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Anti-Money Laundering Law of the People’s Republic of China

By Todd KuhnsPublished on Jan 1, 2007
Anti-Money Laundering Law of the People’s Republic of China

Effective Date: 01-01-2007

Source: Government Website

Chinese Title: 中华人民共和国反洗钱法

Decree No. 56 of the President of the People’s Republic of China

Passed by the 24th Session of the Standing Committee of the Tenth National People’s Congress on 31 October 2006 and promulgated thereon

CHAPTER I — GENERAL PRINCIPLES

Article 1 This Law is formulated for the purposes of preventing money laundering activities, preserving financial order and containing money laundering crimes and other related crimes.

Article 2 Anti-money laundering referred to in this Law shall mean the adoption of relevant measures stipulated in this Law to prevent money laundering activities by various means to hide or conceal the source and nature of gains and other profits from drug offences, organised crime, terrorist activities, smuggling, corruption and bribery, disruption of financial order, financial fraud, etc.

Article 3 Financial institutions established in the People’s Republic of China and specific non-financial-institutions which are required to perform anti-money laundering obligations according to the provisions shall adopt preventive and control measures pursuant to the law, and fulfill anti-money laundering obligations by establishing proper and comprehensive systems for determining customer identity, retaining customer identity information and transaction records, and a system of reporting large amount transactions and suspicious transactions.

Article 4 The State Council anti-money laundering administrative authority is responsible for anti-money laundering supervision and administration efforts nationwide. The relevant departments and agencies of the State Council shall carry out anti-money laundering supervision and administration within their respective scope of duties.

The State Council anti-money laundering administrative authority and the relevant departments and agencies of the State Council and judicial authorities shall coordinate with one another in anti-money laundering efforts.

Article 5 Customer identity information and transaction records obtained in the course of anti-money laundering duties or obligations performed pursuant to the law must be kept confidential and not be disclosed to any organization or individual unless required by the provisions of the law.

Customer identity information and transaction records obtained in the course of anti-money laundering duties, by anti-money laundering administrative authorities and other departments and organisations tasked with supervision and administration of anti-money laundering pursuant to law, must only be used for anti-money laundering administrative investigation efforts.

Customer identity information and transaction records obtained by judicial authorities pursuant to the law must only be used for criminal proceedings relating to anti-money laundering.

Article 6 Agencies and their personnel that submit reports on large amount transactions and suspicious transactions pursuant to the law in their performance of anti-money laundering obligations shall be protected by the law.

Article 7 Any organization or individual shall have the right to report any discovery of money laundering to the anti-money laundering administrative authorities or the public security department. The agency that accepts the report shall maintain in confidence the informant’s identity and the contents of the report.

CHAPTER II — ANTI-MONEY LAUNDERING SUPERVISION AND ADMINISTRATION

Article 8 The State Council anti-money laundering administrative authority shall, organize and coordinate nationwide anti-money laundering efforts, be responsible for monitoring funds pertaining to anti-money laundering, formulate anti-money laundering rules for financial institutions on its own or jointly with the relevant State Council financial supervision and administrative departments, supervise and inspect the performance of anti-money laundering obligation by financial institutions, investigate suspicious transactions within its scope of duties, and perform other duties relating to anti-money laundering as the laws and the State Council stipulate.

The branches of State Council anti-money laundering administrative authority shall, based on the scope of authorization by the State Council anti-money laundering administrative authority, conduct supervision and inspection of anti-money laundering obligations performed by financial institutions.

Article 9 The relevant State Council financial supervision and administrative departments shall participate in the formulation of anti-money laundering rules for financial institutions under its supervision and administration, propose the requirements for a proper and comprehensive internal system of anti-money laundering controls to be established by the financial institutions under its supervision and administration, and perform other duties relating to anti-money laundering as the laws and the State Council stipulate.

Article 10 The State Council anti-money laundering administrative authority shall establish an anti-money laundering information center responsible for receiving and analyzing reports on large amount transactions and suspicious transactions, reporting the analysis results to the State Council anti-money laundering administrative authority pursuant to the provisions, and perform other duties as the State Council anti-money laundering administrative authority stipulates.

Article 11 The State Council anti-money laundering administrative authority may, for the purpose of monitoring the funds for anti-money laundering, obtain the requisite information from the relevant State Council departments and agencies, and the relevant State Council departments and agencies must provide such information.

The State Council anti-money laundering administrative authority shall report on the anti-money laundering efforts to the relevant State Council departments and agencies regularly.

Article 12 The Customs shall, upon discovery of an amount of cash or bearer securities exceeding the stipulated amount carried by an individual during departure or arrival, report to the anti-money laundering administrative authorities promptly.

The standard for amounts which warrant reporting shall be stipulated jointly by the State Council anti-money laundering administrative authority and the General Administration of Customs.

Article 13 Where the anti-money laundering administrative authorities and other departments and agencies tasked with supervision and administration of anti-money laundering discover any suspected money laundering transactions and activities, the discovery must be reported to the investigation agency promptly.

Article 14 Where the relevant State Council financial supervision and administrative department conducts examination and approval of an application to establish a new financial institution or an additional branch of a financial institution, the relevant State Council financial supervision and administrative department shall examine the new establishment’s proposed internal system of anti-money laundering controls; applications that fail to comply with the provisions of this Law shall not be approved.

CHAPTER III — ANTI-MONEY LAUNDERING OBLIGATIONS OF FINANCIAL INSTITUTIONS

Article 15 Financial institutions shall establish a proper and comprehensive internal system of anti-money laundering controls pursuant to the provisions of this Law; the person-in-charge of the financial institution shall be responsible for the effectiveness of the internal system of anti-money laundering controls implemented.

Financial institutions shall establish a specialist anti-money laundering department or appoint an internal department to be responsible for anti-money laundering efforts.

Article 16 Financial institutions shall establish a system of determining customer identity pursuant to the provisions.

When a financial institution establishes a business relationship with a customer or provides one-off financial services such as cash remittance, currency exchange, bill discounting, etc, the financial institution shall conduct verification and registration by requiring the customer to provide true and valid identification documents or any other form of identification document.

Where the transaction is carried out by an agent of the customer, the financial institution shall verify and register the identification documents or any other form of identification document of the agent and the customer.

When a financial institution establishes a business relationship with a customer through a life insurance policy, trust instrument or any other business relationship and the customer is not a beneficiary under the agreement, the financial institution shall verify and register the identification documents or any other form of identification document of the beneficiary and the customer.

Financial institutions shall not provide services or carry out transactions for customers whose identity is unknown, and shall not open anonymous or pseudonym accounts for customers.

Where a financial institution doubts the veracity, validity or integrity of a customer’s identity from identity information previously obtained, the financial institution shall determine the customer’s identity again.

Any organisation or individual that establishes a business relationship with a financial institution or requests for one-off financial services from a financial institution shall provide true and valid identification documents or any other form of identification document.

Article 17 Where a financial institution determines the identity of a customer through a third party, it shall ensure that the third party has adopted measures for determining customer identity which comply with the requirements of this Law; where the third party has not adopted measures for determining customer identity which comply with the requirements of this Law, the financial institution shall bear the liability of not fulfilling the obligation of determining customer identity.

Article 18 When a financial institution is determining the identity of a customer, it may as it deem necessary, verify the relevant customer’s identification information with the public security department, industry and commerce administrative departments and other departments.

Article 19 Financial institutions shall establish a system of retaining customer identity information and transaction records pursuant to the provisions.

Where a customer’s identity information changes when the business relationship is still subsisting and continuing, the customer’s identity information must be updated promptly.

Customer identity information shall be retained for at least five years upon termination of business relationship.

When a financial institution undergoes bankruptcy and dissolution, all customer identity information and transaction records shall be handed over to an agency designated by the relevant State Council department.

Article 20 Financial institutions shall execute the system of reporting large amount transactions and suspicious transactions pursuant to the provisions.

Where the amount in a single transaction or the cumulative amount of transactions within a stipulated period carried out by a financial institution exceeds the stipulated amount, the financial institution shall report to the anti-money laundering information centre promptly.

Article 21 The State Council anti-money laundering administrative authority and the relevant State Council financial supervision and administrative departments shall jointly formulate the specific measures on the system of determining customer identity, system of retaining customer identification information and transaction records that financial institutions establish. The State Council anti-money laundering administrative authority shall formulate the specific measures on reporting large amount transactions and suspicious transactions by financial institutions.

Article 22 Financial institutions shall develop anti-money laundering training and publicity campaigns according to the requirements of prevention and control systems in anti-money laundering.

CHAPTER IV — ANTI-MONEY LAUNDERING INVESTIGATION

Article 23 Where the State Council anti-money laundering administrative authority or its provincial first-level branch discovers suspicious transactions which require investigation and verification, it may investigate the financial institution, and the financial institution shall cooperate and provide the relevant documents and materials truthfully.

There shall be at least two investigators for any investigation into suspicious transactions, and the investigators shall present their legitimate identity pass and the notice of investigation issued by the State Council anti-money laundering administrative authority or its provincial first-level branch. The financial institution shall have a right to refuse investigation where there are less than two investigators or the investigators fail to present their legitimate identity pass and the notice of investigation.

Article 24 The relevant personnel of a financial institution may be questioned and be required to provide explanation in a suspicious transaction investigation.

A written record of the questioning shall be kept. The written record of the questioning shall be verified by the person(s) questioned. Where any omission or error exists in the record, the person(s) questioned may request for supplementation or correction. The person(s) questioned shall sign or seal the written record upon confirmation that no errors exist in the written record; the investigators shall also sign on the written record.

Article 25 Where an investigation requires further verification and approval is granted by the person-in-charge of the State Council anti-money laundering administrative authority or its provincial first-level branch, the investigators may inspect and make photocopies of the account information, transaction records and other relevant materials belonging to the party under investigation; documents and materials that can be removed, hidden, altered or destroyed may be sealed.

Where documents and materials are to be sealed, the investigators and staff member(s) of the financial institution present, shall jointly make a list of the documents and materials in duplicate; the investigators and the staff member(s) of the financial institution present shall sign or seal on the lists; a copy shall be kept by the financial institution and the other copy shall be kept in the case file.

Article 26 Where an investigation fails to eliminate suspicion in a suspected act of money laundering, a report must be lodged with the investigation agency with jurisdiction immediately. Where the customer requests for an overseas transfer of funds from the account under investigation, temporary freeze measures may be adopted upon approval by the person-in-charge of the State Council anti-money laundering administrative authority.

Upon receipt of a report, the investigation agency shall promptly decide whether to continue freezing the funds that are temporarily frozen pursuant to the provisions of the preceding paragraph. Where the investigation agency deems necessary to continue with the freeze, freeze measures shall be adopted pursuant to the provisions of the Criminal Litigation Law; where the investigation agency deems unnecessary to continue with the freeze, it shall notify the State Council anti-money laundering administrative authority immediately; the State Council anti-money laundering administrative authority shall notify the financial institution of the lifting of freeze immediately.

A temporary freeze shall not exceed 48 hours. Where the financial institution has not received notification from the investigation agency of a continued freeze within 48 hours from the adoption of temporary freeze measures pursuant to the request of the State Council anti-money laundering administrative authority, the freeze shall be lifted immediately.

CHAPTER V — INTERNATIONAL COOPERATION ON ANTI-MONEY LAUNDERING

Article 27 The People’s Republic of China shall develop international cooperation in anti-money laundering pursuant to international treaties the People’s Republic of China has concluded or is a signatory, or pursuant to the principles of equality and mutual benefit.

Article 28 The State Council anti-money laundering administrative authority shall, as authorized by the State Council, represent the Chinese government to develop cooperation with foreign governments and relevant international organizations in anti-money laundering, and exchange information and materials relating to anti-money laundering with overseas anti-money laundering agencies pursuant to the law.

Article 29 The judicial authorities shall provide judicial assistance pursuant to the law where pursuit of criminal action against money laundering crimes is involved.

CHAPTER VI — LEGAL LIABILITY

Article 30 Any officer of the anti-money laundering administrative authorities and other departments and agencies that are tasked to conduct supervision and administration of anti-money laundering efforts pursuant to the law who commits any of the following acts shall be subject to administrative penalties:

(1) inspection or investigation, or adoption of temporary freeze measures in violation of the provisions;

(2) disclosure of State secrets, commercial secrets or private personal information obtained in the course of anti-money laundering efforts;

(3) imposition of administrative penalties on relevant agencies or officers in violation of the provisions; or

(4) any duty performed in violation of the law.

Article 31 Where a financial institution commits any of the following acts, it shall be ordered to make correction within a stipulated period by the State Council anti-money laundering administrative authority or an authorised first-level branch of a level above a municipality divided into districts; where the case is serious, a recommendation may be made for the relevant financial supervision and administrative authorities to order the financial institution to impose disciplinary action against its directors, senior management personnel and any other directly accountable personnel:

(1) failure to establish an internal system of anti-money laundering controls according to the provisions;

(2) failure to establish a specialist anti-money laundering department or appoint an internal department to be responsible for anti-money laundering efforts according to the provisions; or

(3) failure to provide anti-money laundering training for staff members.

Article 32 Where a financial institution commits any of the following acts, it shall be ordered to make correction within a stipulated period by the State Council anti-money laundering administrative authority or an authorised first-level branch of a level above a municipality divided into districts; where the case is serious, a fine ranging from RMB200,000 to RMB500,000 shall be imposed and the directors, senior management personnel and any other personnel who are directly accountable shall be subject to a fine ranging from RMB10,000 to RMB50,000:

(1) failure to perform the obligation of determining customer identity according to the provisions;

(2) failure to retain customer identity information and transaction records according to the provisions;

(3) failure to report large amount transactions or suspicious transactions according to the provisions;

(4) carry out transactions with customers whose identity is unknown or open anonymous accounts or pseudonym accounts for customers;

(5) disclose information in violation of confidentiality provisions;

(6) refuse or obstruct anti-money laundering inspection or investigation; or

(7) refuse to provide investigation materials or intentionally provide false materials.

Where any of the acts mentioned in the preceding paragraph committed by a financial institution results in money laundering, the financial institution shall be subject to a fine ranging from RMB500,000 to RMB5 million, and the directors, senior management personnel and any other directly accountable personnel shall be subject to a fine ranging from RMB50,000 to RMB500,000; where the case is very serious, the anti-money laundering administrative authorities may recommend that the relevant financial supervision and administrative authorities order the financial institution to suspend its operations for rectification or revoke the business permit of the financial institution.

The anti-money laundering administrative authorities may recommend that the relevant financial supervision and administrative authorities order the financial institution to take disciplinary action against its directors, senior management personnel and any other directly accountable personnel for any act stipulated in the two preceding paragraphs, or recommend the cancellation of the appointment qualifications of such persons and prohibit such persons from working in the finance industry pursuant to the law.

Article 33 Where a violation of the provisions of this Law constitutes a criminal offenze, criminal liability shall be imposed according to the law.

CHAPTER VII — SUPPLEMENTARY PROVISIONS

Article 34 Financial institutions referred to in this Law shall mean duly established policy banks, commercial banks, credit cooperatives, postal saving organizations, trust investment companies, securities companies and futures brokerages, insurance companies that engage in financial businesses, and any other financial business organizations determined and announced by the State Council anti-money laundering administrative authority.

Article 35 The scope of specific non-financial institutions that are required to perform anti-money laundering obligations, the specific measures on anti-money laundering obligations to be performed by specific non-financial institutions, and the supervision and administration of such specific non-financial institutions shall be formulated jointly by the State Council anti-money laundering administrative authority and the relevant State Council departments.

Article 36 This Law shall apply to the monitor of funds in suspect of being used for financing terrorist activities; where other laws provide to the contrary, such provisions shall prevail.

Article 37 This Law shall be effective 1 January 2007.

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