In anticipation of the industry, the Draft Amendment to the Anti-Money Laundering Law (hereinafter referred to as the "Amendment Draft") has finally been officially released.
The revised draft of the Anti-Money Laundering Law was submitted to the Standing Committee of the 14th National People's Congress for initial deliberation on April 23. The revised draft consists of 7 chapters and 62 articles. In fact, as early as April 2020, at the People's Bank of China's anti-money laundering work teleconference, the revision of the anti-money laundering law has been listed as the focus of anti-money laundering work in the mainland. In June 2021, the People's Bank of China issued a notice on its official website to solicit public comments on the Anti-Money Laundering Law of the People's Republic of China (Draft Amendment) (hereinafter referred to as the "Draft for Comments"). "Over the past decade, the current Anti-Money Laundering Law has played an important role in preventing, investigating and punishing money laundering and deepening international governance and cooperation in anti-money laundering. However, with the continuous upgrading of money laundering methods and the continuous improvement of anti-money laundering requirements in recent years, the current law can no longer fully meet the needs of anti-money laundering work, and it is necessary to amend the Anti-Money Laundering Law in a timely manner. Jia Jidong, a professor at the Law School of Beijing Normal University and the Legal Development Research Center of the Zhuhai Campus of Beijing Normal University, said in an interview with the Financial Times, "The Anti-Money Laundering Law passed in 2006 only mentions seven types of predicate crimes in the concept of anti-money laundering, which is not well connected with the current criminal law." Since 2006, the mainland has made several amendments to the Criminal Law, and after the amendments, the predicate crimes of money laundering under articles 191 and 312 of the mainland criminal law include all crimes. At the same time, this does not meet the needs of practical work, for example, tax-related crimes and telecommunications network fraud are not among the seven types of predicate crimes, but cracking down on tax-related crimes and telecommunications network fraud is an urgent need at present. ”
Adapt to new trends
Revised after 18 years
On October 31, 2006, the National People's Congress (NPC) formally passed the Anti-Money Laundering Law of the People's Republic of China, marking the promulgation of China's first anti-money laundering law. Prior to this, the relevant provisions on anti-money laundering were scattered in the Decision on Drug Control, the Criminal Code and other articles. "Since the promulgation of the current Anti-Money Laundering Law, the mainland's anti-money laundering work system has been increasingly improved, the efficiency of anti-money laundering supervision has been significantly enhanced, the fight against money laundering and upstream crimes has achieved results, and the participation in international anti-money laundering governance and cooperation has been deepened. In an exclusive interview with the Financial Times, an industry insider pointed out that with the iteration of money laundering methods, the anti-money laundering law more than ten years ago can no longer meet the current requirements of the international community and domestic economic development for anti-money laundering. "In recent years, the mainland's perception of the importance of anti-money laundering can be said to have taken a 'triple jump'. Wang Xin, a professor at Peking University Law School, said that from the initial narrowest understanding of maintaining the stability and reputation of financial institutions, it has developed into the connection between money laundering and upstream crimes that generate economic benefits, and extended to maintaining financial security, and finally to the strategic height of maintaining overall national security, and integrating anti-money laundering into the national governance system and the system of modernizing governance capabilities. This will inevitably have an impact on the mainland's anti-money laundering legal regulation. "The report of the 20th National Congress of the Communist Party of China and the 2023 Central Financial Work Conference both mentioned that financial supervision should be comprehensively strengthened, and the main content of anti-money laundering work is to monitor the flow of funds, and the 'starting point' for bringing financial activities into supervision is anti-money laundering. Wang Xin told reporters that in order to make the anti-money laundering work better serve the modernization of the country's governance capacity, serve the requirements of preventing and resolving financial risks, and serve the maintenance of national security and financial security, it is urgent to revise it. In addition, with the deepening of international cooperation on anti-money laundering and the continuous updating of international standards, the revision of the Anti-Money Laundering Law is also imminent. Wang Xin said that in 2018, the Financial Action Task Force (FATF) conducted a comprehensive assessment of the mainland's anti-money laundering system and the effectiveness of its implementation, and although China passed the "external medical examination", it also pointed out that there are some institutional shortcomings in China's anti-money laundering system, and as a responsible major country, it needs to carry out a benchmark rectification. Dai Haoran, Deputy General Manager of the Internal Control and Compliance Department/Legal Affairs Department and General Manager of the Anti-Money Laundering Center of the Bank of Communications Head Office, also expressed similar views. "Anti-money laundering is an important issue in the field of non-traditional security that the international community has paid close attention to and has achieved broad consensus. As a member of the Financial Action Task Force (FATF), China participates in international cooperation and international assessment of anti-money laundering, and needs to continuously improve its domestic legislation and rules to keep up with the latest international anti-money laundering standards. He explained to the Financial Times that for example, the Draft Amendment emphasizes a risk-based approach to anti-money laundering and improves the anti-money laundering obligations of financial institutions. At the same time, it will continue to summarize the practice of domestic rule of law and provide China's experience for the formulation and updating of international anti-money laundering standards. In fact, when the reporter combed through the policy, it was found that although the anti-money laundering law has been revised for several years, in the past few years, the relevant normative documents have been continuously improved, and a lot of substantial progress has been made in the field of anti-money laundering. For example, the 11th Amendment to the Criminal Law further amends the provisions on the crime of money laundering to stipulate that "self-money laundering" is a crime, which further provides a legal guarantee for the effective punishment of money laundering crimes and the pursuit of fugitives and stolen goods;
The supervision of specific non-financial institutions and other aspects are more clear
The revised draft consists of 7 chapters and 62 articles, which supplement and improve the relevant systems around clarifying the scope of application of the law, strengthening the supervision and management of anti-money laundering, and improving the provisions on anti-money laundering obligations. So, what are the new changes? The regulation of specific non-financial institutions has been mentioned by a number of industry experts. The Draft Amendment further clarifies the scope of specific non-financial institutions and the division of regulatory responsibilities. Jia Jidong told reporters. In fact, the current law already has provisions for specific non-financial institutions, and in recent years some departmental regulations have also been promulgated, and the Draft Amendment refines the current practice, especially the enumeration and comprehensive provisions on the scope of specific non-financial institutions, which not only highlights the key points, but also takes into account the development and changes of the situation, not only clarifies the scope of the subject of obligations, but also makes the application of the law more flexible. Wang Xin also touched on this topic. "The most important point of the Draft Amendment is to clarify the scope of specific non-financial institutions. "Three of the six non-compliances assessed by the FATF on the mainland were related to specific non-financial institutions. Wang Xin said. "It should be made clear here that it is not necessary for all specific non-financial institutions to meet the relevant obligations at all times, but rather to require that corresponding measures must be taken on the basis of risk when conducting specific operations. Jia Jidong explained. In particular, he said, "It must be clarified whether a particular non-financial institution is supervised by an industry authority or an anti-money laundering authority." Jia Jidong mentioned that the "Revised Draft" published this time clearly stipulates that the relevant competent departments shall supervise and inspect the performance of anti-money laundering obligations by specific non-financial institutions, and request the assistance of the anti-money laundering administrative departments as needed. "It is clear that the competent authorities will supervise and inspect here, which is in line with the principle of 'risk-based', which is conducive to the allocation of major anti-money laundering resources by the administrative departments of anti-money laundering to the financial industry. He explained. Of course, in addition to the changes in the regulatory rules for specific non-financial institutions, there are many other areas worth paying attention to. For example, the customer due diligence system has been improved. According to Dai Haoran's analysis, this change has shifted from focusing on the static collection and verification of customer identity information when establishing business relationships to continuous and dynamic understanding of customers throughout the business cycle, and from focusing on customer identity to further focusing on the purpose and nature of customer behavior, transaction background and risk profile. "Behind the improvement of the system, it aims to lead the anti-money laundering work to a new stage of substantive and effective, and truly provide valuable clues for the prevention and containment of money laundering and related crimes. He explained. Wang Xin put forward the provision of "protective jurisdiction". "If money laundering occurs outside China, if it endangers the sovereignty and security of the mainland and infringes upon the legitimate rights and interests of citizens, legal persons and other organizations of the mainland, the relevant laws of the Anti-Money Laundering Law have jurisdiction. He explained that previously, the Anti-Money Laundering Law did not address this issue, and it is difficult to meet the actual regulatory needs at the moment when cross-border money laundering is high. Based on this, the Draft Amendment adopts the jurisdictional principle of combining territorial jurisdiction and protective jurisdiction, which is conducive to effectively combating cross-border money laundering and terrorist financing activities.
A true transition from "rule-based" to "risk-based"
Institutionalizing and legalizing the "risk-based" regulatory concept is also an important part of the Draft Amendment. For example, Jia Jidong said that the Draft Amendment clarifies the responsibilities of money laundering risk assessment, emphasizes the risk-based anti-money laundering requirements of obligated institutions, requires financial institutions to establish risk management measures based on money laundering risk status, conduct customer due diligence based on risks and take corresponding measures, and also includes illegal acts such as "failing to establish and improve internal control systems and risk management policies in accordance with regulations" and "failing to implement special anti-money laundering preventive measures in accordance with regulations" into the scope of punishment, which not only makes "risk-based" The regulatory concept has a legal basis, no longer only looking at the rules mechanically, but is deeply integrated into the responsibilities and requirements of the obligated subjects, so that the "rule-based" truly transitions to "risk-based". "Risk-based" is the anti-money laundering regulatory concept corresponding to "rule-based". The reporter learned that in a sense, "rule-based" is actually a form of compliance, and it is a simple application of regulations by financial institutions. In fact, there is no "one-size-fits-all" standard. Industry experts suggest that different types of financial institutions in different regions have different businesses and face different money laundering risks. Therefore, in contrast to a general principle, there are still risks lurking under the surface of "check-and-check" compliance. Correspondingly, "risk-based" requires relevant institutions to conduct more serious risk assessments and formulate corresponding measures for their own risks, which can be described as "tailor-made". Jia Jidong said that the international anti-money laundering standards have transitioned from "rule-based" to "risk-based", and the mainland's anti-money laundering system is also benchmarking against international standards. In his view, the transition to "risk-based" is not that the rules are not important, but that it is not only necessary to meet the requirements of compliance, but also to meet the standards of effectiveness, and the analysis and judgment of risk points must be further deepened. "Risk-based" emphasizes strengthening risk assessment, truly applying the "risk-based" approach to the practice of supervision and duty performance, and paying attention to high-risk institutions, high-risk areas and high-risk businesses. For example, virtual currency money laundering, stock market money laundering, investment money laundering (e.g., money laundering of fictitious transactions of real contracts, money laundering of fake overseas investments, money laundering of secured loans, etc.). He reminded that it is necessary to carry out the anti-money laundering work of Chinese-funded enterprises operating abroad. Dai Haoran also said that at present, anti-money laundering supervision is undergoing an important transformation from "rule-based" to "risk-based", and the performance requirements of obligated entities have also changed from basic compliance to substantive effectiveness. He said that in order to achieve the "risk-based" transformation, financial institutions and other obligated entities need to continue to effectively carry out customer due diligence and transaction monitoring, and the regulatory authorities also need to continuously improve the standardization and effectiveness of anti-money laundering supervision, which need to further clarify the legal basis and provide legal support.
Linkage and cooperation
Promote the implementation of anti-money laundering business
Of course, although it is the basic law in the field of anti-money laundering, the revision of the Anti-Money Laundering Law is of great significance. However, it should not be ignored that anti-money laundering is still a systematic project. Since the 18th National Congress of the Communist Party of China, the People's Bank of China, together with the Supervision Commission, courts, procuratorates, public security, customs, taxation and other departments, has constructed a "capital chain governance system" around the concept of "tracking funds", and severely cracked down on all kinds of money laundering and related crimes in accordance with the law. Strengthen research on money laundering methods such as the use of new payment businesses, virtual currencies, and pseudo-financial innovations, as well as types of money laundering such as environmental crimes and trade money laundering, and promptly issue risk warnings. With the joint efforts of various departments, remarkable results have been achieved in many fields, such as anti-gang crime, anti-terrorism, anti-corruption, anti-narcotics, anti-tax evasion, and crackdown on underground banks. With the revision of the Anti-Money Laundering Law and the subsequent implementation and entry into force, Wang Xin and Dai Haoran both suggested that guiding documents such as implementation rules should be promulgated in the future, and relevant supporting mechanisms should be studied. "In particular, the formal implementation of anti-money laundering customer due diligence regulations, accelerate the promotion of public security, market supervision, civil affairs, taxation, immigration management and other relevant departments and financial institutions to achieve system connectivity and data sharing, strengthen coordination, and form a joint force. Dai Haoran said. "With the continuous improvement of laws and regulations, all departments should strengthen linkage and cooperation to promote the implementation of anti-money laundering business. Jia Jidong introduced that the People's Bank of China should give full play to the leading role of the Office of the Inter-Ministerial Joint Conference on Anti-Money Laundering, and further implement the main responsibilities of member units under the framework of "the People's Bank of China taking the lead and each member unit is responsible for the division of labor", systematically and purposefully coordinate all units to continuously strengthen anti-money laundering work, and maintain a good momentum of joint management. From the perspective of large state-owned commercial banks, Dai Haoran said that Bank of Communications will quickly carry out activities to study and implement the newly revised Anti-Money Laundering Law throughout the bank, and at the same time prepare for the implementation of the new law in terms of systems, processes and systems, strengthen internal control construction, accelerate digital transformation, ensure resource investment, continuously improve the quality and efficiency of money laundering risk management, and make due contributions to preventing and curbing money laundering and related criminal activities, safeguarding national security, social public interests and financial order.
Source: Financial Times client
Reporter: Ma Meiruo
Editor: Yunyang
Email: [email protected]