On 17th April, FATF published the mutual evaluation report on the AML/CFT regime in China.  An IMF staff-led assessment comprehensively reviews the effectiveness of China’s measures and their level of compliance with the FATF Recommendations.   The FATF adopted this report at its February 2019 Plenary meeting.  Hong Kong and Macau were not included in the evaluation.  It says that the lack of coverage of designated non-financial businesses and professions (DNFBP) by the AML/CFT framework is a significant vulnerability.  The absence of coverage of domestic politically exposed persons (PEP) is another significant vulnerability, which is particularly noteworthy in the context of a country where corruption is a major predicate offence and state-owned-enterprises play a dominant role in the economy.  It also notes that a large amount of illicit proceeds flows out of China annually.  An incomplete understanding of risk impacts negatively on the effectiveness of several aspects of China’s AML/CFT arrangements, and there are significant weaknesses in both technical compliance and effectiveness with respect to the transparency of legal persons and legal arrangements and the framework and practices related to targeted financial sanctions.  Shortcomings in the AML/CFT legal framework related to the coverage of online lending institutions, DNFBP, domestic PEP, terrorism financing sanctions, and the criteria for reporting suspicious transactions should be addressed.  Also amongst the report findings is that China should review the functioning of its FIU to ensure that all information received, analysed and disseminated by all 3 FIU components is readily available and accessible both at the central and provincial levels



Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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