In 2021, the People’s Bank of China (PBOC) resolutely implemented the decisions and arrangements of the CPC Central Committee and the State Council, gave full play to the role of the two pillars of risk assessments and law enforcement inspections, and further enhanced the coordination of law enforcement inspections. As a result, financial risks were effectively prevented and contained, and progress was made in AML oversight.
I. Coordination of law enforcement inspections was enhanced and regulatory guidance was further improved.
(I) The principle of legal entity regulation was further stressed, with a special focus on strengthening the coordination of law enforcement inspections of institutions under the direct regulation of the PBOC Headquarters. In 2021, the PBOC placed greater emphasis on the coordination of AML law enforcement inspections, focusing on addressing disparities in regulatory requirements and inspection criteria across regions. The PBOC developed and issued an AML inspection plan for the headquarters’ comprehensive law enforcement inspection projects, providing clear and standardized guidance on the focal points, legal bases, and methodologies of inspections. The inspections further concentrated on the AML mechanism and risk prevention awareness of obligatory institutions, and focused on high-risk and emerging business areas. As a result, there was a significant improvement in the consistency of inspection content and law enforcement standards.
(II) A risk-based and problem-oriented approach was emphasized, and guidance was delivered to branches on special inspections of non-incorporated financial institutions. To make stepped-up efforts to solve specific problems, the PBOC developed and issued six types of special inspection plans on strengthening due diligence, cross-border businesses and other issues to clearly convey regulatory requirements for higher-risk areas. Under the guidance of the headquarters, the PBOC branches conducted 36 special inspections of branches of 15 institutions under the direct regulation of the headquarters throughout the year, which improved the pertinence and effectiveness of oversight.
In terms of AML law enforcement inspections and administrative penalties, the entire PBOC system conducted 159 special AML law enforcement inspections, 476 comprehensive law enforcement inspections involving AML issues, and 3 investigations of administrative penalties on institutions involved in cases. Cumulative fines of RMB341 million, including RMB321 million on 401 institutions and RMB19.36 million on 759 individuals, were imposed for violations, with a year-on-year decrease of 38 percent.
In terms of inspections by industry:
In 2021, the PBOC inspected 600 banking institutions, 9 securities institutions, 11 insurance companies, and 18 non-bank payment institutions.
In terms of penalties by industry:
Banking industry: Cumulative fines of RMB277 million were imposed, including RMB261 million on 365 institutions that violated regulations (including violations found in inspections in previous years and penalties paid this year, similarly hereinafter) and RMB16.11 million on 697 individuals.
Securities industry: Cumulative fines of RMB7.74 million were imposed, including RMB6.97 million on 8 institutions that violated regulations and RMB770,000 on 16 individuals.
Insurance industry: Cumulative fines of RMB9.91 million were imposed, including RMB8.8 million on 16 institutions that violated regulations and RMB1.11 million on 29 individuals.
Non-bank payment institutions: Cumulative fines of RMB46.18 million were imposed, including RMB44.81 million on 12 institutions that violated regulations and RMB1.37 million on 17 individuals.
II. A multifaceted regulatory framework was built and a regulatory portfolio featuring “risk gradients” was explored.
Recognizing the substantial intensity of law enforcement inspections and their limited coverage in the short term, the PBOC consciously increased the application of other regulatory measures in addition to law enforcement inspections. It gradually built a full-process, multifaceted regulatory model, tailoring regulatory measures to match the risk profiles and business norms of different institutions. For obligatory institutions that had not undergone law enforcement inspections in recent years, the PBOC made supervisory visits to learn about their AML duty performance in advance, improved communication with and feedback to these institutions, reviewed and reported typical cases and issues identified during routine supervision promptly, reminded institutions to further understand common AML issues, and urged them to make corrections accordingly on their own initiative. According to statistics, the PBOC system paid 6,679 supervisory visits, held 2,391 meetings and 386 inquiries, and issued 365 regulatory advisory letters to the obligatory institutions throughout the year.
III. The money laundering risk assessment mechanism was improved as the foundation of risk-based regulation strengthened.
In 2021, the PBOC steadily promoted the self-assessment of money laundering risks by incorporated financial institutions. To address issues such as weak foundation, lack of emphasis, and insufficient methodology and experience in the self-assessment of money laundering risks of incorporated financial institutions, the PBOC issued the Guidance on the Self-Assessment by Incorporated Financial Institutions on Money Laundering and Terrorist Financing Risks, providing clear guidance to financial institutions and further specifying the basic requirements for gradually completing self-assessments within two years. PBOC branches increased their guidance on the money laundering risk self-assessment work of obligatory institutions within their jurisdiction, further promoting the transition from classified rating to risk assessment.
IV. Joint-ministerial cooperation was strengthened to accelerate the establishment of an AML regulatory framework for specific non-financial businesses.
The PBOC accelerated conquering difficulties in the AML work in specific non-financial businesses, leading relevant departments to jointly complete risk assessments for six specific categories of non-financial businesses. On this basis, the PBOC actively promoted consensus among various departments, successfully held a seminar on the AML regulatory framework for specific non-financial businesses to research the design of the framework, and formed a preliminary draft of relevant systems.
