The revised Administrative Measures for the Financial Institutions' Report of Large-sum Transactions and Suspicious Transactions (“Revised Measures”) have been released on 30 December 2016 and will come into effect on 1 July 2017.
The Revised Measures require reporting of large-sum transactions and suspicious transactions by financial institutions described in section 1, establishing reporting obligations to the China Anti-Money Laundering Monitoring & Analysis Centre (“CAMLMAC”). These reporting measures seem in part designed to further monitor the remittance of funds abroad. Relatively low thresholds are applicable to the classification of “large-sum transactions”.
1. Who should report large-sum transactions and suspicious transactions?
The following financial institutions established within China (not including Hong Kong, Macau and Taiwan) have the reporting responsibilities:
(1) Policy banks, commercial banks, rural credit banks, rural credit cooperatives, village banks;
(2) Securities companies, futures companies, fund management companies;
(3) Insurance companies, insurance asset management companies, insurance agencies, insurance brokerage companies;
(4) Trust companies, financial asset management companies, finance companies of enterprise groups, financial lease companies, auto financing companies, consumption financing companies, currency brokerage companies, loan companies; and
(5) Other financial institutions determined and announced by the People's Bank of China (“PBOC”).
2. When and how to make a large-sum transaction report?
2.1 When does a large-sum transaction must be reported?
Though there are exceptions (e.g., funding among financial institutions, appropriation of fund within a financial institution etc.), an institution mentioned in section 1, generally must send a large-sum transaction report regarding its client’s transaction to CAMLMAC with respect to any single transaction or the aggregate of transactions made in one single day by the client, which:
(1) Reach RMB 50,000 or for foreign currency reach the equivalent value of USD 10,000, if made in the form of cash transactions, e.g., deposit of cash, withdrawal of cash, settlement or sale of foreign exchange in cash, exchange of notes, cash remittance, payment of cash instrument etc.; (Note: the RMB threshold in previous Measures is RMB 200,000)
(2) Reach RMB 2,000,000 or for foreign currency reach the equivalent value of USD 200,000, if transferred between the bank account of the client who is a non-natural person and other bank account(s);
(3) Reach RMB 500,000 or for foreign currency reach the equivalent value of USD 100,000, if transferred domestically in China between the bank account of the client who is a natural person and other bank account(s);
(4) Reach RMB 200,000 or for foreign currency reach the equivalent value of USD 10,000, if transferred cross-border between the bank account of the client who is a natural person and other bank account(s). (Note: this clause is newly added by the Revised Measures)
Where necessary, the PBOC may adjust the above large-sum transaction thresholds.
2.2 How to report a large-sum transaction?
An electronic large-sum transaction report must be sent to CAMLMAC within 5 working days after the occurrence of this transaction. If the client’s transaction(s) meets two or more conditions above, separate reports must be sent respectively according to each and every condition.
3. When and how to make a suspicious transaction report?
3.1 What is a suspicious transaction?
Suspicious transactions are financial transactions that a financial institution described in section 1, have identified or have reasonable grounds to suspect that are related to the commission or attempted commission, of money laundering, terrorist activity financing or other criminal offences. (Note: “Have reasonable grounds to suspect” as underlined here is a condition newly added by the Revised Measures)
Any suspicious transaction must be reported to CAMLMAC regardless of the amount of money or value of assets involved.
3.2 How to identify and report a suspicious transaction?
A financial institution must establish its own criteria for monitoring financial transactions, and be responsible for the criteria’s effectiveness. The monitoring criteria shall include but not be limited to the client’s identity and behaviour, as well as the sources, currency amount, frequency, flow direction and characteristics, amongst other aspects, of the suspicious transactions. In addition, factors such as the analysis reports and risk assessment reports issued by governmental organs (such as PBOC, public security bureaus, and bureaus of justice), circumstances of the financial institution itself (including but not being limited to its business location, scale of assets, features of business) and so on, should be taken into account when drafting the monitoring criteria.
The Revised Measures do not require the use of an automated system for screening out suspicious transactions, though such a system may be beneficial.
After preliminary results are screened out according to the monitoring criteria, a manual analysis on the results must be conducted to further identify and narrow down suspicious transactions. Then, the identified suspicious transactions shall be reported through electronic means to CAMLMAC within 5 working days after identification.
(Note: the content in section 3.2 is newly added by the Revised Measures)
4. Major requirements as to the internal management of financial institutions
Among others, financial institutions are required to:
(1) Make its own internal management rules and performance rules with respect to reporting large-sum transactions and suspicious transactions. Such rules shall be put on record with the local branch of PBOC.
(2) Have staffer(s) specialised in doing anti-money laundering job, reporting large-sum transactions and suspicious transactions to CAMLMAC.
(3) Keep and preserve a copy of each large-sum transaction report, suspicious transaction report, transaction analysis record and internal operation record, at least for 5 years from the date of formation of these documents. Moreover, if the said documents are involved in any official investigation on anti-money laundering, it shall preserve such documents until the investigation is completed.
(Note: the content in section 4 is newly added by the Revised Measures)
5. Penalties for non-compliance
There are penalties for failing to meet the reporting obligations. In addition to being ordered to make a correction, failure to report a large-sum transaction or suspicious transaction, could lead to a fine up to RMB 500,000 on the financial institution, and a fine up to RMB 50,000 on its directly liable persons (including the liable chairman, senior manager and other staffers). Moreover, if the failure leads to the consequence of money laundering, a fine up to RMB 5,000,000 can be imposed upon the financial institution and a fine up to RMB 500,000 on its directly liable persons. In particularly serious conditions, the authorities could order the financial institution to suspend its business operations or revoke its business license. The authorities could also give the directly liable persons a disciplinary sanction or revoke his or her post qualification, or even prohibit him or her from engaging in any financial work.