In recent years, China’s economy has been growing as we have seen them as the world’s largest exporter of 2010 and yet their per capita income is below the world average. In 2015, China stood as the largest economy globally, surpassing the US in 2014 for the first time in modern history. After the events of COVID, China’s economy is growing at a record-breaking rate of 18.3% in the first quarter of 2021 compared to the same quarter last year. This is the most significant jump in gross domestic product (GDP) quarterly growth since 1992. Growth in services will likely continue to recover in 2021 despite the uncertainty surrounding the pandemic. The rollout of the COVID-19 vaccinations will open the cash flow for the hospitality, recreation, and tourism sector. These industries are expected to function with no restrictions with the right measures. Meanwhile, financial services may experience slower loan growth as banks see more restrictions on mortgages and other property-related loans as the economy is just starting to recover from the losses in the past year.
Financial Action Task Force (FATF) Status
China is a member of the FATF since 2007, as they have established money laundering and terrorist financing regulations in compliance with the FATF recommendations.
Since the FATF’s 2019 assessment, China is continuously updating its 2007 AML regime [JF1] to strengthen its framework. China is compliant on 7, largely compliant on 18, partially compliant on 6, and not compliant on 6 of the recommendations. China remains in enhanced follow-up and will report back to the FATF on progress to strengthen its implementation of Anti-Money Laundering / Countering the Financing of Terrorism measures in October 2021.
Regulators
People’s Bank of China (PBOC) (中国人民银行)
The PBOC is the central bank for the People’s Republic of China, and they are responsible for the establishment and regulation for all monetary policies and financial institutions in mainland China. PBOC is the primary authority coordinating all AML/CFT initiatives of the government with several regulatory bodies under it:
The PBOC heads the Anti-Money Laundering Joint Ministerial Conference (AML Joint Ministerial Conference) with 21 state agency members. Since 2002, they have regular meetings to direct and coordinate the AML/CFT framework implementation.
The China Banking and Insurance Regulatory Commission (CBRIC) is the prudential regulator for bank and insurance entities and supports the PBC on AML/CFT supervision.
The China Securities Regulatory Commission (CSRC) is the prudential regulator for securities institutions and supports the PBC on AML/CFT supervision.
Anti-Money Laundering Bureau (Securities Bureau) is responsible for AML activities in the People’s Republic of China. They cover everything AML from conducting studies, establishing rules and policies for financial institutions, engaging in international cooperation, consolidating and analysing information on suspicious payment transactions. Along with assisting the judiciary departments in investigating money-laundering related criminal cases, ensuring proper security arrangement for the PBC system.
The Ministry of State Security (MSS)
MSS is responsible for investigating crimes that threaten state security including money laundering and terrorist financing. They collect and process ML/TF intelligence and hares such information with other investigative bodies.
Eurasian Group (EAG)
In 2004, the EAG was established by the decision of the Inaugural Conference and at the initiative of the Russian Federation, supported by the FATF, IMF, World Bank, and several other countries. The main goal of EAG is to facilitate the implementation of international standards, carry out joint programs within the Financial Intelligence Unit sphere, conduct evaluations, analyse trends in the AML/CTF mechanisms, and coordinate technical assistance corporations.
Asia Pacific Group on Money Laundering (APG)
China is a founding member of the APG since 1997. The APG is an international governmental organisation. It consists of 41 member jurisdictions, focused on ensuring that its members effectively implement the international standards against money laundering, terrorist financing, and proliferation financing risks.
US Department of State Money Laundering assessment (INCSR)
The US State Department categorises China as a Country/Jurisdiction of primary concern regarding Money Laundering and Financial Crimes.
Relevant regulations
China has taken significant steps to strengthen its AML/CFT regime as money laundering is a severe problem in China. In the first six months of 2020, the PBOC issued penalties of more than 370 million yuan ($53.9 million) for money laundering violations, exceeding the total for all of 2019.
Recently China has tightened its KYC and AML requirements for financial institutions (FI’s) in its practice to eliminate money laundering and terrorism financing. FI’s are required to enhance their process of due diligence by conducting periodic identity verification checks. Along with maintaining their obligation for carrying ongoing monitoring processes for all transactions. The AML regulations drafted in 2007 have been updated, broadening their scope to non-financial institutions. Non-financial institutions will be required to comply with the rules.
The PBOC enacted the Data Security Law (DSL) on June 10, 2021, taking effect on September 1, 2021. The DSL fulfills the deficiencies in the Cyber Security Law, 2017. These data protection laws include a series of laws, regulations, and national standards to further high standards and detailed requirements for the protection of personal information. DSL also states that any data processing that harms China’s national security, public interest, or legal rights and interests of its citizens and organizations is subject to legal liabilities. These increased regulations for personally identifiable information (PII) shape a strict legal structure for the Chinese market. Organisations are obligated to comply with these regulations to function legally.
Chinese verification available
Chinese citizens can be verified using government, commercial and credit data sources. Institutions can verify and validate their customers’ names, dates of birth, gender, province, phone number, addresses (based on their documentation) and document numbers. Citizens of China can be verified using the following documents:
National identity card (居民身份证)
The Chinese national identity card is the official identity document issued by the People’s Republic of China. Residents are required to apply for resident identity cards from the local Public Security Bureau. You can verify your customers’ first name, last name, date of birth, gender, and card number.
Passport
According to the Passport Law of the People’s Republic of China, the passport is issued to citizens by the Ministry of Public Security. You can verify your customers’ first name, last name, date of birth, passport number, and expiry.
Driver licence
The Department of Motor Vehicle issues the Chinese driver licences with each province having a different format. You can verify your customers’ first name, last name, date of birth, and licence number.
AML Screening
Global watchlists can identify if Chinese citizens are high-risk individuals or entities. You can screen your customers’ against PEPs, Sanctions and adverse media lists.