The China Insurance Regulatory Commission (CIRC) is the Chinese insurance industry’s primary regulator, and in order to strengthen its supervision of the Chinese insurance industry’s anti-money laundering implementation and compliance work, it promulgated the CIRC Circular on the Distribution of the Administrative Measures for the Anti-money Laundering Work in the Insurance Industry on September 13, 2011 (BAOJIANFA No. 52, 2011 ) (《关于印发<保险业反洗钱工作管理办法>的通知》（保监发52号）). The CIRC implemented this Circular on October 1st, 2011.
Anti-money laundering duties of the CIRC and the CIRC’s local branch offices
The CIRC is responsible for organising, coordinating and directing all of the anti-money laundering activities in the insurance industry. First, it has the responsibility to promulgate the insurance industry’s anti-money laundering policies and rules and it must cooperate with the State Council’s anti-money laundering department to ensure that its policies and rules for the Chinese insurance industry comply with the Chinese government’s overall anti-money laundering policies. Moreover, it arranges for insurance industry anti-money laundering training and publicity to take place. Furthermore, it assists law enforcement authorities in investigating and prosecuting any situations where money laundering is suspected to have occurred. Finally, the CIRC is responsible for carrying out any other money laundering duties that it is required to under Chinese law.
In addition to the CIRC’s responsibilities, the CIRC’s local branches have anti-money laundering implementation duties that are delegated to them from the central CIRC. With central CIRC authorization each local branch is responsible for carrying out all of the following anti-money laundering activities on its behalf:
- Creating specific local rules and regulations that each insurer and insurance asset management company within the local office's jurisdiction must comply with in their day-to-day operations, and carrying out legally required anti-money laundering supervision activities and inspections;
- Providing the CIRC central office reports on the anti-money laundering work within that local office's jurisdiction;
- Participating in local anti-money laundering cooperation actions that occur within its jurisdiction;
- Arranging and publicizing anti-money laundering training within its jurisdiction;
- Assisting the local law enforcement authorities in investigating and handling money laundering cases within its jurisdiction; and
- Performing any other anti-money laundering activities that are delegated to it by the CIRC.
Anti-money laundering duties of the insurance institutions
Insurance institutions must ensure that they have only engaged in insurance activities with individuals that provide their real names, and they have the duty to ensure that all of the information the policyholder provides is complete. Moreover, insurance institutions must ensure that each individual insurance policy's transaction records are available for the CIRC to inspect, and they must ensure that the dispersement of funds from any insurance policy accounts is regulated and documented. Finally, insurance institutions must effectively control money laundering activities within their organizations via their business' internal control activities.
Anti-money laundering conditions that must be met to set up an insurance company or an insurance asset management company
In order to set up a CIRC licensed insurance company or insurance fund asset management company, an applicant must meet the following anti-money laundering related standards:
- Prove it has a legal source of funds to invest as paid-in capital for the company;
- Prove that it has created an internal control system to prevent money laundering activities;
- Set up a special department, or designate a specific department, to implement the applicant's money laundering prevention program;
- Hire personnel to staff the applicant's anti-money laundering department, and train those individuals to ensure that they have the training necessary to prevent money laundering activities within the company;
- The applicant's IT system must be able to support the necessary anti-money laundering activities the applicant must carry out; and
- Any other anti-money laundering activities that the CIRC requires an applicant engage in.
Anti-money laundering application documents that an entity applying to set up an insurance company or insurance asset management company must provide the CIRC
The CIRC requires an applicant that wishes to set up an insurance company or an insurance asset management company to include the following documents pertaining to the applicant’s anti-money laundering activities with the applicant’s application:
- A description of the investment funds the applicant is using to create the company, and a statement that declares that these funds were acquired legally;
- A description of the applicant's internal money laundering control system;
- A report on how the applicant's anti-money laundering department is set up;
- A report on the individuals that have been appointed to staff the applicant's anti-money laundering department, and a description of the training that they have received on money laundering prevention;
- A report on the applicant's anti-money laundering information system; and
- Any other documentation that the CIRC deems necessary to determine whether or not the applicant has ample anti-money laundering prevention mechanisms in place. The CIRC requires the applicant to submit this documentation prior to submitting its business opening application to the CIRC.
A Chinese insurance company or insurance asset management company must meet the following anti-money laundering conditions if it would like to expand its business
An insurer or insurance asset management company that would like to expand its business by establishing a branch must meet the following anti-money laundering related conditions:
- The company must show that it has a sound internal anti-money laundering control system and has the capability to control its branch's activities to ensure that money laundering does not occur through the branch;
- It must show that its overall IT structure can support its branch's anti-money laundering work;
- It must have plans for the branch to have a special department to handle the branch's anti-money laundering functions, or it must have a plan designate a specific office within the branch to perform money laundering prevention activities;
- The company must show that the individuals that it places in the branch's money laundering prevention positions have been trained to be able perform the branch's money laundering prevention functions; and
- The company must meet any other conditions the CIRC imposes to prove that it and its branch can manage the branch's money laundering prevention activities.
Anti-money laundering proof necessary for an insurance company or an insurance asset management company to increase its registered capital
Any time an insurance company or insurance asset management company wishes to increase its registered capital, or whenever there is a change in an insurer or an insurance asset management company's equity, the company must be able to show where its shareholder obtained the funds to acquire equity in the company. The company must provide a description of where those investment funds came from, and it must provide a statement that declares those funds were acquired legally. However, this explanation is not necessary if the investment is made by purchasing the equity on a public stock exchange, and that equity purchase is worth less than 5% of the publicly traded company's registered capital. Moreover, the CIRC can also require a company to provide information on the source of its investment funds in any other circumstance it deems it is necessary to ensure that those funds are not the result of money laundering activities.
Anti-money laundering training for company directors, supervisors, and senior management
As part of the CIRC appointment qualification requirements for insurance company or insurance asset management company directors, supervisors, and senior management officials, an insurer or insurance asset management company must provide the CIRC information that shows that the individuals being appointed have been trained on China's anti-money laundering laws and regulations, and the company must include a report on the anti-money laundering training that each appointed individual has received as part of the individual's CIRC appointment qualification application.
The CIRC’s requirements for internal anti-money laundering systems
An insurer and insurance asset management company’s internal money laundering prevention control system must include systems that perform all of the following functions:
- Identify the identity of the clients;
- Preserve a client's identification materials and his or her transaction records;
- Create reports on any transactions that are for a large amount and create reports for any suspicious transactions;
- Implement the company's money laundering prevention training and ensure that company’s employees are aware of its anti-money laundering prevention activities;
- Perform internal audits of the company's money laundering prevention activities;
- Handle any major money laundering cases;
- Cooperate with CIRC investigations into potential money laundering activities, and assist law enforcement authorities with any criminal investigations into money laundering activities;
- Keep all of the company's anti-money laundering work confidential; and
- Perform any other anti-money laundering functions that Chinese laws and regulations require insurance companies or insurance asset management companies to perform.
Large transaction identification for anti-money laundering purposes
Insurance companies and insurance asset management companies must identify any transactions that they are a party to that are for a large amount or are suspicious. Moreover, they must provide the CIRC with a report on those transactions.
Anti-money laundering clauses in agreements with insurance intermediaries
Chinese insurers must include an anti-money laundering prevention clause in each insurance agency sales agreements it enters with insurance agents and it must also include an anti-money laundering prevention clause in any agreements it enters with other insurance intermediary institutions.
Circumstances where additional CIRC anti-money laundering supervision will be imposed
An insurance company or an insurance asset management company will receive extra CIRC anti-money laundering supervision if any of the following circumstances occurs:
- The company is suspected of engaging in or assisting others in engaging in money laundering;
- An anti-money laundering prevention authority administratively sanctions the company for any money laundering prevention failures; or
- Any other situations where the CIRC determines that the company should receive more anti-money laundering supervision.