Even when the neighboring countries have major differences in their frameworks, it is expected that a country perceived as relatively “closed” like China, may raise several question marks in minds. So, we have decided to cover its structure in detail in this post.
What Is the Legal Framework for AML in China?
China’s combat against money laundering is built upon the 2007 AML Law. Additionally, the article 191 of the Criminal Law and article 349 aims to prevent criminal acts such as drug trafficking, organized crime and financial fraud. However, in the recent years there have been major updates due to the constantly-evolving landscape of financial crimes. Here, we must also mention People’s Bank of China (PBoC). It is the main AML authority in China. With the help it gets from supervisory agencies from different sectors, it covers various parts of AML efforts in China.
Who Regulates AML Compliance in China?
As we have mentioned in the previous paragraph, PBoC stands as the primary authority and has the support of institutions like CBIRC, CSRS, SAMR and CAMLMAC. We can mention their responsibilities as formulation of regulations, overseeing of financial institutions and investigation of suspicious activities, but we will elaborate upon these later.
AML Requirements for Financial Institutions in China
Despite many differences with other countries, their requirements are highly similar. Financial institutions in China must conduct CDD via national ID systems and check source-of-funds. However, when it comes to PEPs (Politically Exposed Person) and clients of higher risk, they must perform Enhanced Due Diligence (EDD). Since we’re already talking about the duration of necessary actions, let’s not skip the fact that financial institutions must realize ongoing monitoring and STR filing within 3 business days. It is also worth mentioning that telecom fraud is on the rise in China. So many institutions have now adopted AI-based solutions in order to prevent this kind of scam.
What Are AML Obligations for Key Sectors in China
We have already mentioned several AML requirements, now let’s clarify who they concern. Financial institutions must conduct the actions we have listed above such as proper Customer Due Diligence, Enhanced Due Diligence and keep comprehensive records of transactions but since 2021, the measures has been encompassing loan companies, asset-management arms of commercial banks, non-banking payment institutions, insurance agents/brokers and more as well. In addition to record-keeping and CDD, they must apply continuous Know Your Customer measures after the onboarding and apply a risk-based approach.
Penalties for Non-Compliance
China is rather unforgiving when it comes to non-compliance. According to a report from PWC LLP, the PBoC issued fines that total 628 million yuan ($87,435,954) in a single calendar year. As you may have inferred from its stance against crimes, repercussions are not limited to fines. It is also possible to face license suspension, imprisonment and reputational harm. However, you can reduce these risks with the help of internal controls and proactive policies. You can consult Sanction Scanner to learn more about how to prevent these.
How Does China Align With Global AML Standards?
China is largely compliant with global AML standards. Its membership to Financial Action Task Force (FATF) has started in 2007 and continues to collaborate with APG and IMF. Despite its long membership, it is lacking in a few areas; namely implementation gaps and limited cross-border compliance. Thus, it is considered “partially compliant”.
Recent AML Developments (2023–2025)
On 8 November 2024, China has passed a revised Anti-Money Laundering Law to take effect in 2025. This is a positive development, because the previous one had been in force since 2007, which is quite a long time. This 18 year gap presented expectedly many challenges to tackle. The updated law features new obligation for non-financial sectors such as real estate, accounting firms, law firms, notary offices and traders in precious metals and stones. The AML authority, which works under the State Council, can also determine other entities who are obligated based on their risk profile. In addition to its scope of industries, it also introduced new measures against drug offenses, criminal organizations, disruption of financial management and more. It also made significant changes regarding Customer Due Diligence, filing of beneficial ownership information, duty to cooperate and reporting obligations for large value transactions.
China also placed emphasis on the fintechs, with its Fintech Development Plan which took place between 2022-2025. This was mainly due to unbalanced and weak state of intelligent technology in the country.
What Is the Role of the PBOC?
First of all, PBoC is not an independent central bank. It must implement the policies of the Chinese Communist Party and operates under the party’s Central Financial Commission. What it actually does regarding the AML is the supervision of financial institutions and conduction of necessary AML inspections. This year, the bank stated that it will integrate large-scale and homegrown machine learning models into services during the annual Technology Work Conference. Since 2018, PBoC has been doubling down on AI and blockchain adoption through constant promotion of the industry’s development.
While we’re talking about PBoC, it is also worth mentioning the responsibilities of its partners: China Banking And Insurance Regulatory Commission (CBIRC) and China Securities Regulatory Commission (CSRC). While the first is responsible of supervision of banks and insurance companies, the latter is concerned about the security and future markets in China.
Major Money Laundering Cases
Let’s start with one of the biggest bank corruption scandals ever happened in China. According to the US Department of Justice, Xu Chaofan, once the president of the Bank of China branch, fled to the U.S. and became a wanted person by Interpol. If you’re wondering about what he did, Xu Chaofan was found guilty of racketeering, money laundering, international transportation of stolen property and ID fraud. The stolen amount was around $485 million dollars and he was sentenced to 25 years of prison.
The next example is about the country’s biggest underground banking network. According to AP News’ post from 2015, police detained more than 370 people in Qingdao Ring case. One of the leaders of the network allegedly used 850 different bank accounts and a few front companies in Hong Kong, to transfer over 100 billion yuan (about 14 billion dollars) overseas.
How Does AML Risk Assessment Work in China?
In 2022, the PBoC has imposed China’s Risk Based Model (RBA), which approaches the risks from customer, product, channel, geographic and institutional angles. This allowed better verification of customers, understanding the purpose and nature of the client and due diligence measures for higher-risk individuals. If you have any further questions regarding the AML landscape in China, please feel free to contact us.
FAQ's Blog Post
China enforces AML rules through the 2006 Anti-Money Laundering Law, and we follow updates closely to help our clients stay compliant.
China’s key AML regulators are the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission, and we work with data aligned to both.
Financial institutions, payment companies, VASPs, and even some DNFBPs must comply, and we support each with sector-specific solutions.
Chinese AML rules require businesses to verify identity, understand beneficial ownership, and monitor transactions, and we help automate those checks.
China is a FATF member and aligns with most recommendations, and we make sure our tools reflect these global standards.
AML breaches in China can lead to fines, license revocation, and criminal charges, and we help firms avoid those risks through proactive screening.
Companies can strengthen compliance by using real-time screening, ongoing monitoring, and reporting tools, and we provide all three in one platform.
