China’s decentralised Financial Intelligence Unit system lacks the power to analyse suspicious activity adequately, a Financial Action Task Force (FATF) report has said.
In a follow-up to its Mutual Evaluation Report last year, FATF upgraded China from “partially complaint” to “largely compliant” on three recommendations, related to the regulation and supervision of financial institutions, guidance and feedback and new technologies.
However, China remains only partially compliant on a FATF recommendation on Financial Intelligence Units (FIUs).
The Chinese FIU is located in the People’s Bank of China, with its functions split between the China Anti-Money Laundering Monitoring and Analysis Centre (CAMLMAC), which specialises in data collection and processing, and the Anti-Money Laundering Bureau (AMLB) which carries out investigations and operates through 36 regional PBC branches. This arrangement is criticised by FATF.
The FATF report said: “China’s FIU does not act as a national centre for the receipt and analysis of STRs and other information, and for the dissemination of the results of that analysis.
“In addition, CAMLMAC does not have the power to request from the reporting institutions any additional information as needed to perform its analysis properly.
“Furthermore, the FIU’s work is limited in terms of operational and strategic analyses, with some specific shortcomings related to its operational independence and autonomy.”
FATF noted that China has made progress in making the online lending sector subject to anti-money laundering requirements. It has also made progress on issuing guidance to assist online lending institutions, real estate agents, dealers in precious metals and accountants in meeting AML/CTF requirements, although FATF notes guidance for lawyers is outstanding.
It also uprated China on a third recommendation relating to requirements on new technologies for payment institutions. China’s decision to prohibit virtual asset activities mean parts of the FATF recommendation no longer apply, while it has also brought in measures such as requiring payment institutions to identify money laundering risks that may arise from new products or technologies.
China will report back to the FATF on progress to strengthen its implementation of AML/CTF measures in October 2021.
In a separate follow-up report this week, FATF uprated Sweden on one recommendation due to its legislative measures to broaden the scope and content of its “fit and proper” requirements.