Money laundering causes serious problems in China, as in many countries. 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. In this article, we 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
While money laundering is a serious crime in China, some crimes are associated with money laundering, such as terrorism, drugs, smuggling, bribery, financial fraud, and counterfeiting. It is accepted that these crimes have a direct relationship with money laundering. Besides, unlike most countries, tax evasion is a crime that is not considered as money laundering in China. Crimes related to tax evasion are examined under a separate crime. China's AML laws are formulated to deter money laundering, secure financial order, and related crimes. China has a strong understanding of money laundering and terrorist financing risks, so it is not among the countries with AML deficiencies on the Financial Action Task Force (FATF) Country List. In addition, according to the Mutual Evaluation Report made by FATF in China, there are deficiencies in complying with some FATF recommendations.
In addition, the development of China's financial sector has required an effort to enforce more money laundering regulations to keep pace with the complexity and reach of criminal networks. Therefore, Chinese officials are getting more serious about fighting money laundering and continue to increase controls. Chinese officials identify new money laundering methods, including illegal fundraising activities, such as cross-border telecommunications fraud, arms proliferation, and other illegal financial activities.
Determination of Money Laundering Offense in China
The Criminal Law of the People's Republic of China court considers both subjective and objective factors when looking at whether a criminal has committed money laundering. For example, we look at the following factors: the type and amount of criminal revenues, the capacity of the offender, how the criminal funds are laundered, and of course, the statement of the offender, etc. Also, a criminal in China must be involved in at least one of the following crimes in order to be convicted. Assisted others in converting the property into financial instruments, securities, assisted in transferring funds to others, transferred and converted criminal proceeds, in short, helped anyone with money laundering or did it himself/herself.
People's Bank of China
The People's Bank of China is the central bank of the People's Republic of China and the authoritarian in charge of monetary policy and financial institutions' regulation. The People's Bank of China is responsible for drafting laws and regulations for its financial functions, including implementing monetary policy to sustain financial stability and economic growth in China. Apart from that, it also has some additional responsibilities. Besides, The People's Bank of China has a good understanding of how criminals can exploit financial institutions. The President of the People's Bank of China, Yi Gang, announced in June that China had revised its anti-money laundering law to expand the audit scope and stated that its seriousness according to this revision anti-money laundering activities and penalties would increase.
According to central bank data, the People's Bank of China has fined more than 370 million yuan ($ 53.9 million) for money laundering violations in the first six months of 2020 alone, exceeding the total 2019. (You can find the details about these penalties in the rest of the article). Of course, the significant increase in these fines reflects a revision in the central bank's method of calculating penalties for financial institutions that do not take measures against money laundering. Such institutions would only receive one fine at a time, regardless of how many rules they had violated previously. Now, multiple penalties are given for multiple violations. A striking example is that the central bank's single largest single fine exceeded 100 million yuan on this topic.
AML Fines Imposed by the People's Bank of China
After the Chinese central bank changed the way it calculates penalties, there was also an increase in AML fines due to financial institutions that failed to take effective measures against money laundering. The People's Bank of China (PBOC) has fined more than 370 million yuan ($ 53.9 million) for money laundering violations in the first six months of 2020, exceeding the total for the entire 2019. In addition, PBOC fined 93 institutions and their employees for violations of money laundering regulations during the January-March period alone. Until recently, those who broke many rules would only have to pay a few hundred thousand RMB for money laundering violations; there were critics who said that the penalties were not serious enough to be an effective deterrent that the PBOC delivered a total of RMB 189.3 million for money laundering violations throughout 2018; this is roughly the same amount in the first quarter of this year.
Under Chinese law, financial institutions are fined a one-off maximum of 5 million CNY for AML violations, but regulators can punish multiple violations with their own fine at this point. The biggest fines imposed by the People's Bank of China (PBOC) for AML violations so far was a CNY 4 million fine imposed on the Hangzhou branch of China Construction Bank in December 2019. In addition, 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 2017, we can say that this number is increasing, indicating that the PBOC is getting more serious about money laundering. To give a specific example of the penalties it gives:
- China Minsheng Bank was fined 23.6 million CNY, and twelve officers of the institution 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 officers of the institution were fined between 35,000 CNY and 45,000 CNY.