On October 31,2006, the Law of the People’s Republic of China on Anti-Money Launderingwas adopted at the 24th Meeting of the Standing Committee of Tenth National People’s Congress. The Law on Anti-Money Laundering, which will enter into effect as of January 1, 2007, establishes, for the first time and in a comprehensive manner, the anti-money laundering supervision and managementsystem in China, and defines the AML responsibilities and functions of the competent authority of the State Council, relevant agencies and organizationsunder the State Council; it imposes anti-money laundering obligations on designated non-financial institutions, and clearly defines the scope offinancial institutions that shall undertake anti-money laundering obligations,their obligations as well as legal liabilities in the case of violation of the Law; as for the anti-money laundering investigation measures, it establishes the terms of such exercise, the agencies to carry out investigation, approval procedures and time limit of investigation; it also stipulates the fundamental principles of international anti-money laundering cooperation.
The Anti-MoneyLaundering Law, together with the articles of the Criminal Law on punishing and cracking down on the crime of money laundering, constitute the basic legal system for prevention and crackdown of money laundering in China. It is of great importance to the prevention of money laundering activities, the containment of money-laundering crime and its predicate offences, discovery and removal of sources and channels of financing ofcriminal activities, prevention of new criminal activities, dissolution of potential financial and legal risks created by money laundering for financial institutions, and ultimately the preservation of financial security.
The Anti-MoneyLaundering Law establishes, for the first time, the anti-money laundering responsibilities of the People’s Bank of China as the competent authority underthe State Council. These responsibilities include organizing and coordinating nationwide anti-money laundering work, monitoring fund movement for anti-money laundering purpose, formulating either on its own or jointly with relevant financial supervisory authorities rules and regulations for anti-money laundering by financial institutions, monitoring and inspecting how financial institutions perform their anti-money laundering obligations, investigating suspicious transactions within its jurisdiction, receiving money laundering reporting from individuals and agencies, reporting suspicious transactions to the law enforcement agency, informing the relevant State Council departments and agencies of anti-money laundering work on a regular basis, and conducting cooperation with governments of other countries and international organizationson behalf of the Chinese government and with the authorization of the State Council.
The People’s Bankof China began to undertake anti-money laundering responsibilities in 2003. Inorder to perform such duties as stipulated by the Law on People’s Bank of China, the central bank established an Anti-Money Laundering Bureau and the ChinaAnti-Money Laundering Monitoring and Analysis Center(CALMAC). As of end 2005,all state-owned commercial banks, joint-stock commercial banks, city and rural commercial banks, postal savings and remittance institutions, 90 percent of allurban credit cooperatives and foreign banks, almost 50 percent of rural creditcooperatives have connected with the CALMAC electronic system and submit their report through the system. Thanks to the practical experience in anti-money laundering in the past three years and more, the People’s Bank of China hasbuilt a fairly experienced and strong contingent for anti-money laundering. With the promulgation of the Anti-Money Laundering Law, the People’s Bank of China will follow the principle of administering according to law and create a good supervisory environment for financial institutions to conduct their anti-money laundering functions in line with responsibilities and functions stipulated by the Law.
The Anti-MoneyLaundering Law contains very clear stipulations on financial institutions’ anti-money laundering obligations. These obligations are not newly established, as the Securities Law, Provisions on the Real Name System for Personal Deposit Accounts, General Provisions on Lending, accounting standard andother administrative regulations have provisions on customer identification system, reporting system of large-value and suspicious transactions, recording system of customer identity and transaction information. These systems have become the basic systems in the business operation of financial institutions; the Anti-Money Laundering Law has included them from the perspective ofanti-money laundering. Therefore, normal business operation of financia linstitutions will not be affected. Rather, carrying out anti-money laundering obligations will help financial institutions strengthen their risk management capability for the benefit of sound performance.
An important provision in the newly adopted Law is including the designated non-financial institutions into the entities with anti-money laundering obligations, in line with the trend of international anti-money laundering legislation. In order to ensure effective anti-money laundering in the designated non-financial business, the Anti-Money Laundering Law authorizes thePBC to formulate jointly with other State Council agencies management rules on the scope of designated non-financial institutions, their anti-money laundering obligations and the specific provisions on their supervision and oversight.
The Anti-MoneyLaundering Law also attaches importance to protecting the legitimate rights and interests of citizens and legal persons. The Law has strict provisions on the confidential obligations of relevant personnel. Customer identity and transaction information is only to be used for anti-money laundering investigation and criminal proceedings. The approval authorization and procedures of anti-money laundering investigation are clearly stipulated. The terms and time limit of temporary freezing measures are strictly laid out. Legal liabilities are also defined for failure of relevant departments to carry out their functions according to law and activities encroaching upon the legitimate rights and interests of citizens and organizations. In order to mobilize the public to fight against money laundering, and protect thelegitimate rights of individuals and organizations in reporting money laundering activities, the Law stipulates that any organization and individualshall have the right to report money laundering activities to People’s Bank of China or Public Security department, and that the agencies receiving the reportshall keep the reporter and reporting information confidential.
In order to implement the Anti-Money Laundering Law, the People’s Bank of China willincrease public awareness of the content of this Law, enhance law enforcement and administrative capability of its staff, and move quickly to revise or formulate supporting rules and regulations. Communication and cooperation with other agencies and departments will be further strengthened. Efforts will alsobe made to urge financial institutions to improve the quality of their anti-money laundering work and implement the Law. The Anti-money laundering Law awareness work will be broadly based in order to make morepeople understand the importance of and take part in the anti-money launderingwork and create a favorable social environment for the effective implementation of the Law.
