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China Strides Forwards with New KYC Rules to Rein Money laundering

  • Calvin Williams
  • April 02, 2021
  • 2 minutes read
  • 211
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China is stepping up to fight its long-running battle against financial crimes such as money laundering and terrorism financing by updating the Know-Your-Customer regulations for the financial institutions.

China is tightening the Know-Your-Customer (KYC) and Anti-Money Laundering (AML) requirements for the financial institutions as a part of its broader regime to eliminate money laundering and terrorism financing from the region. 

Now the financial institutions will be required to enhance their process of due diligence and identifying the beneficiary owners of the accounts that are opened and maintained. This process must be carried out by all customers and other business entities. The financial institutions are also obligated to carry an ongoing monitoring process for all the transactions. This is in accord with the revised draft of the 2007 rules that were published by the People’s Bank of China (PBOC), China Securities Regulatory Commission, and China Banking and Insurance Regulatory Commission. 

The revision of the draft is not just limited to the bank financial institutions. Non-bank financial institutions will also be required to comply with the regulations. The third-party payment companies, distributors, agents, and online lending firms will also fall under the revised regulations. 

“In recent years, the domestic and international AML situation has continued to change, international AML requirements have become stricter, and regulatory rules have placed greater emphasis on risk-based supervision,” the PBOC said. “The pressure on AML supervision in various countries has increased, and domestic AML supervision measures need to be further refined. At the same time, with the continuous innovation in the financial sector and the emergence of various new types of financial businesses, it is necessary to improve the scope of AML supervision.”

The revision of the regulations also clarifies the role of the People’s Bank of China in carrying out risk assessments of financial institutions and the risk-based supervision.

The regulators also insist that the financial institutions should develop an internal control system that will deal with the money laundering risks including the development of the self-assessment system of money laundering risks, AML information control, and audit mechanism of AML and CFT.