China: anti‐money laundering in a foreign exchange area

Date01 October 2005
Pages335-338
Published date01 October 2005
DOIhttps://doi.org/10.1108/13685200510735301
AuthorLi Dongrong
Subject MatterAccounting & finance
China: Anti-Money Laundering in a
Foreign Exchange Area
Li Dongrong
INTRODUCTION
As China has become more open to the outside world,
with a speedy transition from a planned economy to a
market economy, transnational money laundering has
begun to pose a serious threat to the integrity and stab-
ility of Chinese ®nancial markets and the economy at
large. Commensurate with the level of its ®nancial
market development and ®nancial regulation, China
still, to a certain extent, exercises foreign exchange
regulation. As an important part of the Chinese central
bank (the People's Bank of China (PBC)), the State
Administration of Foreign Exchange (SAFE) is
empowered to monitor cross-border capital ¯ows as
has been part of its traditional mandate; and since
2003 it is mandated to combat transnational money
laundering. This paper will examine the legal insti-
tutional framework, the working mechanism and
the preliminary achievement of SAFE's anti-money
laundering (AML) in the foreign exchange ®eld.
LEGAL FRAMEWORK IN THE
FOREIGN EXCHANGE FIELD
Since the 1990s, coupled with increasing concerns in
the international community over money laundering,
the government has attached great importance to the
anti-money laundering battle. To eectively ®ght
against and contain various criminal activities and safe-
guard national economic security, the government
amended the Criminal Law in 1997 to add regulations
on money laundering crimes. On 29th December,
2001, the National Congress adopted Amendment
(III) to the Criminal Law, revising Article 191,
which de®nes drug tracking, crimes committed by
gangs and criminal syndicates, terrorist activities and
smuggling as the predicate crimes of money launder-
ing. This is the ®rst legal de®nition of money launder-
ing crime in China, serving as a legal safeguard in the
®ght against the criminal activities associated with
money laundering.
1
Meanwhile, the country considers anti-money
laundering in the ®nancial ®eld to be of primary
importance and has issued and implemented a range
of supporting administrative regulations and depart-
ment rules. In January 2003, the PBC enacted three
statutes, namely, Rules for Anti-money Laundering
by Financial Institutions, Administrative Measures
on Reporting Large-value or Suspicious RMB Pay-
ment Transactions by Financial Institutions, and
Administrative Measures on Reporting Large-value
or Suspicious Foreign Exchange Transactions by
Financial Institutions (hereinafter collectively called
`One Rule and Two Measures'). The rules and
measures together with the Criminal Law and other
regulations have built up the ¯edging legal framework
on combating cross-border money laundering in
China, marking the launch of a full-scale anti-
money laundering campaign in the year 2003 in the
®nancial ®eld.
2
Besides its traditional organisational role as ®nancial
regulator in the foreign exchange market and in moni-
toring the ¯ow of transnational funds, SAFE began to
exercise its new responsibility for combating transna-
tional money laundering in 2003. As an instrumental
part of the PBC, SAFE is empowered to formulate,
supervise and manage the system of reporting large-
value and suspicious foreign exchange transactions
under the supervision of the PBC. The PBC is respon-
sible for formulating, supervising and managing the
system of reporting large-value and suspicious trans-
actions of the domestic currency, the Ren Min Bi
(RMB).
Article 7 of the Rules for Anti-money Laundering
by Financial Institutions stipulates, `The SAFE super-
vises and manages the reporting on large-value and
suspicious foreign exchange transactions. The SAFE
formulates the system of reporting large-value and
suspicious foreign exchange transactions.'
Article 3 of the Administrative Measures on Report-
ing Large-value or Suspicious Foreign Exchange
Transactions by Financial Institutions stipulates, `The
SAFE and branches [hereinafter referred to as SAFE]
supervises and manages the reporting on large-value
and suspicious foreign exchange transactions.'
Under the overall deployment by the PBC for the
anti-money laundering campaign and in response
to the new situation posed by foreign exchange
administration, SAFE gave high priority to the task
Page 335
Journal of Money Laundering Control Ð Vol. 8 No. 4
Journalof Money Laundering Control
Vol.8, No. 4, 2005, pp. 335± 338
#HenryStewart Publications
ISSN1368-5201

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