The Anti-Money Laundering Law of the People’s Republic of China (2024 Revision) was passed by the 12th session of the 14th National People’s Congress Standing Committee on November 8, 2024, and will come into effect on January 1, 2025. This revision significantly updates the legal framework for anti-money laundering (AML) in China, aiming to enhance the country’s ability to combat money laundering and related financial crimes. The law consists of seven chapters and 65 articles, covering general provisions, AML supervision and management, AML obligations, AML investigations, international cooperation, legal liabilities, and supplementary provisions.
Highlights
Expansion of Predicate Offenses
The law broadens the scope of predicate offenses associated with money laundering, now including a wider range of criminal activities beyond the traditional seven categories. This change ensures that the legal framework keeps pace with evolving criminal tactics.
Risk-Based Approach
The revision introduces a “risk-based” regulatory approach, replacing the previous “rules-based” method. Financial institutions are now required to assess and manage money laundering risks based on the specific risk profiles of their clients, rather than adhering to a one-size-fits-all set of rules.
Enhanced Monitoring of New Money Laundering Risks
With the rise of new financial technologies, the law emphasizes the need for enhanced monitoring and analysis of emerging money laundering methods, such as those involving virtual currencies and online payments.
Strengthened AML Obligations for Financial Institutions
Financial institutions are required to establish and improve internal control systems for AML, conduct regular risk assessments, and ensure the effective implementation of these systems through internal or external audits.
Increased Penalties
The law imposes stricter penalties for money laundering activities to deter such crimes and protect the financial order, public interests, and national security.
Observations
Impact on Foreign-Invested and Outbound Enterprises
For foreign-invested and outbound enterprises, the new law means a higher level of compliance is required. These enterprises must ensure that their financial transactions and operations are transparent and comply with AML regulations. This includes conducting thorough due diligence on business partners and transactions, especially those involving cross-border activities.
Technological Integration
The law encourages the use of advanced technologies such as big data, artificial intelligence, and blockchain to enhance AML monitoring. This is particularly relevant for enterprises operating in digital finance and e-commerce, where transactions are frequent and complex.
International Cooperation
The enhanced focus on international cooperation in AML efforts is crucial for enterprises with global operations. It ensures that they are aligned with international standards and can effectively respond to cross-border AML investigations and regulatory requirements.
Suggestions
Compliance System Enhancement
Establish a robust AML compliance system that includes regular training for employees, clear internal policies, and procedures for handling suspicious transactions. Ensure that all employees are aware of their AML responsibilities and the potential consequences of non-compliance.
Risk Assessment
Conduct regular risk assessments to identify potential AML risks within your business operations. This should include evaluating the risk associated with different types of transactions, clients, and geographical locations.
Technology Utilization
Invest in advanced technological solutions to improve the efficiency and effectiveness of AML monitoring. Utilize tools that can analyze large volumes of data to detect unusual patterns and flag potential money laundering activities.
International Standards Alignment
Stay informed about international AML standards and best practices, particularly if your business operates across borders. Ensure that your AML policies and procedures are in line with these standards to avoid regulatory issues in different jurisdictions.
Regular Audits and Reviews
Implement a system of regular internal and external audits to ensure the ongoing effectiveness of your AML compliance program. This will help identify any gaps or weaknesses in your current practices and allow for timely adjustments.
