2020 was a critical year for fully implementing the Opinions of the General Office of the State Council on Improving the Regulatory Systems and Mechanisms of Combating Money Laundering, Terrorist Financing, and Tax Evasion. The anti-money laundering (AML) departments of the People’s Bank of China (PBOC) conscientiously implemented the decisions and arrangements of the Committee of the Communist Party of China, continuously enhanced the coordination of law enforcement inspections, and strove to make obligatory institutions more effective in performing AML duties. As a result, progress was made in AML oversight.
I. Progress was made in coordination and guidance work and various tasks advanced solidly during the pandemic.
In early 2020, in response to the severe outbreak of COVID-19, the AML departments, in the context of serving the general interests and combating the pandemic, guided obligatory institutions in scientifically arranging AML work and formulating emergency work plans to ensure the normal and effective operation of AML work during the COVID-19 containment period. Additionally, the PBOC supported financial institutions in simplifying AML identification measures for clients and transactions related to COVID-19 containment, temporarily postponed controls on situations where in-person identity updates could not be carried out during the pandemic, and focused on enhancing fund monitoring for fraudulent activities related to anti-pandemic supplies, ensuring the smooth progress of the national anti-pandemic efforts.
II. Coordination of law enforcement inspections was strengthened.
The AML departments increased the coordination of law enforcement inspections across the entire system and further established a law enforcement inspection model targeting legal entities. The PBOC improved the Anti-Money Laundering Law Enforcement Inspection Manual and drafted the Reference for Evidence Collection in Law Enforcement Inspections to coordinate local inspection standards and to drive the entire system to improve the level of law enforcement inspections. Throughout the year, 614 obligatory institutions were subjected to AML law enforcement inspections, 87 percent of which were legal entities. Cumulative fines of RMB551 million were imposed for AML violations, including RMB526 million on 537 obligatory institutions and RMB24.68 million on 1,000 individuals.
(I) Inspections
In 2020, the PBOC inspected 575 banking institutions, 15 securities institutions, 8 insurers, and 16 non-bank payment institutions.
(II) Penalties
Banking industry: Cumulative fines of RMB349 million were imposed, including RMB328 million on 465 institutions that violated regulations (including violations found in inspections in previous years and penalties paid this year, similarly hereinafter) and RMB20.34 million on 888 individuals.
Securities industry: Cumulative fines of RMB9.53 million were imposed, including RMB9.06 million on 18 institutions that violated regulations and RMB470,000 on 25 individuals.
Insurance industry: Cumulative fines of RMB15.16 million were imposed, including RMB14.15 million on 26 institutions that violated regulations and RMB1.01 million on 41 individuals.
Non-bank payment institutions: Cumulative fines of RMB177 million were imposed, including RMB174 million on 28 institutions that violated regulations and RMB2.86 million on 46 individuals.
The inspection and penalty results showed three noticeable changes from the previous year in the AML law enforcement inspections in 2020. First, more inspections were made by higher-level agencies, as a larger part of inspections and penalties came from the headquarters and branches at or above the sub-provincial level. Second, there was an apparent reduction in the number of inspections, as more of the limited inspection resources were allocated to incorporated financial institutions. Third, the focus of inspections was shifted toward higher-risk industries, particularly banks and non-bank payment institutions.
III. The direction of AML oversight was further clarified and measures are underway to urge obligatory institutions to improve their work.
The AML departments strengthened program coordination and supervisory guidance for inspection projects, extended the focus of inspections to deep-seated issues in AML duty performance, and urged obligatory institutions to transform their AML work from formal compliance to effect in essence. It also placed emphasis on the supervision of the subsequent rectification work of inspected institutions. The entire system organized 917 “revisits” to promote the conscientious implementation of rectification measures by obligatory institutions. The headquarters completed the annual AML classified rating for 26 legal entities and money laundering risk assessment reports for three large banks, and issued 29 supervisory opinions to guide relevant institutions to further improve their AML work.
IV. The AML risk assessment system was further improved to deepen the understanding of risks in specific non-financial businesses.
In 2020, the AML departments drafted the Guidance on the Self-Assessment by Incorporated Financial Institutions on Money Laundering and Terrorist Financing Risks to guide incorporated financial institutions in self-assessment of risks. It also conducted researches to improve PBOC’s methods for assessing risks in obligatory institutions, in line with the latest risk-based regulatory requirements of the Financial Action Task Force (FATF). Additionally, it organized money laundering risk assessments for specific non-financial businesses, which improved the understanding of the risk status of these industries in China and relevant international AML standards, and laid the foundation for establishing AML systems and carrying out AML supervision in these sectors in the future.
V. Progress was made in regulatory cooperation with priorities identified.
In 2020, the PBOC signed a memorandum of cooperation with the China Banking and Insurance Regulatory Commission as well as a regulatory cooperation plan with the China Securities Regulatory Commission, further enhancing the regulatory cooperation mechanism for AML and anti-terrorist financing (ATF) in related industries. Through regular AML joint work meetings and guidance to branches and dispatched agencies to strengthen regulatory cooperation, the PBOC explored cooperation in areas such as institutional development, risk assessment, and law enforcement inspections, to effectively enhance the AML and ATF risk management capabilities of financial institutions in banking, securities, and insurance sectors.
