Anti-Money Laundering (AML) in China

AML Country Guide / Anti-Money Laundering (AML) in China

Overview of AML in China

Money laundering is a severe problem in China. Money laundering develops as technology improves; for example, traditional money laundering is replaced by electronic black money, namely transaction laundering. However, to protect the Chinese economy against increased money laundering, it maintains a sound Anti-Money Laundering (AML) policy. Some of China's money laundering crimes; are 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 for a separate crimes. 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 laundering 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 criminals can abuse financial institutions—adopted to be largely Compliant with 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 becomes globally-connected, criminals' opportunities increase significantly.

AML Regulations in China

Some institutions in China 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 must also 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 implementing 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 Obligations in China

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:

  • Responsible for the realization of internal control systems
  • The customer identification system should be established in accordance with the relevant provisions.
  • Does not provide service or trade to any customer who cannot clarify their identity or anonymity
  • Creates a protection system for customers' identity materials and transaction records
  • Large or suspicious transactions also run the reporting system
  • Identity documents and transaction records of customers should be kept
  • A money-laundering department should be established in institutions and should be an authorized officer.
  • AML training should be provided for the institution

 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.     

Which Organizations Have to Comply with AML Regulations?

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, other financial and non-financial institutions exist. As a result, they must all comply with AML regulations.

 All banks and cooperatives

 İnsuarence companies

 Futures companies

 Fund management companies

 İnvestment companies

 Finance companies

 Money brokerage companies

 Internet financial institutions

 Funds distribution institutions

Real estate selling agencies

 Low firms and notary agencies 

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