Money Laundering, Terrorism and Financial Institutions - USA Patriot Act Monitor

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8/9/2007 FATF Mutual Evaluation of China Finds Rapid Progress, But Significant Deficiencies

The Financial Action Task Force has completed a mutual evaluation of China and posted a summary, though not yet the full report. The summary includes a rating of China’s compliance with the FATF 40 Recommendations and the nine Special Recommendations, and finds the country is fully observant in only eight categories, being largely or partially compliant in 32, and non-compliant in nine. (An evaluation of the UK and Northern Ireland in roughly the same period found full compliance in 24 categories.) Nevertheless, the Evaluation lauds China for its progress, noting that serious focusing on anti-money laundering/counter-terrorist financing began in 2003 when three sets of regulations imposed requirements on the banking, trust, and finance sectors. Onsite AML compliance inspections were begun by the People’s Bank of China (PBC) in 2004. The country’s financial intelligence unit is inside the PBC, being composed of two units under a deputy governor. One of those units, the China Anti-Money Laundering Monitoring & Analysis Center (CAMLMAC) analyzes suspicious transaction reports (STRs), and receives each month 130,000 reports on suspicious domestic currency (Chinese renmimbi, RMB) transactions and 350,000 reports on suspicious foreign currency transactions. All this must be processed by a staff of 60. Since it began receiving STRs in 2004, CAMLMAC has transferred 57 files involving 80,000 suspicious transactions to the Ministry of Public Security for investigation. Nine have resulted in cases being filed for investigation and one has been referred for prosecution. There is no explicit obligation to report suspicions of terrorist financing, and no STR reporting obligations for the securities and insurance sectors. Rules do not define the basis on which suspicion should be founded. The FATF expresses significant concern about the overall effectiveness of the STR system, but notes that changes are occurring rapidly. The mutual evaluation will be discussed in detail in the October USA Patriot Act Monitor.

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