The People’s Bank of China (PBOC) promulgated The Measures for the Supervision and Administration of Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) of Financial Institutions (Measures), which came into effect on 01 August 2021. The new Measures have widened the scope of applicable institutions by adding developmental financial institutions, consumer finance companies, loan companies, non-banking payment institutions and many other types of financial service companies.

Following China’s fourth round mutual evaluation conducted by the Financial Action Task Force on Money Laundering (FATF) from 2018 to 2019, several departments undertook steps to strengthen the AML/CTF regime as recommended by the FATF. These efforts include an amendment to the money laundering offense in the Amendment XI to Criminal Law by the Standing Committee of the National People’s Congress, PBOC’s public consultation in December 2020, greater cooperation between the PBOC’s public consultation in December 2020, greater cooperation between the PBOC and the procuratorates, and an increased number of prosecutions for money laundering offenses in 2020 of 368.2% compared to 2019.[1]

Here are other key takeaways:

  • Organizations subject to the AML/CTF requirements under the new Measures have been widened to include loan companies, asset management subsidiaries of commercial banks, non-banking payment institutions, insurance agents and insurance brokers.
  • Financial institutions subject to existing AML regulatory obligations will need to review and pay attention to the connection between the Measures and their existing obligations to ensure they are fully compliant with PBOC’s requirements.
  • The Measures adopt a risk-based approach and require that an organization’s internal control mechanism correspond to its AML/CTF risks and business scale, and should include a risk assessment mechanism. Applicable institutions will need to review their existing controls to ensure compliance, noting that PBOC has been given greater powers for enhanced AML/CTF supervision.
  • Organizations are reminded to undertake customer due diligence, including the need to keep customer identification data and transaction records, and report large-value transactions and suspicious transactions.

Among other things, the Measures expand the scope of applicable entities, provide specific details of internal control and risk management requirements and increase PBOC’s supervision and administration powers. The new Measures are a significant development, demonstrating China’s efforts to improve and enhance its AML/CTF regime. You can read the full details on our client alert available on InsightPlus.

[1] See Supreme People’s Procuratorate, The Supreme People’s Procuratorate and PBOC jointly issued typical cases of punishing money laundering: last year, the nation’s procuratorates approved the arrest of 221 people for money laundering and prosecuted 707 people, issued at 19 March 2021, at https://www.spp.gov.cn/spp/xwfbh/wsfbt/202103/t20210319_513155.shtml#1.

Author

Simon Hui is a principal and leads Baker McKenzie’s Dispute Resolution Group in Shanghai. Simon is ranked among the leading lawyers for dispute resolution/regulatory and compliance in China by Chambers Asia Pacific, Chambers Global and Legal 500 Asia Pacific. He has conducted complex internal investigations for a large number of multinational companies across a range of industries. He is also a skilled investigator and has experience in dealing with PRC government authorities and regulators such as PSB, SAMR, NSB and SPP.

Author

Zhengwei Yang is a counsel at Baker McKenzie's Dispute Resolution Group in Shanghai. Zhengwei has experience in a wide range of areas, including regulatory & compliance, dispute resolution and employment matters. He has been involved in works of various business sectors, including medical device, pharmaceutical, TMT and real estate.