Law taking on money laundering in works
By Chuan Yu (China Daily)
Updated: 2004-07-24 00:23

China's anti-money laundering campaign is gathering speed after months of preparation laid the groundwork for protecting one of the world's fastest-growing economies from the threat of dirty money.

The People's Bank of China (PBOC), the nation's central bank, said Friday lawmakers are drafting the nation's first anti-money laundering law with assistance from more than 10 government ministries.

The team authoring the draft was set up in March, a PBOC spokesman said,with the law aimed at adopting international best practices. It will also be highly workable in China, and will "greatly propel China's anti-money laundering efforts," drafters say.

The central bank is upgrading an anti-money laundering monitoring and analysis centre to enhance its supervisory capacities, and plans to inspect commercial banks' anti-money laundering mechanisms later this month, the spokesman said.

The bank is also considering the possibility of requiring additional financial institutions,including securities firms and insurance companies, to report suspicious and large-sum transactions.

The State's campaign against the growing threat of money laundering came into the spotlight only early last year, when the PBOC promulgated its first anti-money laundering regulations, legally requiring financial institutions to report suspicious and large-sum transactions.

The central bank later set up an anti-money laundering bureau, and has established co-ordinating mechanisms with the nation's banking, securities, insurance and foreign exchange regulators, who" play a very important role in the anti-money laundering work," the spokesman said.

Some preparations were made earlier. The State Council enacted a regulation banning bank accounts opened under pseudonyms four years ago, blocking a key channel for money laundering.

Analysts said the issue caught the central bank's attention quite some years ago as the problems of financial risks, corruption, losses of State-owned assets and drug-related crimes, all intertwined with money laundering, emerged. But it stopped short of moving further for lack of concrete solutions, they said.

"Now the problems are getting more obvious,'' said Qin Chijiang, deputy secretary-general of the China Society of Finance.

Money laundering is believed by many economists as growing in recent years, largely tracking an uptrend in activities that produce dirty money, including corruption, drug trafficking, and smuggling.

The State has reinforced crackdowns on corruption in recent years, including a ban on using pseudonyms to open bank accounts, which have driven more corrupt officials to seek to launder their illegal gains.

The PBOC spokesman Friday cited a 200 billion yuan (US$24 billion) unofficial estimate in the annual flow of dirty money laundered in China.

"Of course this figure is an estimate and can only be used as a reference point," he said. "But it can at least remind us that China,like other parts of the world,faces a severe money laundering situation.

" Fighting money laundering is very important and urgent," he added.

And the State's anti-money laundering efforts are paying off. Chinese police smashed 62 underground money-laundering groups in 2002 and last year,confiscating 130 million yuan (US$15.6 million) in illegal funds and arresting more than 200 suspects, the spokesman said.

And last year alone, the first when banks were required to report suspicious and large-sum transactions,institutions reported 2.6 million such transactions, involving US$600 billion.

But there are still cracks in China's anti-money laundering firewalls, the PBOC said. China still lacks a special law governing money laundering, while the scope of illegal activities used by existing laws in defining money laundering is seen as too narrow.

In China's Criminal Law, the definition of money laundering covers proceeds from only three categories of illegal activity -- smuggling, drug trafficking and crimes by criminal groups.

And the PBOC plans to improve its monitoring and analysis capacity by integrating suspicious and large-sum transactions information for both renminbi and foreign currencies, which are now reported on a separate basis, the spokesman said.

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