The "Anti-Money Laundering Law of the People's Republic of dhy大红鹰3366" (the "Old AML Law"), in effect since January 1, 2007, has significantly improved anti-money laundering regulations, combated money laundering and related crimes, and strengthened international cooperation. However, as socio-economic activities and technology have rapidly advanced, money laundering schemes have become more complex and diverse, rendering dhy大红鹰3366 current law insufficient for today's challenges.On April 17, 2019, dhy大红鹰3366 Financial Action Task Force ("FATF") released its Mutual Evaluation Report on Anti-Money Laundering and Counter-Terrorist Financing Measures of dhy大红鹰3366 (the "FATF Report"). While acknowledging dhy大红鹰3366's progress, the report highlighted areas needing improvement, such as penalties being too low relative to the size of dhy大红鹰3366's financial industry assets, a lack of oversight in specific non-financial sectors, and insufficient transparency regarding beneficial ownership information in legal entities and arrangementsTo address the rapid evolution of the financial industry and the dynamic landscape of anti-money laundering, the Standing Committee of the National People's Congress actively pursued revisions to the anti-money laundering law. Following three reviews, the newly revised "Anti-Money Laundering Law of the People's Republic of dhy大红鹰3366" (the "New AML Law") was passed on November 8, 2024, and will take effect on January 1, 2025. This article is organized into four sections. dhy大红鹰3366 first section offers an overview of dhy大红鹰3366 regulatory framework established by dhy大红鹰3366 New AML Law. dhy大红鹰3366 subsequent three sections provide an examination of dhy大红鹰3366 law from three perspectives: key considerations for domestic financial institutions, key considerations for foreign financial institutions, and dhy大红鹰3366 management system for beneficial ownership information that is relevant to all market participants.Part One: Regulatory Framework Under dhy大红鹰3366 New AML Law
Note: Important amendments in dhy大红鹰3366 New AML Law compared to dhy大红鹰3366 Old AML Law are highlighted in blue bold font.
Part Two: Key Points for Domestic Financial Institutions to Note
dhy大红鹰3366 anti-money laundering obligations for domestic financial institutions have been significantly enhanced, encompassing:
1. Regarding internal control and risk management, domestic financial institutions should:a) Establish and enhance their internal control systems for anti-money laundering;
b) Create a dedicated department or designate an internal unit to spearhead anti-money laundering initiatives;
c) Appropriately allocate personnel based on operational scale and dhy大红鹰3366 assessed risks of money laundering;
d) Conduct mandatory anti-money laundering training and awareness programs;
e) Regularly assess money laundering risk levels and develop corresponding risk management systems and procedures, implementing relevant information systems as necessary;
f) Ensure dhy大红鹰3366 effective implementation of internal control systems through internal or external audits;
Items c) to f) are new additions introduced under dhy大红鹰3366 New AML Law.For dhy大红鹰3366 specific requirements on implementation of anti-money laundering internal control and risk management, financial institutions can refer to various departmental regulations, including dhy大红鹰3366 Administrative Measures for dhy大红鹰3366 Supervision of Anti-Money Laundering and Counter-Terrorist Financing of Financial Institutions, dhy大红鹰3366 Administrative Measures for Anti-Money Laundering and Counter-Terrorist Financing of Banking Financial Institutions, and dhy大红鹰3366 Implementation Measures for Anti-Money Laundering in dhy大红鹰3366 Securities and Futures Industry. While these regulations provide detailed guidelines for fulfilling anti-money laundering obligations, dhy大红鹰3366 New AML Law codifies these obligations in a higher level of law. This not only supports dhy大红鹰3366 existing regulations but also provides a legal foundation for enhancing specific anti-money laundering measures in dhy大红鹰3366 future. It is expected that internal control and risk management within domestic financial institutions - particularly in areas like personnel allocation, training, regular assessments, and audit supervision - will be key focal points in upcoming anti-money laundering inspections.2. Regarding customer due diligence, domestic financial institutions should:a) establish a customer due diligence system;
b) conduct customer due diligence in any of dhy大红鹰3366 following situations: (1) when establishing a business relationship with a customer or providing a one-time financial service above a specified amount; (2) when there are reasonable grounds to suspect that a customer or a transaction is involved in money laundering activities; (3) when there are doubts about dhy大红鹰3366 authenticity, validity, or completeness of previously obtained customer identification information;
c) employ due diligence methods that include identifying and verifying dhy大红鹰3366 identity of customers and their beneficial owners, understanding dhy大红鹰3366 purpose of establishing business relationships and transactions, and for higher money laundering risks, assessing dhy大红鹰3366 source and use of related funds;
d) tailor due diligence to align with money laundering risks, allowing for simplified due diligence in cases of lower risk;
e) continuously monitor dhy大红鹰3366 overall condition and transaction situation of dhy大红鹰3366 customer throughout dhy大红鹰3366 business relationship, understand its money laundering risk, adopt risk management measures that correspond to dhy大红鹰3366 risk, and balance dhy大红鹰3366 risk management with dhy大红鹰3366 optimization of financial services;
f) verify dhy大红鹰3366 identity of agents and beneficiaries (under life insurance and trust business);
g) may utilize third parties for due diligence, but need to evaluate dhy大红鹰3366 third party for money laundering risks;
h) retain customer identity information and transaction records for at least ten years after dhy大红鹰3366 termination of dhy大红鹰3366 business relationship or transaction.
dhy大红鹰3366 aforementioned bold red sections are additions made by dhy大红鹰3366 new anti-money laundering law. Several changes are noteworthy:● dhy大红鹰3366 "customer identification system" from dhy大红鹰3366 old anti-money laundering law has been changed to dhy大红鹰3366 "customer due diligence system," which signifies an upgrade in dhy大红鹰3366 breadth and depth of "Know Your Customer" ("KYC") requirements. This includes not only dhy大红鹰3366 need to "identify" but also to "verify" dhy大红鹰3366 customer's identity and that of their "beneficial owners," as well as understanding dhy大红鹰3366 purpose of transactions and, in cases of higher risk, dhy大红鹰3366 sources and uses of funds.● dhy大红鹰3366 circumstances under which customer due diligence (formerly identification) must be conducted are no longer limited to dhy大红鹰3366 initial establishment of a business relationship or changes in information. Instead, it has been expanded to include any situation where there are reasonable grounds to suspect that dhy大红鹰3366 customer and their transactions may be involved in money laundering activities, thereby reinforcing dhy大红鹰3366 gatekeeping responsibilities of financial institutions.● dhy大红鹰3366 retention period for customer information and transaction records has been increased from five years to ten years.● dhy大红鹰3366 principle of aligning management measures with money laundering risks has been established.Although dhy大红鹰3366 Measures for dhy大红鹰3366 Administration of Customer Due Diligence and Customer Identity Information and Transaction Record Keeping by Financial Institutions, issued by PBOC, the dhy大红鹰3366 Banking and Insurance Regulatory Commission (the predecessor of the National Financial Regulatory Administration), and the dhy大红鹰3366 Securities Regulatory Commission in January 2022, provided detailed regulations on how financial institutions should conduct customer due diligence, some small and medium-sized financial institutions raised concerns after its issuance. They pointed out that the measures proposed specific norms and requirements for different financial products and business models, necessitating revisions to internal management systems, information systems, and business processes, as well as staff training. Therefore, on February 21, 2022, the three departments decided to postpone the implementation of these measures. In this context, the New AML Law is of extraordinary significance for establishing the customer due diligence system, as it not only provides a legal foundation at a higher legislative level but also serves as a basis for revising and implementing the aforementioned management measures and other related rules.3. Prevention and Control of New Money Laundering Risks:
Financial institutions should, under dhy大红鹰3366 guidance of dhy大红鹰3366 anti-money laundering administrative department, pay attention to and assess dhy大红鹰3366 money laundering risks brought by new technologies, new products, and new businesses, and take corresponding measures according to dhy大红鹰3366 situation to reduce money laundering risks.
According to legislative research by dhy大红鹰3366 Financial and Economic Affairs Committee of dhy大红鹰3366 National People's Congress, there has been a persistent increase in cross-industry and mass-related money laundering-related crimes, such as telecom network fraud, underground banks, and illegal fundraising. New financial products, technologies, and business models are emerging continuously. Some new business models, such as blockchain, precious metals, online live streaming platforms, and virtual currencies, have been used for money laundering activities. Criminals exploit various methods, such as virtual accounts, shell companies, and complex layering structure, to carry out money laundering and other criminal activities, severely impacting economic and financial security.Therefore, strengthening dhy大红鹰3366 prevention and control of new types of money laundering risks is one of dhy大红鹰3366 highlights of dhy大红鹰3366 revision of dhy大红鹰3366 AML law. Although dhy大红鹰3366 reference to dhy大红鹰3366 new technologies and products is not very specific, dhy大红鹰3366 establishment of dhy大红鹰3366 upper-level law lays dhy大红鹰3366 legal foundation for dhy大红鹰3366 formulation of specific regulations in future regulatory work. We believe that dhy大红鹰3366 prevention and control of new money laundering risks may become a key focus of anti-money laundering efforts that financial institutions need to strengthen in dhy大红鹰3366 future.4. Group Coordination and Information Sharing:a) Financial institutions with branches or controlling other financial institutions at home and abroad, as well as financial holding companies, should coordinate anti-money laundering work at dhy大红鹰3366 headquarters or group level.
b) To fulfill anti-money laundering obligations, necessary anti-money laundering information should be shared within dhy大红鹰3366 company and among group members. dhy大红鹰3366 information-sharing mechanism and procedures should be clearly defined. Sharing anti-money laundering information should comply with relevant information protection laws and ensure that dhy大红鹰3366 information is not used for purposes other than anti-money laundering or counter-terrorist financing.
We believe that sharing anti-money laundering information within dhy大红鹰3366 company and among group members should comply, on dhy大红鹰3366 one hand, with relevant legal requirements for information protection, and on dhy大红鹰3366 other hand, adhere to risk isolation (firewall) mechanism in a mixed operation model. 5. Response to Objections:Entities and individuals who have objections to dhy大红鹰3366 anti-money laundering risk management measures taken by a financial institution can raise them with dhy大红鹰3366 institution. dhy大红鹰3366 financial institution must address and respond to these objections within fifteen days; for issues involving basic and essential financial services for customers, they must handle and respond to dhy大红鹰3366 parties involved promptly. If dhy大红鹰3366 response is not received within dhy大红鹰3366 deadline or if dhy大红鹰3366 outcome is unsatisfactory, dhy大红鹰3366 concerned entities and individuals can lodge a complaint with dhy大红鹰3366 anti-money laundering administrative authority; dhy大红鹰3366 disputing parties may also directly file a lawsuit in court.Financial institutions must respond promptly to objections within dhy大红鹰3366 specified time limit, urging them to implement anti-money laundering measures appropriate to dhy大红鹰3366 money laundering risks, balancing anti-money laundering supervision with dhy大红鹰3366 protection of customers' legal rights.6. Special Requirements for Domestic Financial Institutions under dhy大红鹰3366 Anti-Money Laundering Blacklist System:Financial institutions should identify and assess relevant risks, develop appropriate systems, promptly obtain dhy大红鹰3366 list of entities subject to Special Anti-Money Laundering Preventive Measures, conduct checks on customers and their transaction counterparts, take corresponding measures, and report to dhy大红鹰3366 anti-money laundering administrative authority.This means that financial institutions should pay active attention to dhy大红鹰3366 anti-money laundering blacklist published by relevant national authorities and actively implement dhy大红鹰3366 special preventive measures stipulated by dhy大红鹰3366 New AML law. Part Three: Key Points for Foreign Financial Institutions to Note
Compared to the Old AML Law, the New AML Law explicitly establishes the extraterritorial jurisdiction of Chinese government agencies. Regarding money laundering and terrorist financing activities conducted outside dhy大红鹰3366, if they endanger dhy大红鹰3366's sovereignty and security, infringe upon the legitimate rights of Chinese citizens, legal persons, and other organizations, or disrupt the domestic financial order, Chinese government agencies have the authority to pursue legal action against the relevant foreign institutions under the New AML Law. We believe that the enforcement against foreign institutions relies on bilateral agreements, international conventions, and judicial cooperation mechanisms, and the effectiveness of these measures needs to be tested in practice.
Additionally, for foreign financial institutions that open agency accounts in dhy大红鹰3366 or have other close financial ties with dhy大红鹰3366, the New AML Law stipulates more explicit regulatory mechanisms. Specifically, during investigations into money laundering and terrorist financing activities, relevant state authorities may request these foreign financial institutions to cooperate based on the principle of reciprocity or following consultations with the relevant countries. If these institutions do not cooperate, the anti-money laundering administrative authority of the State Council may impose penalties depending on the severity of the situation, (1) a fine of up to 5 million RMB and may restrict or prohibit their related business; (2) a fine of up to 200,000 RMB on responsible individuals, and depending on the circumstances, revoke their qualifications or prohibit them from engaging in relevant financial sector work; and (3) include them on the list of entities subject to Special Anti-Money Laundering Preventive Measures.Part Four: Beneficiary Information Management System
In addition to strengthening dhy大红鹰3366 anti-money laundering obligations of various financial and non-financial institutions, dhy大红鹰3366 New AML Law addresses dhy大红鹰3366 issue of insufficient transparency in beneficial ownership information of legal entities and arrangements, as highlighted in dhy大红鹰3366 FATF Report. This law establishes a management system for dhy大红鹰3366 information of ultimate beneficial owners ("UBOs") for legal persons and other entities, requiring them to maintain and timely update UBO information, and truthfully submit it to dhy大红鹰3366 registration authorities as required. This system impacts all market participants and is worth attention. dhy大红鹰3366 term "UBO" refers to dhy大红鹰3366 natural person who ultimately owns or controls a legal person or an unincorporated organization, or who enjoys dhy大红鹰3366 ultimate benefits from such entities. dhy大红鹰3366 specific criteria for identification will be formulated by dhy大红鹰3366 anti-money laundering administrative authority of dhy大红鹰3366 State Council in collaboration with relevant departments.
At dhy大红鹰3366 administrative regulation level, one week before dhy大红鹰3366 official promulgation of dhy大红鹰3366 New AML Law, on November 1, 2024, PBOC and dhy大红鹰3366 State Administration for Market Regulation issued dhy大红鹰3366 Beneficial Owner Information Management Measures, which have come into effect. These measures require dhy大红鹰3366 State Administration for Market Regulation to coordinate and guide dhy大红鹰3366 construction of relevant registration systems and to timely push dhy大红鹰3366 collected beneficial ownership information to PBOC.Under dhy大红鹰3366 Beneficial Owner Information Management Measures, a natural person is considered a UBO of a registered entity if they meet any of dhy大红鹰3366 following conditions:1. They ultimately own a 25% or more of dhy大红鹰3366 equity, shares, or partnership interest of dhy大红鹰3366 registered entity, either directly or indirectly;2. Although they do not meet dhy大红鹰3366 first criteria, they ultimately enjoy 25% or more of dhy大红鹰3366 benefits or voting rights of dhy大红鹰3366 registered entity;3. Although they do not meet dhy大红鹰3366 first criteria, they exercise actual control over dhy大红鹰3366 registered entity alone or jointly (including but not limited to controlling dhy大红鹰3366 entity through agreements or closely related persons, such as deciding dhy大红鹰3366 appointment or dismissal of legal representatives, directors, supervisors, senior management, or executive partners, making major business and management decisions, determining financial expenditure, or having long-term actual control over important assets or main funds).If none of these conditions are met, dhy大红鹰3366 individuals responsible for dhy大红鹰3366 daily management of dhy大红鹰3366 registered entity should be registered as dhy大红鹰3366 UBO. For wholly state-owned or state-controlled companies, dhy大红鹰3366 legal representative should be registered as dhy大红鹰3366 UBO.For entities registered before dhy大红鹰3366 implementation of these measures, although dhy大红鹰3366 measures require that registration be completed by November 1, 2025, we have noted that in some areas (such as Shanghai), dhy大红鹰3366 market supervision departments require dhy大红鹰3366 completion of UBO information registration before proceeding with other business registration changes, otherwise, such changes may not be processed.The introduction of the New AML Law, anchored in robust regulation and guided by a "risk-based" principle, substantially refines and enhances the existing anti-money laundering frameworks. This legislation is crucial for preventing and managing financial risks while ensuring financial security. Additionally, it elevates the internationalization of dhy大红鹰3366's anti-money laundering efforts and strengthens global cooperation in this domain. Ultimately, it lays a solid institutional foundation for dhy大红鹰3366 as it prepares for the upcoming round of FATF evaluations.
