Anti Money Laundering (AML) in China
Anti Money Laundering (AML) in China
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|Money laundering in China is a significant problem. China must maintain its robust Anti Money Laundering (AML) system to protect against the growing threat of financial crimes faced by the new economy.
Within mainland China, it is estimated that approximately 200 billion Yuan is lost due to money laundering each year. Money laundering remains a major concern as China restructures its economy. Opportunities for criminals increase significantly as the economy becomes more sophisticated and globally connected. To date, most money laundering cases that have been investigated involve funds obtained from corruption and bribery, narcotics trafficking, smuggling, alien smuggling, counterfeiting, fraud and other financial crimes. Additionally, proceeds of tax evasion, recycled through offshore companies, often return to China disguised as foreign investment, and as such, receive tax benefits, acting as another source of laundered funds.
Since 2006, China has taken steps to enhance its Anti Money Laundering (AML) regime. After conducting studies on how to strengthen the system, the People’s Bank of China (PBC) and the State Administration of Foreign Exchange (SAFE) developed a series of AML regulatory measures for financial institutions. The resulting legislation are the Rules for AML by Financial Institutions which took effect on January 1, 2007.
The aim of this legislation is to prevent money laundering, standardize AML regulatory activities and AML activities of financial institutions, to safeguard the order of the financial industry.
AML Training in China
The Rules for Anti Money Laundering by Financial Institutions requires all financial institutions located in China to implement training programs to combat illicit transactions from being conducted within the country.
The Economy of China
The economy of the People’s Republic of China was the second largest in the world following the United States. In 2007, it fell to number three with Japan taking the number two spot.
In the last 25 years, the economy in China has moved towards a more market-orientated economy, opening itself to more international trade. The government has also sold minority shares in four of its largest banks to foreign investors in order to make the market more diversified.
Banking in China
The financial landscape in China is largely government-owned, with the “Big Five” banks as the main banking institutions in the country:
All of the banks within China, however, are supervised by the central bank – The People’s Bank of China (PBC). Together, with the help of the China Banking Regulatory Commission (CBRC), the PBC is able to create new laws and regulations with which banks must comply.
China's booming economy is drawing foreign investors in record numbers. By the end of 2007, more than 20 foreign banks had received permission to operate on the Chinese mainland with corporate status. The banks, including Citibank, Deutsche Bank, Standard Chartered Bank and Mizuho Corporate Bank, can conduct comprehensive business in foreign currencies and Renminbi. In November 2006, the China Banking Regulatory Commission (CBRC) promulgated the Regulations of the People's Republic of China on the Administration of Foreign-funded Banks, paving the way for foreign banks to enter the Chinese market, but putting in place restrictions on business scope and capital requirements that foreign-funded banks must first fulfill.
As China allows more and more foreign organizations into the marketplace, officials fear that the presence of these foreign entities will increase the likelihood of money laundering and terrorism financing activities. As such, those foreign financial institutions that have a presence in China are required to follow the same AML obligations as their domestic counterparts in the fight against these crimes. Foreign banks are required to report large and suspicious transactions, and maintain records on clients and transactions.
The Renminbi (often abbreviated as RMB or CNY) is the currency of the People’s Republic of China (PRC), whose principle unit is the Yuan. The majority of Chinese paper currency features the image of Mao Zedong, former leader of the Communist Party of China. There are currently five series of CNY in circulation. The fifth series is the most current.
Other Key Statistics of China
Time Zone: Despite China being a vast country geographically spanning several time zones, the entire country uses a single Standard Time (GMT+8).
Location: Eastern Asia bordering the East China Sea, Korea Bay, Yellow Sea, and South China Sea, between North Korea and Vietnam. (Geographic coordinates for China are 35 00 N, 105 00 E.)
Population: 1,330,044,605 (July 2008 est.)
Labor Force: Approximately 43% work in agriculture, while the remaining portion of the population is divided between industry (25%) and services (32%). The unemployment rate (in urban areas) is 4%, but there is substantial unemployment and underemployment in rural areas.
Languages Spoken: Standard Chinese or Mandarin (Putonghua, based on the Beijing dialect), Yue (Cantonese), Wu (Shanghainese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese), Xiang, Gan, Hakka dialects, and minority languages.