CHINA has unveiled its first anti-money-laundering regulation in its war against the flow of “dirty” money, which threatens the prospect of its fast growing economy.
The regulation, announced on Monday by the People’s Bank of China (PBOC), details its regulatory responsibilities and the obligations of local and foreign financial institutions. The regulation will come into effect on March 1.
“It is very necessary because there are various irregular economic activities as the system undergoes a transition (from a planned economy to a market-oriented one),” said Qin Chijiang, deputy secretary general of the China Society of Finance.
“If we don’t tackle money laundering, there might be big trouble and capital drainage.”
Chinese officials and analysts widely acknowledge that money laundering has been on the rise in the country, largely tracking an up-trend in activities like embezzlement, drug trafficking and smuggling.
Such illegal conduct, which analysts’ say is concentrated in China’s better-developed coastal areas, not only results in the legalisation of crime proceeds and drainage of State assets, but also threatens China’s financial security.
A government official, who declined to be named, said: “They (money launderers) don’t care about costs (in transferring money from one place to another) and it’s mostly moving rapidly. It’s very likely to disturb financial stability.”
Insiders estimate the illegal outflow of foreign exchange from China, a major form of money laundering that is better known as capital flight, has totalled about US$150bil (RM570bil) since 1987 and averaged US$20bil (RM76bil) annually in recent years.
The PBOC launched its anti-money-laundering campaign in June by establishing two departments to monitor suspicious transactions and co-ordinate inter-ministry co-operation.
The campaign escalated on Monday as the new regulation was substantially broadened to also include illicit gains from terrorist acts and “others,” alongside smuggling, drug trafficking and operations by criminal gangs.
Under the new regulation, financial institutions are required to create their own anti-money laundering mechanisms and report suspicious and certain large transactions, as well as decline services to clients with suspicious identities.
According to experiences from nations with freely convertible currencies like France, the official said a threshold equivalent to US$5,000 (RM19,000) could be a reasonable limit to require forex transactions to be reported. – China Daily
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