“These changes will expand the coverage of money laundering channels [to include] digital currencies and bitcoin, as well as the [medium of laundering through] non-financial institutions, which enhance the safety of China’s financial system and national financial security,” said Dong Jinyue, principal economist at BBVA Research.
Hong Kong’s position as the cryptocurrency hub in Asia should also be protected, Dong said.
06:54
Is cryptocurrency too risky for China?
Is cryptocurrency too risky for China?
“As long as cryptocurrency is not used as a way to launder money or [support] other illegal activities in Hong Kong, its position should be sustained,” he said.
“The legal usage and development of cryptocurrency in Hong Kong will be protected, rather than being hit by the law.”
The planned revision comes in advance of a fifth review by the Financial Action Task Force, an international organisation that sets standards to combat money laundering and the financing of terrorism.
Scope of China’s crypto crimes exposes capital-control loopholes
Scope of China’s crypto crimes exposes capital-control loopholes
China narrowly passed the fourth round of assessments in 2019. The review stated some of the country’s financial institutions had weak obligations in the control of money laundering, and the overall system lacked transparency regarding legal arrangements.
The central bank released a draft for public feedback in 2021, when improving the law was listed as one of the major tasks for the top legislature to tackle.
A new organ will be set up to monitor and analyse the transfer of “large sums” and “suspicious” transactions for potential signs of illicit activity, according to the draft.
07:55
Opium, war and crime: How Hong Kong became known as a smuggling hub
Opium, war and crime: How Hong Kong became known as a smuggling hub
Chen Zhiwu, chair professor of finance at the University of Hong Kong, said the enforcement of anti-money-laundering rules is already tough on the mainland, with domestic financial institutions stepping up their reporting to the central bank in recent years to comply with recommendations from the Financial Action Task Force.
The new iteration of the law would also bolster the supervision and management of anti-money-laundering operations, advance provisions of obligations and clarify the scope of non-financial institutions that must comply, Xinhua said.
Pan noted the revision is based on a “risk-centric” principle and protects “national security”, coordinates “development and safety” and will “perfect” the anti-money-laundering system.
The fifth review is still going to be challenging to the country and its financial industry
In a report released last year, the consultancy Oliver Wyman said the fifth-round assessment by the Financial Action Task Force will focus on “effectiveness” and “results”.
“Although the fourth examination has affirmed certain work from China, like new technology, internal control, telegraphic transfer, non-profit organisations and financing of terrorism and proliferation, the fifth review is still going to be challenging to the country and its financial industry,” said Qian Hang, a partner at Oliver Wyman.
He suggested Chinese financial institutions “raise consciousness” on fulfilling their obligations and use the fifth review period to examine weak links and upgrade their operations before the task force’s field work begins in 2025.
Additional reporting by Ralph Jennings
