International Communiqué

January 9, 2007

China’s First Anti-money Laundering Law Goes into Effect

China's first Anti-money Laundering Law, approved on October 31, 2006, by the Standing Committee of the National People’s Congress, the country’s top legislature, went into effect on January 1, 2007.  The People’s Bank of China, the country’s central bank, issued new implementation rules on anti-money laundering through financial institutions.

Highlights
China ’s Anti-money Laundering Law widens the definition of money laundering that previously only referred to drug trafficking, organized or terrorist crime, and smuggling to include corruption, bribery, and financial frauds. 

The two rules apply to the following financial institutions: (1) commercial banks, urban credit cooperatives, rural credit cooperatives, postal savings institutions, policy banks; (2) securities companies, futures brokerage companies, fund management companies; (3) insurance companies, insurance asset management companies; (4) trust and investment companies, financial assets management companies, financial companies, financial leasing companies, auto finance companies, currency brokerage firms; (5) other financial institutions determined by the People’s Bank of China.

The Measures provide specific types of large transactions in RMB and foreign exchange.

The Measures also require that financial institutions maintain records on clients and transactions and report large and suspicious transactions to the Anti-money Laundering Detection and Analysis, a department set up by the People’s Bank of China.

The Provisions make clear-cut provisions on the freezing of funds: a temporary freezing may not exceed 48 hours.  If a financial institution fails to receive a notice of continuing the freezing within 48 hours after it takes temporary freezing measures as required by the People’s Bank of China, it shall immediately lift the temporary freezing.

The anti-money laundering law will help China's accession to the world’s money policing agency, the Financial Action Task Force on Money Laundering (FATF).  The FATF was established at the G-7 Summit in Paris in 1989 in response to mounting concern over money laundering.  It has 33 members and China became an observer in 2005.

For further information, please contact a member of the International Services Group.

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