China to revise legislation to tackle illicit capital flows

It is grappling with tech that complicates anti-laundering efforts, like crypto assets

- Joyce ZK Lim

Sweeping revisions to China's law against money laundering are in the works, as the world's second-largest economy steps up efforts to curb illicit capital flows that could threaten not just the security of its financial system, but also its international reputation.

China's legislature reviewed last week a new draft of the law which has not been updated since its promulgation in 2007 and is now soliciting public feedback on the text until May 25.

China is grappling with new technologies that complicate antilaundering efforts by obfuscating the source of funds, such as cryptocurrencies and other virtual fintech assets.

The revisions to the law also precede an upcoming evaluation of China's anti-money laundering regime by the Financial Action Task Force (FATF), a leading international watchdog that sets global standards.

"In recent years, our anti-money laundering efforts have exposed a number of problems," China's central bank governor Pan Gongsheng was reported by state media to have said.

Among these are institutions' inadequate fulfilment of anti-laundering obligations, insufficient information sharing, and "new types of money laundering risks" against which safeguards have "yet to be strengthened".

These are on top of several deficiencies the FATF had flagged when it last evaluated China's efforts from 2018 to 2019, the reports noted.

To plug these gaps, China's new draft law - which now has 62 articles, up from the previous 37 spells out institutions' anti-laundering requirements in greater detail, provides for more scrutiny of their actions, and imposes harsher penalties for non-compliance.