China’s Major Update to Anti-Money Laundering Laws
In a significant move to modernize its financial regulatory framework, China is set to revamp its Anti-Money Laundering (AML) laws, marking the first major update since 2007. The revision will incorporate stringent measures specifically targeting cryptocurrency-related transactions. This development, as reported by Jiemian.com, is part of China’s response to the challenges posed by the increasing use of digital assets in money laundering activities. Prime Minister Li Qiang chaired an executive meeting of the State Council on January 22 to discuss the revised AML law, initially proposed in June 2021 and included in the 2023 legislative work plan. The enactment of the final law is anticipated by 2025.
Addressing Cryptocurrency Challenges in Money Laundering
The amendment to the AML laws is a direct response to the evolving nature of financial crimes, particularly in the context of virtual currencies. Experts like Wang Xin, a professor at Peking University Law School, have highlighted the urgent need to tackle the legal intricacies of cryptocurrency in the realm of money laundering. While the revised draft targets digital asset money laundering, there are concerns about the lack of detailed operational guidance for procedures like the seizure and freezing of assets linked to these crimes. China’s stringent stance on cryptocurrency, including the 2021 ban on its use and mining activities, has not fully mitigated the risks, as the decentralized nature of cryptocurrencies allows continued access to crypto markets within the mainland.
Broadening Regulatory Oversight and International Compliance
The upcoming amendment to China’s AML regulations aims to extend regulatory oversight beyond financial institutions to include certain non-financial entities, aligning China’s laws with international standards set by organizations like the Financial Action Task Force (FATF). This expansion of the legal framework is critical for effective monitoring and control of various forms of money laundering. Furthermore, the amendment is expected to refine definitions, obligations, jurisdiction rules, and penalties under the AML laws, strengthening China’s financial regulatory system.
China’s Strategic Steps in Global Financial Regulation
The legal changes are also seen as China’s effort to reinforce its position as a responsible international actor in financial regulation. By involving key authorities like the People’s Bank of China, the country aims to enhance its influence in global financial governance, which could attract foreign investment and prevent capital flight. However, experts like Wang Xin and Yan Lixin from Fudan University’s Anti-Money Laundering Research Center underscore the need for further improvements. They advocate for enhanced judicial relief mechanisms and establishing a comprehensive financial intelligence network, essential for effectively enforcing AML laws and protecting citizens’ rights and interests.
