Anti-Money Laundering (AML) in China

Within mainland China, it is estimated that approximately 200 billion yuan is lost due to money laundering each year. Money laundering remains a major concern as China restructures its economy. Opportunities for criminals increase significantly as the economy becomes more sophisticated and globally connected. To date, most money laundering cases that have been investigated involve funds obtained from corruption and bribery, narcotics trafficking, smuggling, alien smuggling, counterfeiting, fraud, and other financial crimes. Additionally, proceeds of tax evasion, recycled through offshore companies, often return to China disguised as foreign investment, and, as such, receive tax benefits, acting as another source of laundered funds.

Since 2006, China has taken steps to enhance its AML regime. After conducting studies on how to strengthen the system, the People’s Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) developed a series of AML regulatory measures for financial institutions. The resulting legislation are the Rules for AML by Financial Institutions which took effect on January 1, 2007. The aim of this legislation is to prevent money laundering, standardize AML regulatory activities and AML activities of financial institutions, and to safeguard the financial industry.

In 2012, the Central Bank issued “Financial Institutions to Enhance Customer Classification and Risk Ranking Model for AML/CTF Purpose” that requires financial institutions to add money laundering risk scoring to each of their customers. Then in 2014, the Chinese government issued the "Measures on the Administration of Freezing Assets Related to Terrorist Financing."

The People's Bank of China (PBC) is the nation's main enforcement body, carrying out on-site inspections and applying fines if violations are found. Within the PBOC can be found China's Anti-Money Laundering Monitoring and Analysis Centre (AML MAC) and the Anti-Money Laundering Bureau. The industry regulatory body for banking is the China Banking Regulatory Commission (CBRC).

AML Training in China

The Rules for Anti-Money Laundering by Financial Institutions requires all financial institutions located in China to implement training programs to combat illicit transactions from being conducted within the country.

The Economy of China

In the last several decades, the economy in China has moved towards a more market-orientated economy, opening itself to more international trade; in 2010, China became the world's largest exporter. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, in 2014 China was deemed the largest economy in the world. Even so, per capita income is below the world average.

Banking in China

The financial landscape in China is largely government-owned, with the “Big Five” banks as the main banking institutions in the country:

• Bank of China
• China Construction Bank
• Industrial and Commercial Bank of China
• Agricultural Bank of China
• Bank of Communications

All of the banks within China, however, are supervised by the PBC. Together, with the help of the CBRC, the PBC is able to create new laws and regulations with which banks must comply.

In the last few decades, the Chinese economy has experienced astonishing growth, making it one of the world’s largest economies and manufacturing centers. In November 2006, the CBRC promulgated the Regulations of the People's Republic of China on the Administration of Foreign-funded Banks, paving the way for foreign banks to enter the Chinese market, but putting in place restrictions on business scope and capital requirements that foreign-funded banks must first fulfill. By the end of 2007, more than 20 foreign banks had received permission to operate on the Chinese mainland with corporate status. Even so, the government screens foreign investment and still tightly controls the financial system.

Foreign financial institutions that have a presence in China are required to follow the same AML obligations as their domestic counterparts in the fight against money laundering crimes. Foreign banks are required to report large and suspicious transactions, and maintain records on clients and transactions.

Chinese Currency

The Yuan Renminbi (often abbreviated as RMB or CNY) is the currency of the People’s Republic of China (PRC), whose principle unit is the Yuan. The majority of Chinese paper currency features the image of Mao Zedong, former leader of the Communist Party of China. There are currently five series of CNY in circulation. The fifth series is the most current.

Other Key Statistics of China

Time Zone: Despite China being a vast country geographically spanning several time zones, the entire country uses a single Standard Time (GMT+8).

Location: Eastern Asia bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam (Geographic coordinates for China are 35 00 N, 105 00 E.)

Population: 1,355,692,576 (July 2014 est.)

Labor Force: Approximately 33.6% work in agriculture, 30.3% in industry, and 36.1% in services (2012 est.). The unemployment rate (in urban areas) is 4.1%, but there is substantial unemployment and underemployment in rural areas.

Languages Spoken: Standard Chinese or Mandarin (Putonghua, based on the Beijing dialect), Yue (Cantonese), Wu (Shanghainese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang, Gan, Hakka dialects, and minority languages.

Trade Organizations: China is a member of the World Trade Organization (WTO) and the Asia-Pacific Economic Cooperation (APEC).