Financial Crime World

Sanctions’ Dissuasiveness Questioned as Upper Limits Reached

Concerns Over Effectiveness of Sanctions in Combating Financial Crimes

In a recent assessment, international authorities have raised concerns about the effectiveness of sanctions in combating money laundering and terrorist financing. The review, which focused on China’s anti-money laundering (AML) and counter-terrorist financing (CFT) measures, suggests that the country has made significant progress in strengthening its defenses against financial crimes.

Progress Made, but Concerns Remain

However, experts warn that as the upper limits of sanctions are reached, their dissuasiveness is increasingly being questioned. This raises concerns about the potential for criminals to find ways to circumvent these measures and continue to finance illicit activities.

China’s AML/CFT framework has been re-rated by the Financial Action Task Force (FATF), with 5 out of 40 recommendations upgraded to “compliant” or “largely compliant”. The country has made progress in implementing measures to expedite foreign seizing, freezing, and confiscation requests, as well as facilitating non-conviction based confiscations.

Recommendations Remain Partially Compliant

Despite these advancements, concerns remain regarding the effectiveness of China’s sanctions. Recommendation R.35, which relates to the dissuasiveness of sanctions, remains partially compliant due to insufficient progress in this area.

Improvements in AML/CFT Regulations and Supervision

The report also highlights China’s efforts to improve its AML/CFT regulations and supervisory framework for designated non-financial businesses and professions (DNFBPs). The country has conducted sectoral risk assessments on various DNFBP sectors and is planning to draft AML/CFT regulations and conduct separate supervision.

Conclusion

In conclusion, while China has made significant progress in strengthening its AML/CFT measures, concerns remain about the effectiveness of sanctions in combating financial crimes. As the upper limits of sanctions are reached, it is essential that countries continue to refine their defenses against money laundering and terrorist financing to prevent criminals from finding ways to circumvent these measures.

Recommendations

  • Reassess Sanctions’ Dissuasiveness: Reassess the dissuasiveness of sanctions as upper limits are reached.
  • Prioritize AML/CFT Regulations and Supervision: Prioritize refining AML/CFT regulations and supervisory frameworks to prevent criminal activity.
  • Conduct Sectoral Risk Assessments: Conduct sectoral risk assessments regularly to identify vulnerabilities in DNFBP sectors.
  • Implement Effective Measures for Seizing, Freezing, and Confiscation Requests: Implement effective measures to expedite foreign seizing, freezing, and confiscation requests.