Money laundering causes severe problems in China, as in many countries. However, especially in the technology age, we live in, money laundering techniques are gradually improving. However, regulators in China also maintain a robust Anti-Money Laundering (AML) policy to protect the Chinese economy against increasing money laundering. This article will examine the regulations and AML penalties of The People's Bank of China, one of China's money regulators.
China's Perspective on Money Laundering
Money laundering is a serious crime in China and is often associated with crimes such as terrorism, drug trafficking, smuggling, bribery, financial fraud, and counterfeiting. These crimes are believed to have a direct link to money laundering. However, unlike many other countries, tax evasion is considered a separate crime in China and is not classified as money laundering. The Anti-Money Laundering (AML) laws in China are designed to deter money laundering and other related financial crimes, and the country has a strong understanding of the risks associated with money laundering and terrorist financing. As a result, China is not among the countries on the Financial Action Task Force (FATF) Country List with AML deficiencies. However, according to the Mutual Evaluation Report conducted by FATF in China, there are some deficiencies in complying with some FATF recommendations.
In recent years, the development of China's financial sector has necessitated the implementation of more stringent money laundering regulations to keep up with the increasing complexity and reach of criminal networks. Consequently, Chinese officials have become more committed to combating money laundering and have stepped up their efforts to increase controls. They have identified new money laundering methods, including illegal fundraising activities like cross-border telecommunications fraud, arms proliferation, and other illicit financial activities.
Determination of Money Laundering Offense in China
The determination of a money laundering offense in China is based on both subjective and objective factors, as outlined in the Criminal Law of the People's Republic of China. Factors that are considered include the type and amount of criminal revenues, the capacity of the offender, how the criminal funds are laundered, and the statement of the offender. In addition, a criminal in China must be involved in at least one of the following crimes to be convicted: assisting others in converting property into financial instruments or securities, transferring funds to others, transferring and converting criminal proceeds, and aiding or committing money laundering.
The Criminal Law of China takes a comprehensive approach to prosecuting money laundering offenses, and it also provides for punishment of those who assist in the commission of such crimes. In recent years, China has increased its efforts to combat money laundering and has implemented stronger measures to detect and prevent such activities.
People's Bank of China
The People's Bank of China (PBOC) is not only the central bank of the People's Republic of China but also the regulator responsible for monetary policy and financial institutions. The PBOC is in charge of drafting laws and regulations for its financial functions, including the implementation of monetary policy to sustain China's financial stability and economic growth. In addition to these responsibilities, the PBOC also has a good understanding of how criminals can exploit financial institutions.
To combat money laundering, the President of the PBOC, Yi Gang, announced in June 2020 that China had revised its anti-money laundering law to expand the audit scope. The revision of this law aims to increase the seriousness of anti-money laundering activities and penalties.
According to data from the PBOC, in the first six months of 2020, it fined more than 370 million yuan ($53.9 million) for money laundering violations, surpassing the amount of fines in 2019. The increase in fines is due to a change in the PBOC's method of calculating penalties for financial institutions that do not take measures against money laundering. Previously, such institutions would only receive one fine at a time, regardless of how many rules they had violated. Now, multiple penalties are given for multiple violations, and the largest single fine exceeded 100 million yuan.
AML Fines Imposed by the People's Bank of China
In recent years, the Chinese government has taken a more aggressive approach to combatting money laundering, which has led to a sharp increase in fines imposed by the People's Bank of China (PBOC) for AML violations.
One of the reasons for this increase in fines is that the PBOC has changed the way it calculates penalties. Financial institutions that fail to take adequate measures against money laundering are now being fined more heavily than before, resulting in fines of over 370 million yuan ($ 53.9 million) in the first half of 2020 alone. This represents an increase over the total amount of fines imposed for the entire year of 2019.
In addition to the increase in the number of fines imposed, the PBOC has also been targeting a larger number of institutions and their employees. During the first quarter of 2020, the PBOC fined 93 institutions and their employees for violations of money laundering regulations. Previously, institutions that broke multiple rules would only face a relatively small fine, leading some critics to suggest that the penalties were not severe enough to act as an effective deterrent.
The maximum fine imposed by Chinese law for AML violations is currently 5 million CNY. However, regulators can punish multiple violations with their fine, resulting in larger penalties. The largest fine ever imposed by the PBOC for AML violations was a CNY 4 million fine on the Hangzhou branch of China Construction Bank in December 2019.
The PBOC's increased focus on AML violations is reflected in the number of fines it has imposed over the years. According to a report published in 2019, the PBOC fined approximately 190 million CNY for AML violations in 2018, an increase of 41 percent compared to the previous year. This number is expected to continue to rise as the Chinese government becomes increasingly serious about cracking down on money laundering.
Overall, the PBOC's efforts to combat money laundering are an important step towards promoting financial stability and economic growth in China. By holding financial institutions accountable for their actions and imposing strict penalties for AML violations, the PBOC is helping to ensure that the Chinese financial system remains transparent and trustworthy. These are specific examples of the penalties:
- China Minsheng Bank was fined 23.6 million CNY, and twelve institution officers were fined between 10,000 and 70,000 CNY.
- China Everbright Bank was fined 18.2 million CNY, and eight officers of this institution were fined between 10,000 and 35,000 CNY.
- Huatai Securities was fined 10.1 million CNY, and four institution officers were fined between 35,000 CNY and 45,000 CNY.