CCTV News:According to the website of the People’s Bank of China, recently, the People’s Bank of China issued the Measures for the Administration of Reports on Large Transactions and Suspicious Transactions of Financial Institutions (Order No.3 [2016] of the People’s Bank of China, hereinafter referred to as the Measures), which will be implemented on July 1, 2017. A few days ago, the relevant person in charge of the People’s Bank of China answered a reporter’s question about the Administrative Measures.
1. What is the background and main significance of the Administrative Measures?
The Administrative Measures, in combination with domestic work practice and international standards, revised and integrated the existing two regulations, namely, the Administrative Measures for Reporting Large Transactions and Suspicious Transactions of Financial Institutions (Order No.2 of the People’s Bank of China [2006]) and the Administrative Measures for Reporting Suspicious Transactions of Financial Institutions Suspected of Terrorist Financing (Order No.1 of the People’s Bank of China [2007]).
Since the implementation of the above two regulations in 2007, in the initial stage of China’s anti-money laundering work, they have played a positive role in guiding financial institutions to effectively fulfill their suspicious transaction reporting obligations. However, with the development and changes of the domestic and international situation and the deepening of anti-money laundering work, problems such as excessive defensive reports and insufficient effective reports have gradually emerged, which have affected the effectiveness of anti-money laundering work. To this end, the People’s Bank of China has successively issued the Notice on Further Strengthening the Anti-Money Laundering Work of Financial Institutions (Yinfa [2008] No.391) and the Notice on Defining the Relevant Implementation Issues of the Suspicious Transaction Reporting System (Yinfa [2010] No.48) and other normative documents to regulate how financial institutions can effectively fulfill their obligations of reporting suspicious transactions and avoid simply grabbing and submitting transactions that meet the suspicious transaction reporting standards through the system. In 2012, the People’s Bank of China selected 37 corporate financial institutions across the country to carry out comprehensive pilot projects on suspicious transaction reports, requiring the pilot institutions to independently define transaction monitoring standards in light of their own conditions, and submit suspicious transaction reports on the basis of reasonable suspicion in combination with manual analysis. These efforts have laid a solid foundation for the revision of the existing two regulations and the promulgation of the Administrative Measures. At the same time, the current reporting standards for large transactions can no longer fully meet the actual needs of anti-money laundering and combating and curbing related upstream crimes, so it is necessary to make appropriate adjustments to the reporting standards for large transactions.
In 2014, the People’s Bank of China officially launched the revision of regulations, repeatedly studied and demonstrated, and twice organized nationwide to solicit opinions and suggestions from financial institutions to ensure the scientificity and feasibility of the Administrative Measures. The Administrative Measures clarify the new requirements for financial institutions to effectively fulfill the obligation of reporting suspicious transactions at the regulatory level, which is helpful for financial institutions to improve the effectiveness of reporting suspicious transactions, to prevent and curb criminal activities such as money laundering and terrorist financing, to maintain the security and stability of China’s financial system, and to further integrate with international standards.
2. What are the main considerations for requiring financial institutions to report large-value transactions and suspicious transactions?
According to the Anti-Money Laundering Law of People’s Republic of China (PRC), reporting large transactions and suspicious transactions is one of the three core anti-money laundering obligations that financial institutions should perform, and it also lays a solid data foundation for the People’s Bank of China to carry out monitoring and analysis of anti-money laundering funds transactions according to law. In practice, financial institutions automatically capture and submit large transactions through the system, and discover and submit suspicious transaction reports through customer identification, keeping customer identity data and transaction records, and conducting transaction monitoring and analysis. Based on the reports of large-value transactions and suspicious transactions submitted by financial institutions, the People’s Bank of China conducts active analysis, investigation analysis and international mutual investigation, transfers case clues to law enforcement departments according to law, and works with relevant departments to prevent and curb money laundering and terrorist financing and maintain financial security.
Three, compared with the current regulations, what are the main changes in the "management measures"?
The changes in the Administrative Measures mainly include the following four aspects: First, the requirements for reporting suspicious transactions based on "reasonable suspicion" are clarified, and the requirements for establishing and improving transaction monitoring standards, transaction analysis and identification, monitoring of terrorism-related lists, establishment of monitoring systems and record keeping are added, while the reporting standards for suspicious transactions in banking, securities and futures industries and insurance industries that are no longer in line with the development of the situation are deleted from the original regulations. Second, the RMB reporting standard for large cash transactions was adjusted from "200,000 yuan" to "50,000 yuan", and the statistical methods of large transfer transactions of financial institutions and the reporting time limit of suspicious transactions were adjusted. Third, the scope of application of the new regulations and the reporting standards for large-scale cross-border transactions in RMB are added. The reporting standard for large cross-border transactions denominated in RMB is "RMB 200,000". Fourthly, the contents of transaction report elements are adjusted, such as "Payee Matching Number" and "Equipment Code for Off-Counter Transaction" are added, and the elements such as "Report Date", "Filler" and "Name of Financial Institution" are deleted, and a more streamlined General Suspicious Transaction Report Element is designed.
4. What is the scope of application of the Administrative Measures? When will it take effect?
The Administrative Measures are applicable to institutions legally established in People’s Republic of China (PRC) that should perform anti-money laundering obligations according to the Anti-Money Laundering Law of People’s Republic of China (PRC) and other laws and regulations, mainly including policy banks, commercial banks, rural cooperative banks, rural credit cooperatives, village banks, securities companies, futures companies, fund management companies, insurance companies, insurance asset management companies, insurance professional agencies and insurance brokerage companies. Trust companies, financial asset management companies, enterprise group finance companies, financial leasing companies, auto finance companies, consumer finance companies, money brokerage companies, loan companies and non-bank payment institutions. Among them, "insurance professional agency company", "insurance brokerage company", "consumer finance company" and "loan company" are the newly added scope of application of the Administrative Measures.
The Administrative Measures came into effect on July 1, 2017. Considering that it will take some time for financial institutions to revise their systems, build their own trading monitoring standards and transform their systems. Therefore, the "Administrative Measures" gave financial institutions a transition period of half a year after their promulgation and before their implementation.
V. What are the specific requirements of the Administrative Measures for reporting large transactions? Is it necessary to submit a large transaction report for cross-border capital transactions?
The reporting standards for large-value transactions stipulated in the Administrative Measures are as follows: First, large-value cash transactions of natural persons and non-natural persons, with domestic and cross-border reporting standards of RMB 50,000 or more and foreign currency equivalent of USD 10,000 or more. Second, it is a large transfer transaction in a non-natural person’s bank account. The domestic and cross-border reporting standards are more than RMB 2 million and the foreign currency equivalent is more than USD 200,000. Third, large-sum transfer transactions in natural person’s bank accounts, with domestic reporting standards of RMB 500,000 or more and foreign currency equivalent of USD 100,000 or more, and cross-border reporting standards of RMB 200,000 or more and foreign currency equivalent of USD 10,000 or more.
For cross-border capital transactions, financial institutions shall submit large transaction reports. For example, if a natural person remits $10,000 overseas by cash or transfer through a banking institution, the banking institution that handles the business needs to report this transaction as a large transaction. The reporting standard for large-value cross-border transfer transactions of natural person customers "more than RMB 200,000" is a new standard in the Administrative Measures. The main considerations are as follows: First, with the gradual promotion of Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, the cross-border business of domestic residents will be gradually liberalized, and the cross-border RMB business of individual residents will be more frequent. Special RMB reporting standards will be designed to facilitate the regulatory authorities to grasp the cross-border RMB transaction data in time and carry out risk monitoring. Second, according to the existing system, the daily limit of cross-border RMB remittance between Hong Kong residents’ individual accounts with the same name and Taiwan Province residents’ individual accounts is 50,000 yuan, and cross-border RMB business under personal trade of residents is subject to unlimited management. The Notice on Optimizing the Information Submission Process of RMB Cross-border Receipt and Payment Information Management System (Yin Ban Fa [2013] No.188) stipulates that banks can submit individual RMB cross-border receipts and payments with a single amount of less than 200,000 yuan (inclusive), but they need to keep the detailed information one by one. On the whole, the reporting standard of large-scale cross-border transfer transactions of natural person customers in the Administrative Measures is determined as "more than RMB 200,000", which can strengthen the statistical monitoring of cross-border RMB transactions and better prevent risks related to cross-border RMB transactions.
It should be noted that according to the Administrative Measures, the People’s Bank of China can adjust the reporting standards for large transactions according to the needs of work.
Six, the "Administrative Measures" will report large cash transactions as "RMB 50,000" and "foreign currency equivalent of 10,000 US dollars". What are the main considerations?
The Administrative Measures stipulate that financial institutions shall submit large-value transaction reports for cash deposits, cash withdrawals, cash settlement and sale, cash exchange, cash remittance, cash bill payment and other forms of cash receipts and payments with a single or cumulative transaction of more than RMB 50,000 (including RMB 50,000) and a foreign currency equivalent of more than US$ 10,000 (including US$ 10,000) on that day. For example, if a natural person purchases US dollar cash with RMB cash through a banking institution, and the single or cumulative transaction on the same day is more than RMB 50,000 (including RMB 50,000), the banking institution handling the business needs to report this transaction as a large transaction.
The "Administrative Measures" will adjust the reporting standard for large cash transactions from the current RMB 200,000 to RMB 50,000. The main considerations are:
First of all, strengthening cash management is an important part of anti-money laundering work. The international anti-money laundering supervision standards in the cash field are mostly strict. For example, the starting point for reporting large cash transactions in the United States, Canada and Australia is US$ 10,000 (or equivalent foreign currency), and the regulatory authorities can further lower the reporting standards for cash transactions in order to crack down on illegal and criminal activities in specific fields according to legal authorization. Secondly, the popularity, development and innovation of non-cash payment tools facilitate non-cash transactions, and residents’ preference for cash use is gradually changing. Normal payment needs can be met more quickly and safely through non-cash payment tools, which provides favorable conditions for strengthening cash management. Finally, the development of China’s anti-corruption, taxation, balance of payments and other fields also requires strengthening cash management to prevent the risk of using large cash transactions to engage in corruption, tax evasion, evasion of foreign exchange management and other illegal activities.
7. Does the Administrative Measures require non-bank payment institutions to submit large transaction reports?
The relevant provisions of the Administrative Measures apply to non-bank payment institutions. At present, the People’s Bank of China has more specific requirements on the anti-money laundering obligations that non-bank payment institutions should perform, such as the Administrative Measures on Anti-Money Laundering and Anti-Terrorist Financing of Payment Institutions (Yinfa [2012] No.54). After the "Administrative Measures" come into effect, the People’s Bank of China will revise and improve the reporting requirements for large transactions and suspicious transactions of non-bank payment institutions in a timely manner according to the actual situation.
Eight, "management measures" whether there are provisions on large transactions without reporting?
There are relevant regulations. According to the Administrative Measures, the types of large-value transactions exempted from reporting by financial institutions mainly include fixed-activity mutual transfer transactions under the name of the same customer of the same financial institution, transactions in which one party is the party, government and military organs, inter-bank transactions of financial institutions, taxation handled by banking institutions, correction of wrong accounts, interest payment, etc.
9. What are the specific requirements of the Administrative Measures for suspicious transaction reports?
The Administrative Measures stipulate that financial institutions shall submit suspicious transaction reports when they find or have reasonable reasons to suspect that customers, customers’ funds or other assets, customers’ transactions or attempted transactions are related to criminal activities such as money laundering and terrorist financing, regardless of the amount of funds involved or the value of assets. That is, to report suspicious transactions on the basis of "reasonable suspicion". Specific requirements mainly include:
First, financial institutions should monitor suspicious transactions throughout all aspects of financial business. Financial institutions should not only take reasonable measures to identify suspicious transaction clues in the process of customer identification, but also find out whether customers, funds or other assets and transactions are related to illegal and criminal activities such as money laundering and terrorist financing through screening, reviewing and analyzing transaction data. For ongoing transactions or transactions that customers try to carry out, financial institutions should also submit suspicious transaction reports if they find or have reasonable reasons to suspect that they are involved in money laundering and terrorist financing.
Second, financial institutions should also pay attention to whether customers’ funds or assets are related to criminal activities such as money laundering and terrorist financing. Assets include but are not limited to bank deposits, remittances, traveler’s checks, postal orders, insurance policies, bills of lading, warehouse receipts, stocks, bonds, bills of exchange and letters of credit, houses, vehicles, ships, goods, and other legal documents and certificates that prove the ownership and other rights and interests of assets in electronic or digital form.
Third, financial institutions submit suspicious transaction reports, and there is no requirement for the starting amount of funds or assets. If the amount of fund transactions suspected of terrorist financing activities may be small, financial institutions should still submit suspicious transaction reports according to the Administrative Measures.
Fourth, financial institutions should submit suspicious transaction reports within the prescribed time. The Administrative Measures stipulate that a financial institution shall "submit a suspicious transaction report in a timely manner within 5 working days at the latest after it is confirmed as suspicious transaction according to its internal operating procedures for suspicious transaction reporting".
In order to implement these requirements, financial institutions should, in accordance with the Administrative Measures, formulate suspicious transaction reporting systems and operating procedures, provide sufficient human resources and support for suspicious transaction reporting, establish and improve self-defined transaction monitoring standards, establish a fully functional and well-functioning monitoring system, do a good job in monitoring terrorist lists, strengthen manual analysis and identification of abnormal transactions with early warning by the system, keep relevant work records, and abide by confidentiality requirements.
X. The Administrative Measures defines the time limit for reporting suspicious transactions as "to submit the suspicious transaction report in a timely manner within 5 working days at the latest after it is confirmed as suspicious transaction according to the internal operating rules of this institution". What are the main considerations?
The original Administrative Measures on Large-value Transactions and Suspicious Transaction Reports of Financial Institutions (Order No.2 of the People’s Bank of China [2006]) required financial institutions to submit suspicious transaction reports within 10 working days after suspicious transactions occurred. However, under the new mode of reporting suspicious transactions based on "reasonable suspicion" in the Administrative Measures, there may be a big difference between the time when suspicious transactions occur and the time when suspicious transactions are identified and confirmed, which makes the original reporting time limit difficult to operate. The international common practice is to require financial institutions to submit suspicious transaction reports in time after confirming suspicious transactions. Therefore, the "Administrative Measures" defines the time limit for suspicious transaction reporting as "to submit the suspicious transaction report in time, no later than 5 working days, after it is confirmed as suspicious transaction according to the internal operating rules of the institution for suspicious transaction reporting".
It should be noted that "five working days" does not mean that financial institutions must complete all links from abnormal transaction warning to manual analysis and judgment within five working days, and submit suspicious transaction reports to China Anti-Money Laundering Monitoring and Analysis Center, but that financial institutions should submit suspicious transaction reports within five working days after being confirmed as suspicious transactions through internal early warning and analysis.
XI. What are the specific requirements of the Administrative Measures for financial institutions to monitor terrorism-related lists?
According to the Administrative Measures, financial institutions should follow the following requirements when monitoring the terrorism-related list: First, financial institutions should ensure the completeness and accuracy of the terrorism-related list and update it in time. Second, the scope of monitoring the terrorism-related list of financial institutions should cover all customers and their counterparties, funds or other assets. Third, financial institutions should conduct real-time monitoring of the terrorism-related list. Fourth, financial institutions should immediately conduct retrospective investigations on all their customers or their counterparties after the adjustment of the terrorism-related list. Fifth, if financial institutions have reasonable reasons to suspect that customers or their counterparties, funds or other assets are related to the terrorism-related list, they should immediately report them as key suspicious transactions and take freezing measures in accordance with the Measures for the Administration of Assets Freezing Related to Terrorist Activities (Order No.1 of the Ministry of Public Security of the People’s Bank of China [2014]).
It should be noted that financial institutions are obligated to perform the monitoring of terrorism-related lists, and they have the responsibility to actively obtain and master the list of terrorist organizations and terrorist personnel released and updated by the competent departments of the state. In order to facilitate financial institutions to grasp relevant information in a timely manner, the People’s Bank of China publishes the list of terrorism-related information under the anti-money laundering column of the official website, and the relevant supervision and management departments will also forward the list that needs to be implemented and concerned to the regulated institutions.
Twelve, the "Management Measures" require financial institutions to be equipped with full-time personnel to be responsible for reporting large transactions and suspicious transactions. What are the main considerations?
In practice, whether financial institutions conduct timely and effective analysis and treatment of abnormal transactions with early warning system, or pay close attention to the adjustment of terrorism-related lists at home and abroad at any time, and conduct retrospective investigation in time, they all put forward higher requirements for the professionalism and sufficient number of institutional personnel. Therefore, the board of directors and senior management of financial institutions should attach great importance to the reporting of large-value transactions and suspicious transactions, and allocate enough full-time personnel to take charge of related work. By optimizing the workflow of reporting large-value transactions and suspicious transactions, they should do basic work such as customer identification, identity data and transaction record preservation, improve the setting of transaction monitoring indicators and related system functions and other supporting measures to ensure that full-time personnel can effectively carry out monitoring and analysis work.
Thirteen, in recent years, what measures has the People’s Bank of China taken to improve the suspicious transaction reporting system?
Since the promulgation of the Administrative Measures on Large-value Transactions and Suspicious Transaction Reports of Financial Institutions (Order No.2 of the People’s Bank of China [2006]), the People’s Bank of China has been actively taking measures to improve the suspicious transaction reporting system and promote the effective implementation of the suspicious transaction reporting system. For example, the People’s Bank of China has successively issued a series of normative documents, such as the Notice on Further Strengthening the Anti-Money Laundering Work of Financial Institutions (Yinfa [2008] No.391) and the Notice on Defining the Implementation Issues of the Suspicious Transaction Reporting System (Yinfa [2010] No.48), to clearly distinguish the different regulatory requirements for abnormal transaction reports from suspicious transaction reports, so as to reduce the defensive reporting behavior of financial institutions. In 2012, the People’s Bank of China launched a comprehensive pilot project of suspicious transaction reporting with independent definition of abnormal transaction monitoring indicators in 37 corporate financial institutions to test the effectiveness and feasibility of the new model of independent definition of monitoring indicators. Since 2013, the People’s Bank of China has successively issued suspicious transaction types and identification points for upstream crimes of money laundering, such as illegal fund-raising, underground money houses, terrorist financing, etc., issued multiple risk warnings, and issued a notice to strengthen the monitoring of terrorism-related lists and fugitives lists, guiding financial institutions to do a good job in monitoring and analyzing suspicious transactions and monitoring lists. At the same time, through law enforcement inspection, supervision visits, classification and rating and other regulatory measures, financial institutions are urged to continuously improve suspicious transaction reporting and improve the quality of suspicious transaction reporting.
XIV. What progress has financial institutions made in suspicious transaction reporting in recent years?
Financial institutions have been strengthening and improving the monitoring and analysis of suspicious transactions and list monitoring in accordance with the requirements of the People’s Bank of China, and the effectiveness of suspicious transaction reporting has been continuously improved. At present, financial institutions have generally strengthened the manual analysis and identification of abnormal transactions. Financial institutions have participated in the comprehensive pilot work of suspicious transaction reports with independent definition of abnormal transaction monitoring standards as the core, and implemented the requirements of suspicious transaction types, identification points, risk warnings and list monitoring issued by the People’s Bank of China. The ability of financial institutions to define abnormal transaction monitoring standards has been verified and strengthened, and the professionalism and intelligence of monitoring and analysis have been continuously improved. While the overall number of suspicious transaction reports has dropped significantly, the quality of reports has improved significantly, and the number of clues transformed into cases has increased significantly, which has provided strong support for the country to prevent and combat money laundering and related crimes.
15. What will the People’s Bank of China do to guide financial institutions to effectively implement the relevant requirements of the Administrative Measures?
In order to guide financial institutions to effectively implement the Administrative Measures, the People’s Bank of China will fully listen to the opinions and suggestions of financial institutions, issue supporting normative documents as soon as possible, clarify specific work requirements such as suspicious transaction continuation report and suspicious transaction analysis report process, and issue relevant guidelines for financial institutions to formulate transaction monitoring standards in combination with industry best practices, guide financial institutions to establish and improve transaction monitoring standards and improve transaction monitoring systems, and strengthen guidance and training for small and medium-sized financial institutions. At the same time, the People’s Bank of China will issue specific reporting formats and reporting requirements for reporting elements of large-value transactions and suspicious transactions, and guide financial institutions to do a good job in the development of transaction reporting data interfaces and related systems. The People’s Bank of China is also stepping up the construction of the second-generation anti-money laundering monitoring and analysis system to provide more powerful system support for the monitoring and analysis of large and suspicious transaction reports.
