China is tightening the screw on money laundering by requiring
its financial bodies to report any large or suspicious
transactions.
According to new rules released by the People's Bank of China on
Tuesday, financial institutions such as banks and insurers will be
required to report large and suspect transactions to anti-money
laundering authorities.
The new rules, which come into effect next March, came on the
heels of the country's first anti-money laundering law, which was
passed last month and is effective in January.
The new rules set out specific definitions of large and suspect
transactions that must be reported to the Anti-Money Laundering
Monitoring and Analysis Centre, an office under the central
bank.
A single transaction exceeding 200,000 yuan (US$25,400) or a
transaction with accumulated value of 200,000 yuan within a day are
defined as large transactions.
For foreign currency, the sum is US$10,000.
As for suspicious transactions, securities dealers, futures
brokers and fund management companies should report if they notice
idle accounts being suddenly reactivated and large transactions
taking place over a short period, Xinhua News Agency reported.
Also, commercial banks, credit unions, postal savings
institutions and trust companies have also been warned to look out
for sudden closure of accounts following large transfers, loans
paid back ahead of schedule and transactions that do not tally with
clients' financial status.
The detailed rules, experts and industry players said, will make
the anti-money laundering efforts more effective, although it could
increase costs for financial bodies.
"Being more specific will enable financial institutions to
better deal with anti-money laundering tasks," said Qiu Zhaoxiang,
professor at the Institute of Finance Studies at University of
International Business and Economics.
Some have voiced concerns over the costs involved.
"The (transaction) sum may be too small, which may increase our
reporting workload," said an official from a leading private bank
in the country who wished to remain anonymous.
But Qiu said the definition of a large transaction is in line
with China's conditions, citing the example of United States where
any transaction larger than US$10,000 is required to be reported to
the relevant authority.
"Although the rules will make it hard and complex to launder
money, it will also increase the workload for financial
institutions," Qiu said.
But he said financial institutions are also public institutions,
which means it is their public duty to fight money laundering.
"It is obvious that it will mean extra operating costs for us,
but it is manageable," said a manager from a fund company who also
requested anonymity.
The rules also require financial institutions to set up
specialized anti-money laundering posts and designate staff to
handle the job.
The central bank said it could adjust the definition of the
large transaction if needed.
(China Daily November 16, 2006)