Financial Crime World

Title: China Cracks Down on Money Laundering: New Rules for Financial Institutions

Introduction

The People’s Bank of China (PBOC) has issued new rules, the Rules for Anti-Money Laundering by Financial Institutions, aiming to strengthen China’s anti-money laundering (AML) framework, prevent money laundering, standardize AML regulatory activities, and enhance the overall financial sector’s ability to combat financial crimes.

Background

Governor of the PBOC, Zhou Xiaochuan, announced the adoption of these Rules on November 6, 2006, effective from January 1, 2007. The Rules comply with the Law of the People’s Republic of China on Anti-Money Laundering, the Law of the People’s Republic of China on the People’s Bank of China, and other relevant laws.

Scope of Application

The new Rules apply to:

  • Commercial banks
  • Securities companies
  • Insurance companies
  • Trust and investment companies
  • Other financial institutions specified by the PBOC

They also include entities involved in:

  • Currency exchange
  • Payment and settlement
  • Fund sales

Regulatory Bodies

The PBOC oversees and manages AML activities for financial institutions. The China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission each oversee AML supervision within their respective sectors.

Key Provisions

  1. Customer Identification Systems: Financial institutions must verify the identity of their customers by requiring authentic and valid identity documents and update customer information promptly.

  2. Reporting Large-Value and Suspicious Transactions: Financial institutions must report large-value and suspicious transactions to the PBOC’s China Anti-Money Laundering Monitoring and Analysis Center.

  3. Record Keeping: Proper record keeping is necessary for AML compliance.

  4. On-site Examinations: The PBOC and its branches conduct on-site examinations to assess institutions’ AML compliance.

Cooperation with Relevant Agencies

Financial institutions must cooperate with the PBOC and law enforcement agencies, maintaining confidentiality regarding customer information and transaction details when required. Non-compliance may result in administrative penalties for PBOC staff or fines and business restrictions for financial institutions.

Conclusion

These new Rules underscore China’s continuing commitment to strengthening its AML framework and combating financial crimes effectively. The PBOC plans to provide further implementation guidelines soon.

Further Reading: People’s Bank of China Website