China’s dirty laundry – international organizations posing a risk to China’s AML systems
| DOI | https://doi.org/10.1108/JMLC-08-2015-0032 |
| Pages | 189-202 |
| Date | 08 May 2018 |
| Published date | 08 May 2018 |
| Author | Mohammed Ahmad Naheem |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
China’s dirty
laundry –international
organizations posing a risk to
China’s AML systems
Mohammed Ahmad Naheem
Mayfair Compliance, London, UK
Abstract
Purpose –This paper aims to review some of the current challenges that international money
laundering schemes are posing in the Chinese banking sector. Anti-money laundering (AML) systems
in China are relatively new, and customer due diligence checks and other AML systems are
underdeveloped in some areas.
Design/methodology/approach –The paper considers a particular case exampleof a multi-company
organization that has known links to China. This company has been the target of both European and US
investigationsfor suspected embezzlement and money laundering,and yet is still in operation.
Findings –The paper considers the complexitiesof this organization and how a seemly innocent link to a
used clothing charity can fundan international organization spanning several countries. Thepaper offers a
list of basic indicators of risk that could be appliedto a risk-based system used within the Chinesebanking
contextby usingthis group as an example.
Originality/value –The paper uses empirical and academic studies from other authors working in
this region and supports many of the findings of the need to develop stronger risk-based, as opposed
to rules-based, systems for managing AML risk assessment. Previous work by the author and
suggestions from other authors are both used to suggest a basic framework for AML risk assessment.
The paper concludes by reiterating the fact that China, like all other countries, is now operating in an
international banking context, in much the same way that international organized crime is also
operating at a global level.
Keywords Trade-based money laundering, Money laundering, Customer due diligence,
China banking system, Charity sector
Paper type Research paper
Introduction
Money laundering has been an issue of international concern at several levels,
including facilitating the growth in international organized crime involving drugs
through to the removal of assets from countries and undermining vulnerable
economies (Kar and LeBlanc, 2013). Many of these money laundering schemes would
have been simple to start with and often involved physically carrying money across
country borders and depositing them into foreign bank accounts:
[...] for almost six years money launderers carried suitcases filled with HK$10m from Luo Hu
Custom in Shen Zhen to Hong Kong and then transferred these of these funds to 1,300 accounts
every day. (Ping, 2005, p. 49)
The strengthening of international money laundering regulations across the globe,
and the introduction of the Financial Action Task Force guidelines (FATF, 2012),
China’s dirty
laundry
189
Journalof Money Laundering
Control
Vol.21 No. 2, 2018
pp. 189-202
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-08-2015-0032
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