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China鈥檚 central bank joins global AML efforts
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THIS year marks the 10th anniversary of the passage of China’s anti-money laundering (AML) law.
Reflecting on the achievements and deficiencies of ongoing AML efforts in the country, Guo Qingping, vice governor of the People’s Bank of China (PBOC), the country’s central bank, said at a recent forum held at Fudan University that China is making huge strides in the global fight against money laundering.
To begin with, as a signatory to a set of international conventions, China has underscored its commitment to the global AML cause by joining such groups as the Financial Action Task Force on Money Laundering (FATF). The FATF is the policy-making body that coordinates global AML efforts by national governments, Guo said.
The growing profile of the issue of money laundering — it was a side issue barely a decade ago — has also propelled China to enact and enforce a raft of related laws and regulations.
The most notable example, in addition to the 2006 AML law, is the country’s first anti-terrorism law adopted in 2015, which features clauses specifically addressing terrorist financing.
According to Guo, a joint meeting mechanism has been put in place to enlist the support of 23 ministries, commissions and top watchdogs — ranging from the PBOC to the banking regulatory commission, from the Supreme People’s Court to the Ministry of Public Security — in the joint crusade against money laundering.
While much has been done to make AML a top priority at many financial institutions, China needs desperately to revamp its regulatory system to stay ahead of new situations on the financial and economic front.
For example, “in addition to banks, securities and insurance companies, a host of non-banking financial institutions such as online payment companies have also been on the regulatory radar screen,” said Guo.
Although it is impossible to prevent the rise of myriad financial innovations powered by the Internet, they do have negative ramifications for AML efforts.
The stakes are raised by events beyond regulatory control. Volatility in China’s neighborhood and the rise of the terrorist outfit Islamic State (IS) complicate China’s AML task.
Guo noted a clear trend of growing stringency of regulatory standards enforced by overseas watchdogs, with money laundering, terrorist funding and nuclear proliferation looming large in the evaluation of financial service providers.
In the past compliance was a major issue for Chinese firms operating overseas, but effectiveness of their own AML efforts is gradually emerging as an equally important consideration.
Effectiveness
To some extent the emphasis is now on effectiveness. Even if a business meets all compliance requirements, failure to come clean about a lapse in monitoring dubious flows of capital could cost it dearly in millions of dollars paid in penalties. “A string of cases where institutions such as BNP Paribas were fined in the United States have brought the issue to our attention,” said Guo.
Amid a clampdown on money laundering in the financial sector, new avenues for laundering have emerged in real estate, precious metals, artifact auctions and pawn-broking, he argued.
He singled out the sale of artifacts in arguing for a more robust regulatory role. According to a revelation by US intelligence operatives, the biggest source of funding for IS, after crude oil sales and foreign donations, is reportedly the sale of relics at auction houses around the world.
While many may wonder if the PBOC can maintain the coherency of its cross-ministry AML efforts, Guo shrugged off the concern and cited their “good cooperation” with the Ministry of Public Security as proof of a pervasive “team spirit” among members of the special task force.
“When the ministry (of public security) needs support in intelligence, we at the PBOC intelligence unit would work overtime to gather the information required for their subsequent law enforcement action,” said Guo.
He added that China’s ongoing efforts to free up its capital account — an initiative that inevitably is accompanied by greater money laundering risks — ought to prepare regulators for more challenges that lie ahead.
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