Draft to tighten anti-money laundering supervision

Foreign financial institutions may be asked to cooperate during investigation

A draft amendment to the AntiMoney Laundering Law proposes establishing a monitoring body and improving the financial regulatory system.

The draft was submitted for initial review to the Standing Committee of the 14th National People’s Congress, China’s top legislature, on Tuesday.

Pan Gongsheng, governor of the People’s Bank of China, said that several issues have emerged in anti-money laundering efforts in recent years, with institutions showing insufficient capacity to fulfill anti-money laundering obligations, a lack of smooth coordination mechanisms for supervision, and a low degree of information sharing.

There is also a need to strengthen monitoring and control of emerging money laundering risks and combat corruption, cross-border gambling, “underground banking” and other illegal activities, the central bank chief told the Standing Committee.

The draft clarifies that anti-money laundering refers to actions taken to prevent and curb activities that disguise or conceal the origins and nature of criminal proceeds and their benefits, as well as related criminal activities, including measures against terrorism financing.

It assigns the central bank the responsibility for national antimoney laundering supervision and management, in coordination with State Council departments, national supervisory authorities and judicial bodies.

Additionally, the draft calls for enhanced risk control and supervisory management, specifying antimoney laundering fund monitoring, and risk assessment systems for national and industry-specific money laundering.

It also clarifies that the People’s Bank of China may take supervisory and inspection measures and conduct investigations. It calls for improving the information-sharing mechanism among departments and establishing a management and usage system for beneficial ownership information.

The draft says the main responsibilities of financial institutions include establishing and implementing internal anti-money laundering control systems, conducting due diligence on customers to understand their identity, transaction background and risk status, maintaining customer identity information and transaction records, and implementing reporting systems for large or suspicious transactions.

It also improves provisions for legal liability, increases penalties for violations and specifies the extraterritorial applicability of the law.

During legal investigations of money laundering and terrorism financing, foreign financial institutions may be asked to cooperate, it said.

Those who refuse to cooperate with investigations may be issued warnings, fined or prohibited from conducting related business activities. Directors, supervisors or senior management of financial institutions, or others directly responsible, may also be fined or banned from working in the industry.

Such institutions may also be included on a list of organizations and individuals identified by the authorities as having significant money laundering risks, where failure to take measures could lead to severe consequences.