Money laundering poses a significant challenge in China, particularly as technological advancements give rise to new forms of illicit activities, such as transaction laundering replacing traditional methods. However, China maintains a robust Anti-Money Laundering (AML) policy to safeguard its economy against the escalating threat of money laundering. Various criminal activities contribute to money laundering in China, including terrorism, drug-related offenses, smuggling, bribery, financial fraud, and forgery. It’s worth noting that revenue generated through tax evasion and recycled via overseas entities is not strictly classified as money laundering but is punished separately as a distinct offense.

China has formulated comprehensive AML laws aimed at deterring money laundering, maintaining fiscal order, and combating related crimes. With a strong understanding of money laundering and terrorist financing risks, China is not listed as having AML deficiencies by the Financial Action Task Force (FATF). However, according to a February 2019 FATF report, China should focus more on addressing the proceeds of crime and expanding the resources employed for national risk assessment. The People’s Bank of China demonstrates a good understanding of how criminals can exploit financial institutions and is deemed largely compliant with 15 out of the 40 FATF Recommendations.

Since 2006, China has taken steps to enhance its AML regime. The China People’s Bank (PBC) and State Foreign Exchange Administration (SAFE) enacted AML Rules on January 1, 2007, following efforts to strengthen the system. These regulations aim to prevent money laundering, standardize AML regulatory activities, and ensure the integrity of the financial industry. In addition, the Chinese government issued the “Measures on the Management of Freezing Assets Related to Financing Terrorism” in 2014. As the economy becomes increasingly interconnected globally, the opportunities for criminals also rise significantly.

In China, several institutions play a role in regulating and overseeing Anti-Money Laundering (AML) regulations. These include the People’s Bank of China, the China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC), the Ministry of Public Security, and the State Administrator of Foreign Exchange Administration. AML regulators worldwide are intensifying their oversight efforts within their respective jurisdictions. Financial institutions are required to establish and implement robust and effective AML compliance programs that align with local regulatory expectations.

Furthermore, self-regulatory bodies outside these institutions also enforce AML requirements and are responsible for implementing these regulations among their members. These self-regulatory bodies not only serve as regulatory authorities responsible for complying with AML requirements but also monitor AML internal control systems and impose necessary administrative sanctions.

Regulators have the authority to impose administrative fines for non-compliance with AML obligations, with a maximum penalty of 5 million RMB. Additionally, organizations that fail to meet the necessary conditions may have their financial permits revoked. The maximum penalty for non-compliance with AML requirements is 500,000 RMB. Prior to imposing fines, organizations are typically issued orders to rectify any violations, and disciplinary sanctions may be applied.