Money laundering is a serious problem in China. Money laundering develops as technology improves; for example, traditional money laundering is replaced by electronic black money, namely transaction laundering. However, in order to protect the Chinese economy against increased money laundering, it maintains a sound Anti-Money Laundering (AML) policy. Some of China’s money laundering crime; terrorism, drugs, smuggling, bribery, financial fraud, and forgery. On the contrary, tax evasion revenues recycled through overseas companies are not strictly money laundering offenses. They are punished under a separate crime. China's AML law has been formulated to discourage money laundering, safe guardian fiscal order, and related crime. China has a strong understanding of money laundering and terrorist financing risks, so it is not on the Financial Action Task Force (FATF) Country List identified as having AML deficiencies. Although China has a strong understanding of this issue, according to the FATF's February 2019 report, it should focus more on the laundering of crime revenues and increase the range of resources used for national risk assessment. In addition, the People's Bank of China has a good understanding of how financial institutions can be abused by criminals. Adopted to be largely Compliant for 15 of FATF 40 Recommendations.
Since 2006, China has taken steps to improve the AML regime, and the China People's Bank (PBC) and State State Foreign Exchange Administration (SAFE) entered into force the AML Rules on January 1, 2007, after their work on how to strengthen the system. The main purpose of these regulations is to prevent money laundering, standardize the AML regulatory activities and AML activities of financial institutions, and protect the financial industry. Then, in addition to these regulations, in 2014, the Chinese government issued "Measures on the Management of Freezing Assets Related to Financing Terrorism". As the economy begins to become globally connected, opportunities for criminals increase significantly.
There are some institutions in China that regulate and control AML regulations: People's Bank of China, China Banking and Insurance Regulatory Commission (the "CBIRC"), China Securities Regulatory Commission (the “CSRC”), Ministry of Public Security, State Administrator of Foreign Exchange Administration. AML regulators increase oversight in their jurisdictions worldwide. Financial institutions also need to develop and implement a robust and effective AML compliance program that meets local regulatory expectations. In addition, there are AML requirements implemented by the self-regulatory bodies outside these institutions, and these self-regulatory bodies are responsible for the implementation of the AML regulations of their members. It is not only the regulatory authority responsible for complying with AMCO requirements to PBCO but also responsible for controlling AML internal control systems and applying the necessary administrative sanctions.
Regulators may impose administrative fines if they comply with the terms of the AML, this penalty is a maximum of 5 million RMB. Besides, the financial permit of organizations that do not comply with the conditions may be revoked. The maximum penalty for not complying with AML requirements is 500,000 RMB. Before fines are imposed, organizations are ordered to correct all violations and disciplinary sanctions are applied.
AML laws, as well as obligations. All financial institutions must comply with these obligations, and the country's current regulators check whether these obligations are met. If these obligations are not followed, regulators have certain sanctions. Here are some important obligations in China:
If a customer entrusts an agent to deal with the transaction on their behalf, the relevant financial institution will verify and register the identity certificate of the principal.
Financial institutions and non-financial institutions that are subject to AML requirements must comply with these regulations. In addition to some institutions that have to comply with the following regulations, there are other financial and non-financial institutions. As a result, they must all comply with AML regulations.
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