China Gets Tough on Money Laundering

In January 2003, the People's Bank of China (PBOC) promulgated three sets of rules relating to money laundering: the Financial Institutions Anti-money Laundering Provisions; the Large and Suspicious Renminbi Payment Transactions Reporting Administrative Procedures; and the Management Procedures for Financial Institutions Governing Reporting of Large and Suspicious Foreign Currency Funds Transactions. These rules become effective March 1 2003.

The PBOC set up an anti-money laundering working group in September 2001, in the immediate aftermath of 9.11. In July 2002 it established a payments transaction monitoring office and an anti-money laundering office. The target is the "black money" proceeds of smuggling, drugs, corruption, and terrorism that enters banks, sometimes in cash, and is laundered through the mechanism of normal settlements.

Within the PBOC, the State Administration of Foreign Exchange (SAFE) is responsible for monitoring foreign currency transactions and possible anti-money laundering activities, while the Payments and Settlements Management Office looks after renminbi transactions. In both cases, the approach is to draft rules and procedures and to oversee their implementation by the banks. The latter office, however, is more directly involved in implementation and monitoring of the inter-bank transfers and settlements system.