China making efforts globally, domestically to combat financial crimes
China is facing increasing international pressure to step up efforts in the fight against money laundering as overseas branches of some State-owned banks have come under scrutiny. Officials and experts dismissed accusations that China is an international hub for money laundering, but noted improvements are still needed.
China's anti-money laundering measures have come into the spotlight in recent weeks, as international pressure intensified on Chinese authorities to step up its fight against money laundering and cooperate more with foreign governments.
Chinese officials and experts have dismissed accusations that the country is an "international hub" for money laundering, highlighting China's anti-money laundering efforts. But experts also acknowledged there is room for improvement, especially for Chinese banks that operate overseas.
On March 28, media reports suggested that China has emerged as an "international hub" for money laundering because of its level of globalization and insufficient cooperation with foreign law enforcement agencies.
Amid rising pressure and reports of growing scrutiny on Chinese banks overseas, the China Banking Regulatory Commission (CBRC) issued a notice on Tuesday urging Chinese financial institutions to increase risk management measures when operating overseas.
An investigation by the Associated Press published on March 28 reported that China's well-developed underground financial network has attracted foreign criminals looking to clean their money because the network is largely out of the reach of Western law enforcement agencies.
Foreign criminals such as gangs from Israel and Spain, marijuana dealers in North Africa and drug cartels in Mexico and Columbia have laundered billions of dollars through major State-run banks, import-export schemes and informal money transfer systems in China, the AP report said.
Meanwhile, overseas branches of Chinese State-owned banks are facing increased scrutiny from foreign governments in money-laundering investigations, following a case in Spain that involved one of China's largest banks - Industrial and Commercial Bank of China (ICBC).
In late February, Spanish authorities raided ICBC's branch in Madrid, and arrested six employees on suspicion of committing several financial crimes, including money laundering, according to media reports.
Details about the investigation remain sketchy, and ICBC said at the time it was cooperating with local authorities.
The UK's Financial Conduct Authority might also increase scrutiny on the London branches of ICBC and China Construction Bank (CCB), domestic financial news portal caixin.com reported on March 29, citing unidentified sources. The scrutiny would focus on money laundering and financial corruption.
ICBC and CCB did not respond to repeated requests for comment from the Global Times as of press time.
But law enforcement agencies in Europe and the U.S. have said that China has generally done "little" to help them in money-laundering cases, the AP reported, citing law enforcement officials and government documents.
In a report released last month, the U.S. State Department reproached China for lackluster cooperation on money-laundering investigations, noting that "China has not cooperated sufficiently," the AP reported.
Not a hub
China has pushed back such accusations of being a global hub for money laundering and pointed to its international and domestic anti-money laundering efforts.
"The Chinese government places great emphasis on [fighting money laundering]," said Hong Lei, spokesman for the Ministry of Foreign Affairs, in a briefing on March 28, after the AP report.
"China was not, is not, and will not be a so-called international hub for money laundering," he said.
Hong said China has signed, approved and executed the UN's convents and resolutions on fighting money laundering and terrorism financing, and is "actively expanding" international cooperation on such efforts.
In 2014, China made great progress in expanding cooperation with foreign governments on fighting money laundering, according to the annual report on anti-money laundering work released in November 2015 by the People's Bank of China (PBC), the country's central bank.
In addition to working more closely with the Financial Action Task Force, the global standard-setting body for combating money laundering and terrorism financing, China continued to seek cooperation on the issue with countries such as the U.S., France, Germany and UK through bilateral talks in 2014, the report said.
The Chinese Foreign Ministry had also continued to improve the legal network for international cooperation in the fight against money laundering, signing extradition treaties with countries such as Brazil and completing negotiations on legal assistance in criminal investigations with about a dozen countries including Belgium in 2014, according to the PBC report.
Also in 2014, the Ministry of Justice provided assistance in international anti-money laundering cases at the request of more than 10 countries including Mexico, France, the U.S. and Australia, the report said.
The Ministry of Public Security also helped foreign law enforcement agencies with 330 financial crime cases, including cases of money laundering.
Issues with execution
Experts said reports like the AP's exaggerate the facts, and that money laundering is a universal issue that can be found in all countries, not only China.
However, regulators and financial institutions do need to step up efforts to fight money laundering.
"To say China is a global hub for international money laundering is definitely an overstatement," Huang Wei, director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, told the Global Times on March 29.
However, there are issues involving Chinese companies, Huang noted.
Compared with the European and U.S. banking systems, China's system, from regulatory agencies to bank employees, are not paying "enough attention" to the origin of deposits, according to an article from Anbound Consulting, a domestic think tank on public policy. The article was posted on the website of the China Center for Anti-Money Laundering Studies at Fudan University on Friday.
A source at the Agricultural Bank of China, who spoke on condition of anonymity, told the Global Times on Monday that domestic banks have monitoring systems for transactions and clients and report unusual transactions that involve more than 10 million yuan ($1.54 million) to the PBC.
"But until now, we have not caught any money-laundering activities," the source said.
Another source at ICBC, who also requested anonymity, told the Global Times on March 29 that there are procedures by both computer programs and employee's personal judgment to track money-laundering activities.
However, although the basic mechanism and standards for anti-money laundering efforts in China are in line with international standards, there are many issues in executing them, in terms of whether banks comply or whether the issues they discover can be dealt with in a timely fashion, the Anbound article said.
Globally, due to differences in culture and political and legal systems, Chinese banks might come across issues involving money laundering, according to Chen Fengying, a research fellow with the China Institutes of Contemporary International Relations.
"It seems recent money-laundering cases involving Chinese banks happened not because the banks were looking for the money, but because of lax monitoring mechanisms," Chen told the Global Times on March 29.
