China Raises Penalty, Broadens Scope of AML Laws

The People’s Bank of China (PBOC) has published a revised draft for the country’s AML law which expands the scope of the current law. The draft also suggests penalties for violations to be raised, along with other changes.

According to the PBOC, a revised version is much needed considering that the current AML law was last updated 14 years ago. The AML law draft aims to achieve three goals:

1. Curbing money laundering, terrorist financing and other illegal activities
2. Safeguarding national security and financial order
3. Addressing gaps and deficiencies of the current AML law

The deficiencies found in the current AML law include a narrow scope of money laundering predicate crimes, a lack of AML requirements for non-financial industries and individuals, gaps in the Ultimate Beneficial Owner (UBO) system, and insufficient regulatory penalties. 

The PBOC stated: “It is clear that anti-money laundering includes not only preventing money laundering crimes but also curbing illegal activities related to money laundering”. 

To bridge the identified gaps, the following amendments have been drafted:

Scope 

The new scope of the law extends to non-banking payment firms, online micro-lenders, asset management firms and financial leasing companies. Additionally, non-financial institutions such as property developers, accounting firms and precious metal exchanges are also included in the scope of the Anti-money Laundering law. 

This means that similar to financial institutions such as banks, these firms also have to comply with AML laws and regulations. To stay compliant, companies will be required to devise risk management systems, perform Customer Due Diligence (CDD), implement adequate AML controls, and monitor clients on an ongoing basis to prevent money laundering risk.

Penalties 

For those that do not comply with regulatory requirements and fail to perform CDD, the penalties have also been raised. The new penalty for the offence would be as high as CNY 2 million, up from CNY 500,000.

Moreover, the company directors, executives, senior managers and other individuals found guilty of this offence would receive a written warning, confiscation of the illegal gains, and a monetary fine worth anywhere between CNY 20,000 and CNY 200,000.

As for the penalty for helping another criminal organization, the fines have been raised from CNY 5 million to CNY 10 million, or 10% of the illegal gains based on which amount is higher. 

The draft was issued for consultation (View Consultation Here) in March 2021 and is open for suggestions until 30 June. 

The draft law is expected to be passed by the Standing Committee of the NPC (National People’s Congress) by the end of this year.