companies
  9. Insurance asset management companies
  10. Affiliate investment companies
  11. Financial asset management companies
  12. Finance companies
  13. Financial leasing companies
  14. Auto financing companies
  15. Currency brokerage companies
  16. And any other financial institutions as determined and announced by the PBOC

As the administrative department for AML of the State Council, the PBOC is responsible for:

  1. Supervising and administering AML work within financial institutions
  2. Establishing international cooperation in AML on behalf of the Chinese Government
  3. Setting up cooperation mechanisms with anti-money laundering institutions from other countries or regions

Key Functions of AML Supervision and Administration

Under the new regulations, the PBOC will fulfill several key functions of AML supervision and administration:

  1. Legislating regulations
  2. Monitoring funds
  3. Inspecting financial institutions

Obligations for Financial Institutions

Financial institutions must establish a sound internal control system for AML, implement client identification systems, maintain records for clients and large transactions, and report any large transactions or suspicious activities to the AML Monitoring and Analyzing Center operated by the PBOC.

Client identity information and transaction records must be kept confidential.

Consequences of Violations

Violations of these regulations could result in:

  1. Administrative sanctions, such as revoking business licenses
  2. Prohibiting individuals from working in the financial sector
  3. Penalties according to the Anti-money Laundering Law of the People’s Bank of China.