One Asia Lawyers Compliance News Letter (September 2021)
We published One Asia Lawyers Compliance News Letter (August 2021).
To view the PDF version, please click the following link.
→One Asia Lawyers Compliance News Letter (September 2021)
One Asia Lawyers Compliance News Letter
China’s New Measures for the Supervision and Administration of Anti-Money Laundering and Counter-Terrorist Financing of Financial Institutions
The Measures for the Supervision and Administration of Anti-Money Laundering and Counter-Terrorist Financing of Financial Institutions (the “Measures”),[1] issued by the People’s Bank of China (“PBOC”), came into effect on 1 August 2021.[2] These Measures aim to prevent and defuse risks related to anti-money laundering (“AML”) and counter-terrorist financing (“CFT”) by improving AML/CFT supervision. The new Measures will supersede the previous Measures for Supervision and Administration of Anti-Money Laundering in Financial Institutions (for Trial Implementation), issued by the PBOC in 2014 (the “2014 Trial Measures”).[3]
Expanded Scope of Application
Although the PBOC’s 2014 Trial Measures had already governed a wide range of entities, the new Measures further expand the scope of application. The Measures now also apply to developmental financial institutions, wealth management subsidiaries of banks, loan companies, consumer financing companies, specialised insurance agents and insurance brokers, non-banking payment institutions as well as network microfinance companies. These new additions will apply alongside entities that were already subject to the 2014 Trial Measures, such as policy banks, rural cooperative banks, rural credit cooperatives, securities companies, financial asset management companies and financial leasing companies.
Enhanced Internal Control and Risk Management Obligations
The new Measures also implement enhanced internal control and risk management mechanisms for subject entities, by specifying obligations in relation to their internal control mechanisms, staff and reporting requirements, which must be compatible with their AML/CFT risks and business scale. These obligations include the following:
・Establish a risk self-assessment mechanism at head office level to assess AML/CFT risks, and report results to the PBOC (or the relevant local branch)
・Establish an appropriate risk management mechanism according to AML/CFT risks (and level of risk) identified
・Establish a new internal department or designate an existing internal department to be responsible for AML/CFT matters
– set up corresponding performance assessment systems, as well as reward and punishment systems in respect of these responsibilities (of board of supervisors, senior management and relevant personnel)
・Establish an audit mechanism (either by an internal audit team or an independent external auditor) for AML/CFT matters, and submit audit reports to the board of directors or authorised committee
・Establish a compatible IT system for AML/CTF matters and promptly upgrade the system as required
・Ensure that any overseas affiliates, branches and subsidiaries implement the Measures to the extent permitted by the laws of the country/region in which they are located, and submit annual reports to the PBOC which confirm and describe the supervision under which these overseas offices operate
・Promptly report to PBOC of any amendments made to the internal control system and/or any change of personnel responsible for AML/CFT matters
Role of PBOC for Supervision and Administration
The Measures stipulate the variety of circumstances for which the PBOC may take action, and the powers afforded to the PBOC to carry out such supervisory and administrative actions. These actions include the following:
・Conducting AML/CFT law enforcement inspections
・Consulting with staff and requiring explanations related to regulatory matters
・Carrying out risk assessments, including on-site assessments
– the PBOC has the power to check, copy and seal documents and materials, as well as inspect an entity’s digital data management system
・Issuing an AML Supervision Reminder Letter (requiring a response within 20 working days) if the PBOC notices any risks or loopholes which need to be rectified
・Conducting meetings with directors, supervisors, senior managers or department heads (e.g. if there is inadequate performance of AML/CFT obligations or if any risk incident has occurred)
The Measures also prescribe accompanying documents,[4] such as the AML Supervision Reminder Letter and notice forms to be given to the entity (e.g. prior to inspection).
New AML/CFT Intelligence-Sharing Initiative between China and UAE
Shortly after these new Measures (above) took effect, it was announced on August 3rd that China and the UAE have agreed to share intelligence to fight money laundering and terrorism financing. More specifically, China’s Anti-Money Laundering Monitoring and Analysis Centre (CAMLMAC) and the UAE’s Financial Intelligence Unit (FIU) will exchange relevant information on investigations conducted by their respective national authorities concerning financial transactions related to money laundering and terrorist financing, as well as any persons or entities involved.[5]
[1] The Measures for the Supervision and Administration of Anti-Money Laundering and Counter-Terrorist Financing of Financial Institutions are only available in Chinese, and are provided through the government website as below:
< http://www.gov.cn/zhengce/zhengceku/2021-04/16/content_5600189.htm >
[2] The draft of these Measures was released by the PBOC on 30th December 2020 for public consultation.
[3] The 2014 Measures for Supervision and Administration of Anti-Money Laundering in Financial Institutions (for Trial Implementation) are only available in Chinese, and are provided through the government website as below:
< http://www.gov.cn/gongbao/content/2015/content_2838183.htm >
[4] These are provided as attachments within the official Measures.
[5] Emirates News Agency. UAE’s Financial Intelligence Unit Signed MoU with China Anti-Money Laundering Monitoring and Analysis Centre. (3rd August 2021)
< https://www.wam.ae/en/details/1395302957569 >
Reuters. UAE, China to cooperate against money laundering, terrorism financing. (3rd August 2021)
