China's Anti-Money Laundering Efforts Gather Steam

by Mary Swire, for LawAndTax-News.com, Hong Kong

29 August 2006

The Chinese authorities are stepping up their legislative efforts to crack down on money laundering after investigations carried out in 2005 uncovered more than 50 cases of serious money laundering involving a total of 10 billion yuan (US$1.15 billion).

The People's Bank of China revealed in a recent report that it intended to increase inspections and strengthen cooperation between banking regulators and other government bodies in an effort to thwart money launderers.

According to the bank, the majority of the cases uncovered, about 61%, were centred in the coastal provinces of Zhejiang and Guangdong which it said were prime spots for smuggling contraband. These cases involve underground banking, embezzlement of public funds, drug smuggling, and illegal lotteries, among others.

Illegal foreign exchange bureaus are also a popular industry for money launderers. Last year, there were 283,400 reports on suspicious renminbi funds and around 2 million suspicious foreign exchange transactions.

Throughout 2005, the central bank and the State Administration of Foreign Exchange (SAFE) conducted investigations into 1,614 suspected cases of money laundering. They also provided police with 2,790 pieces of evidence in criminal cases.

With the National People's Congress reviewing the country's first draft anti-money laundering laws, Xiang Junbo, the central bank's deputy governor, said in the report that 2006 will be an "important year" in the country's efforts to crack down on the activities of money launderers.

The bill was submitted to the NPC, China's highest legislative body, in April 2006, and will pass into law after its third reading, possibly by the end of this year.

While money laundering is already illegal under Chinese law, the new legislation seeks to clarify anti-money laundering regulations and plug existing loopholes in the law.

Draft rules posted in July will mean that banks would have to report cash transactions of more than 50,000 yuan, or the foreign currency equivalent of $US10,000. Individuals would also be required to use their real names when opening a deposit account.

Other regulations targeting the banking, securities and insurance industries will also be posted by the authorities in the latter half of this year, says Xiang.

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