Opinions of the General Office of the State Council on Improving the Regulatory Systems and Mechanisms of Combating Money Laundering, Financing of Terrorism, and Tax Evasion

· Document Number：Letter No. 84 [2017] of the General Office of the State Council

· Area of Law： Banking & Finance

· Level of Authority： Regulatory Documents of the State Council

· Date issued：08-29-2017

· Effective Date：08-29-2017

· Status： Effective

· Issuing Authority： General Office of the State Council

Opinions of the General Office of the State Council on Improving the Regulatory Systems and Mechanisms of Combating Money Laundering, Financing of Terrorism, and Tax Evasion
(No. 84 [2017] of the General Office of the State Council)
All member entities of the Inter-Ministerial Anti-Money Laundering Joint Meeting:
The regulatory systems and mechanisms of combating money laundering, financing of terrorism, and tax evasion (hereinafter collectively referred to as the "three combats") are an integral part of developing the rule of law with China's unique socialist characteristics and a modern financial regulatory system in China, an important guarantee for advancing the modernization of the nation's governance system and capability and maintaining economic and social security and stability, and an essential means to participate in global governance and expand the two-way openness of the financial industry. Since the issuance and implementation of the Anti-Money Laundering Law, China has made immense progress in the development of the "three combats" regulatory systems and mechanisms and marked achievements in the work, and basically brought them in line with generally accepted international standards. Nevertheless, it should be noted that there remain some prominent conflicts and problems in relevant fields, mainly including incomplete regulatory rules, inefficient coordination and cooperation mechanisms, a low degree of inter-departmental data and information sharing, inadequate capabilities of institutions with anti-money laundering obligations (hereinafter referred to as "obligated institutions") to perform their obligations, and a mismatch between China's participation and say in the international arena and China's international status. The following opinions are hereby offered with the approval of the State Council in order to advance the building of the "three combats" regulatory systems and mechanisms in an in-depth and sustained manner and improve "three combats" regulatory measures.
I. General requirements
(1) Guiding ideology
The spirit of the 18th CPC National Congress and the Third, Fourth, Fifth, and Sixth Plenary Sessions of the 18th CPC Central Committee shall be fully implemented, and under the guidance of the Deng Xiaoping Theory, important thoughts of "Three Represents," and the Scientific Outlook on Development, the spirit of a series of important speeches and new concepts, thoughts, and strategies on governance of the country from General Secretary Xi Jinping shall be carried out profoundly, the decisions and arrangements of the CPC Central Committee and the State Council shall be conscientiously implemented, the overall national security view shall be adhered to, and the requirements of advancing the modernization of the nation's governance system and capability shall be complied with, to improve the "three combats" regulatory systems and mechanisms.
(2) Basic principles
Adhering to a problem-oriented approach and using joint forces: The mind shall be further freed, and problems existing in the "three combats" regulatory systems and mechanisms shall be researched in depth and solved effectively according to the basic national conditions and the needs in actual work. Anti-money laundering administrative departments, tax authorities, and public security authorities shall practically perform their duties, and the banking, securities, and insurance regulators under the State Council and other relevant entities shall actively join forces for the "three combats." Exploration shall be made for establishing "three combats" regulatory systems and mechanisms bonded by financial intelligence, using funds monitoring as the means, based on data and information sharing, and meeting the needs of state governance.
Adhering to prevention and control as the base and effectively resolving risks: Risks shall be assessed comprehensively and scientifically, the allocation of regulatory resources shall be further optimized according to the level and distribution of risks, and the regulation in high-risk fields shall be strengthened. The risk assessment mechanism and monitoring and analysis system shall continue to be optimized, and the risk prevention system shall be improved, so as to effectively prevent and control the risks of money laundering, financing of terrorism, and tax evasion.
Adhering to the national conditions and providing service guarantees for two-way openness: The "three combats" legal system and regulatory rules shall be gradually established and improved based on the actual circumstances of risks of money laundering, financing of terrorism, and tax evasion in China. International cooperation shall be conducted under relevant international treaties or according to the principles of equality and reciprocity. International obligations that should be assumed by China shall be faithfully performed, international standards shall be strictly implemented, cross-border regulatory cooperation shall be strengthened, and the lawful rights and interests of China's financial institutions shall be practically protected, so as to safeguard the two-way openness of the financial industry.
Adhering to administration by the law and maximizing the primary role of anti-money laundering institutions: The duties of relevant entities shall be determined in accordance with the law, and ensure that they fulfill their respective duties, take proactive action, and strictly control risks. The obligated institutions play a role of "first line of defense" in preventing money laundering, financing of terrorism, and tax evasion, which shall be underscored.
(3) Objectives
By 2020, a system of "three combats" laws and regulations adapting to the requirements of the socialist market economy, conforming to China's national conditions, and meeting international standards will have taken shape, and "three combats" regulatory coordination and cooperation mechanisms featuring well-defined duties, consistency between power and responsibility, and powerful cooperation will have been established, to effectively prevent and control risks of money laundering, financing of terrorism, and tax evasion.
II. Improving the working mechanisms
(4) Strengthening overall coordination and improving the organizational mechanism: The Inter-Ministerial Anti-Money Laundering Joint Meeting shall be further improved to coordinate the "three combats" regulatory work. Depending on the Inter-Ministerial Anti-Money Laundering Joint Meeting, the inter-departmental "three combats" organization and coordination mechanisms shall be enhanced to develop general strategies and major policies and measures, promote their implementation, guide international cooperation in the "three combats" fields, and strengthen regulatory cooperation.
(5) Researching and designing an assessment system of risks of money laundering and financing of terrorism and establishing a strategy formation mechanism for combating money laundering and financing of terrorism: Risk assessment shall positively play its fundamental role in discovering problems, improving systems and mechanisms, and allocating resources, and risk-based research on strategies for combating money laundering and financing of terrorism shall be conducted. A national assessment indicator system of risks of money laundering and financing of terrorism and the assessment mechanisms shall be established, and a working group for the assessment of risks of money laundering and financing of terrorism consisting of the anti-money laundering administrative departments, tax authorities, public security authorities, national security authorities, judicial authorities, the banking, securities, and insurance regulators under the State Council, and other relevant administrative agencies shall be assembled to regularly assess risks of money laundering and financing of terrorism. Oriented to the problems discovered in risk assessment, strategies for combating money laundering and financing of terrorism shall be formulated and regularly updated, the objectives at different stages, major tasks, and significant moves in combating money laundering and financing of terrorism shall be determined, division of tasks shall be specified, and the anti-money laundering regulation in high-risk fields shall be heightened. A multi-level assessment result application mechanism shall be established, and relevant entities and the obligated institutions shall, based on assessment results, pertinently improve their work against money laundering and financing of terrorism, so as to raise the resource allocation efficiency and the effectiveness of risk prevention and control.
(6) Enhancing transfer of leads and collaboration in case investigation and optimizing the crime crackdown cooperation mechanism: The communication and coordination between the anti-money laundering administrative departments and tax authorities on one side and the supervision authorities, criminal investigation authorities, and administrative agencies with law enforcement powers on the other side shall be strengthened, the suspicious clue cooperation mechanism shall be further improved, and the intelligence consultation and information feedback mechanisms shall be strengthened, to analyze the situations and trends of money laundering, financing of terrorism, and tax evasion and continuously optimize the anti-money laundering investigation strategies, methods, and technologies. Anti-money laundering administrative departments shall strengthen the transfer of leads to suspicious transactions and collaboration in case investigation, and relevant entities shall provide more timely feedback on the use of clues and the resulting investigation and punishment so as to join forces in the crackdown on money laundering, financing of terrorism, and tax evasion and maintain the financial order and social stability.
(7) Strengthening regulatory coordination and improving the regulatory cooperation mechanism: The anti-money laundering regulatory requirements shall be embedded in the industry regulatory rules, and a complete ex-ante, interim, and ex-post regulatory chain shall be built. The role of the Inter-Ministerial Anti-Money Laundering Joint Meeting shall be maximized in strengthening the coordination between anti-money laundering departments and financial regulators, improving the regulatory rules, policies, and measures, taking joint regulatory actions, sharing regulatory information, and coordinating cross-border regulatory cooperation.
(8) Legally using government affair data and improving the data and information sharing mechanism: On the premise of compliance with laws and regulations and aimed at resource integration, exploration and research shall be conducted on the "three combats" data and information sharing standards and a statistical indicator system, and relevant entities' data provision responsibilities and data use privileges shall be specified. The development of a data and information sharing mechanism shall be advanced steadily, and while administration is conducted strictly by the law and trade secrets and individual privacy are protected, the building of relevant databases shall be advanced and all relevant parties shall be encouraged to participate in the sharing. An electronic network of relevant entities shall be created to provide support for achieving safe and efficient data and information sharing.
(9) Optimizing the allocation of regulatory resources and researching and improving the regulatory resource guarantee mechanism: The regulatory scopes of combating money laundering and financing of terrorism shall be expanded in due time according to the objectives of full coverage of financial fields and priority regulation of high-risk fields in particular non-financial industries. The allocation and use of regulatory resources shall be optimized, and the issue of guarantee for "three combats" regulatory resources shall be addressed in a coordinated manner, so as to provide sufficient human and material resources for "three combats" regulation.
III. Improving legal rules
(10) Promoting the research and improvement of relevant criminal legislation and amending provisions relating to punishment of crimes of money laundering and financing of terrorism: According to the requirements of the international conventions that China has acceded to and the international standards that China has expressly committed itself to, the scope of upstream crimes of money laundering crimes shall be researched and expanded, and the principal offenders in the upstream crimes shall be included in the scope of offenders in money laundering crimes. According to the requirements of international conventions and based on China's actual needs in counterterrorism, the gradual improvement of criminal legislation relating to crimes of financing of terrorism shall be promoted, and judicial interpretation work shall be strengthened. The relevant judicial work incentive mechanism shall be researched and established to enhance the recovery effects of anti-money laundering work.
(11) Specifying the procedures for implementing the resolutions of the United Nations Security Council regarding combating financing of terrorism: The rules for the determination and release of a targeted financial sanction list shall be established, and the division of duties of relevant entities in respect of list submission, deliberation, release, supervision of implementation, and removal from the list shall be specified. The procedural provisions and regulatory measures for all administrative departments, financial regulators, and obligated institutions to carry out the requirements of the resolutions of the United Nations Security Council on combating the financing of terrorism shall be improved and detailed, and the asset freezing periods, scopes, and procedures, the protection of bona fide third parties, and the relevant legal liability shall be further specified, so as to ensure the timely implementation of the relevant resolutions of the United Nations Security Council.
(12) Strengthening the risk monitoring of particular non-financial institutions and exploring the establishment of a regulatory system of particular non-financial institutions in combating money laundering and financing of terrorism: The coordination and cooperation between the anti-money laundering administrative departments and tax authorities on one side and the particular non-financial institutions on the other side shall be strengthened, the changes in risks of money laundering, financing of terrorism, and tax evasion in non-financial fields shall closely followed, risks assessment shall be conducted for high-risk industries, the distribution and developmental trend of industry-specific risks of money laundering, financing of terrorism, and tax evasion shall be researched and analyzed, and proposals for "three combats" regulatory policies shall be offered. The regulatory rules for combating money laundering and financing of terrorism shall be gradually established in industries such as realty agencies, sale of precious metal, jewelry and jade, and corporate services and other particular non-financial industries with high risks for which international anti-money laundering standards have set forth clear requirements. According to the principle of "industry-specific policy," anti-money laundering departments shall, in conjunction with the departments in charge of particular non-financial industries, publish industry-specific regulatory rules for combating money laundering and financing of terrorism, and determine the industry-specific regulatory modes of combating money laundering and financing of terrorism based on the status quo of industry regulation and the characteristics of operations of institutions under regulation. Industry associations and self-regulatory organizations shall play a positive role, and industry associations shall be guided in developing industry guidelines for work on combating money laundering and financing of terrorism.
(13) Strengthening the development of supporting regulatory policies and improving the risk prevention and control system: The rules for regulators to conduct anti-money laundering background checks of newly established obligated institutions, non-profit organizations, and their directors, supervisors, and senior executives shall be researched and established, the backgrounds of promoters, shareholders, actual controllers, final beneficiaries, directors, supervisors, and senior executives shall be scrutinized, and the sources and channels of funding shall be examined, so as to prevent at the source the perpetrators from laundering money, financing terrorism, or evading tax by establishing organizations or institutions. The money laundering risks of various negotiable bearer securities and priorities in regulation shall be studied, the technologies to identify the values and verify the authenticity of negotiable bearer securities shall be researched, the division of labor in regulation between anti-money laundering administrative departments and the Customs shall be specified, and efforts shall be made to promote the issuance of rules for the regulation and notification of the cross-border carrying of negotiable bearer securities as soon as possible. The specific procedures for the Customs to notify anti-money laundering administrative departments, public security authorities, and national security authorities of the cross-border carrying of cash shall be developed, and the abnormal cross-border funds monitoring system shall be improved.
IV. Improving preventive measures
(14) Establishing and improving regulatory mechanisms based on risk prevention and control and guiding the obligated institutions in effectively resolving risks: Aimed at effective risk prevention and control, the anti-money laundering regulatory policy framework shall continue to be optimized, the risk tolerance in anti-money laundering regulation shall be rationally determined, a regulatory policy transmission mechanism shall be established and improved, the obligated institutions shall be urged, directed, and stimulated to vigorously and proactively strengthen the management of risks of money laundering and financing of terrorism, and their role of "first line of defense" in preventing money laundering, financing of terrorism, and tax evasion shall be maximized. Anti-money laundering regulatory policy tools shall be comprehensively used, regulation by category shall be promoted, the risk early warning and emergency response mechanisms shall be improved, and the anti-money laundering regulation of high-risk markets, business, and institutions shall be practically reinforced.
(15) Enhancing measures for corporate regulation and raising regulatory efficiency: Anti-money laundering administrative departments and the banking, securities, and insurance regulatory departments of the State Council shall strengthen anti-money laundering regulation, and gradually establish and improve the corporate regulation framework aiming to promote the self-management and autonomous management of risks by the obligated institutions. Anti-money laundering regulatory policies shall be appropriately tiered and categorized, centering on the different orientations and functions of corporate institutions and their branch offices as well as group companies and their subsidiaries in risk management. The internal control mechanism requirements for the headquarters of the obligated institutions shall be strengthened, the responsibilities of directors, supervisors, and senior executives shall be reinforced, and the obligated institutions shall be impelled to improve their capability of performing anti-money laundering obligations. Exploration shall be conducted for the establishment of the mechanisms of division of labor and cooperation in regulation commensurate with corporate regulation, a technical platform meeting the needs of corporate regulation shall be set up, and the inter-regional sharing of information on anti-money laundering regulation shall be gradually achieved. On the premise of strict compliance with confidentiality provisions, an anti-money laundering work information exchange platform and exchange mechanism among the obligated institutions shall be researched and established.
(16) Improving the monitoring and analysis system and raising the level of monitoring and analysis: The sources of data and information for anti-money laundering monitoring and analysis shall continue to be expanded, and the two-way flow and sharing of data and information between relevant entities shall be promoted in accordance with the law. The organization and coordination of anti-money laundering monitoring and analysis shall be enhanced, and the targeted monitoring and analysis of priority fields, regions, and groups shall be effectively conducted. The reach of anti-money laundering regulation shall continue to be extended, and the feedback and evaluation opinions from relevant entities on the use of suspicious transaction report information shall be regarded as an important basis for anti-money laundering administrative departments to evaluate the suspicious transaction reports of the obligated institutions. Off-site regulation policy tools shall be enriched to fix the weaknesses of documentary reviews. Accounting firms, law firms, and other professional service institutions shall play a positive role in anti-money laundering monitoring and early warning and the legal disposition, and the anti-money laundering rules and measures for professional service institutions shall be researched.
(17) Encouraging equal attention to innovation and bottom line and properly tackling risks accompanying new business and new business types: The self-assessment rules for risks of money laundering and financing of terrorism of the obligated institutions shall be established and improved, the risks of money laundering and financing of terrorism resulting from new products, business, technology, and channels shall be identified and assessed on an autonomous and on-going basis, the changes in market risks shall be dynamically monitored, and the relevant anti-money laundering regulatory requirements shall be improved. The responsibilities of the obligated institutions to autonomously manage risks shall be reinforced, and they must, before launching new products and business, conduct self-assessment of risks of money laundering and financing of terrorism, and according to the risk assessment results, take effective measures to prevent and control risks. The obligated institutions are encouraged to use big data, cloud computing, and other new technology to improve the effectiveness of work on combating money laundering and financing of terrorism.
(18) Improving the abnormal cross-border funds monitoring mechanisms and preventing and suppressing cross-border financial criminal activities: With the strengthened monitoring of abnormal transactions as the entry point, the foreign exchange transaction monitoring, cross-border RMB transaction monitoring, anti-money laundering funds monitoring, and other information shall be comprehensively used to discover risks of cross-border money laundering and financing of terrorism in a timely manner. The requirements of international anti-money laundering standards relating to transparency of payment clearance shall be observed, financial institutions shall be guided in strengthening risk management, and the "three combats" monitoring and early warning functions of the cross-border RMB clearance system shall be enhanced, so as to maintain the good reputation of the RMB clearance system and reduce the risks in cross-border business of financial institutions.
(19) Establishing and improving the training and education mechanisms and fostering and building professional teams: Anti-money laundering training and education mechanisms comprehensively covering various obligated institutions shall be established to raise the level of anti-money laundering work of relevant personnel. The innovation on the forms of anti-money laundering training and education shall be encouraged vigorously, the scope of recipients shall be expanded by fully using modern science and technology, and the training and education of personnel at the base shall be strengthened.
V. Severely punishing illegal and criminal activities
(20) Effectively consolidating audit resources and relentlessly cracking down on tax-related illegal acts and crimes: A random inspection system and case source management system shall be established and improved to enhance the quality and efficiency of audit. A targeted audit mode oriented to risk management shall be promoted to enhance the precision and deterrence effect of audit. The erosion of tax base and transfer of profits shall be prevented and suppressed. An inter-departmental and inter-regional special crackdown campaign shall be launched across the country to jointly investigate a group of major cases involving export tax refund frauds and false issuance of special value-added tax invoices, destroy a group of career criminal gangs and networks, severely punish a group of enterprises and persons breaching the law or committing crimes, recover the state's lost tax revenue, effectively contain the trend of highly frequent occurrences of illegal and criminal activities of export tax refund frauds and false issuance of special value-added tax invoices, and maintain the national taxation order and security.
(21) Establishing a cooperation mechanism of crackdown on tariff-related illegal and criminal activities: The cooperation and collaboration between anti-money laundering administrative departments and anti-smuggling departments of the Customs shall be strengthened to jointly crack down on illegal and criminal activities of tariff evasion. Anti-money laundering administrative departments and anti-smuggling departments of the Customs shall jointly research the models of characteristics of illegal funds movement for tariff evasion to improve the capability of the monitoring and analysis of leads to the funds involved in illegal and criminal activities of tariff evasion and notify the anti-smuggling departments of the Customs in a timely manner; and anti-money laundering administrative departments shall, in conjunction with the banking regulatory department of the State Council, vigorously assist the anti-smuggling departments of the Customs in cracking down on fund transactions in illegal and criminal activities of tariff evasion, make more achievements in crackdown on illegal and criminal activities of tariff evasion, and join forces in the crackdown. Anti-smuggling departments of the Customs shall notify in a timely manner the anti-money laundering administrative departments and relevant authorities of the leads to money laundering activities discovered in their work, and vigorously assist them in work.
(22) Reinforcing anti-money laundering investigations and establishing and improving the working mechanism of money laundering type analysis: The working procedures for anti-money laundering investigations shall be further regulated, the processes of anti-money laundering investigations shall be improved, investigative means shall be optimized, the analysis and judgment of leads to suspicious transactions shall be strengthened, anti-money laundering investigation and transfer of leads shall be enhanced, assistance in investigations upon request of relevant authorities shall be vigorously provided, and the actual effects of anti-money laundering investigations shall continue to be enhanced. The analysis of money laundering types and risk alerts shall be strengthened, the obligated institutions shall be guided in analyzing money laundering types, risk alerts shall be issued to the obligated institutions in a timely manner, and the obligated institutions shall be urged to strengthen the early warning of risks.
VI. Deepening international cooperation
(23) Effectively conducting mutual evaluations of combating money laundering and financing of terrorism and setting a good international image: The obligations of China as a member shall be practically fulfilled, and the Financial Action Task Force (FATF) mutual evaluations of combating money laundering and financing of terrorism shall be positively conducted. The assessments conducted by international organizations shall be regarded as a major opportunity to improve anti-money laundering work, and relevant entities and obligated institutions shall be organized and mobilized to practically improve the compliance and effectiveness of anti-money laundering work in strict accordance with international anti-money laundering standards and based on China's actual conditions.
(24) Deepening international anti-money laundering cooperation and promoting the smooth implementation of China's general strategic arrangements: China's participation in the research, development, and oversight of implementation of international anti-money laundering standards shall be furthered, and China shall vigorously participate in the internal governance reform and major decision making of international (or regional) anti-money laundering organizations, to elevate China's say and influence in those organizations. The bilateral anti-money laundering exchange and cooperation shall be continuously strengthened, and the regulatory cooperation between China and the U.S. in combating money laundering and financing of terrorism shall be advanced. A mechanism of anti-money laundering regulatory cooperation with some key countries (or regions) shall be established, and Chinese-funded financial institutions and their overseas branch offices shall be urged and directed to raise their awareness and level of anti-money laundering work and maintain their lawful rights and interests. In response to the "Belt and Road" initiative, the anti-money laundering exchange and cooperation with surrounding countries (or regions) shall be effectively conducted. Communication and coordination shall be strengthened, and the work relating to joining the Egmont Group shall be steadily advanced. International financial intelligence exchange platforms shall be used to expand anti-money laundering intelligence channels.
(25) Deepening international anti-tax evasion cooperation and protecting China's tax interests: China shall participate in depth in the conversion of the achievements of the G20 tax system reform, and vigorously participate in the development of international tax rules, so as to make China's voice heard positively, put forward China's proposals, contribute China's wisdom, and practically improve China's say in tax matters. Bilateral and multilateral tax cooperation shall be strengthened, the role of international tax information exchange shall be maximized, tax transparency shall be improved, international tax evasion and avoidance shall be strictly suppressed, the positive role of combating tax evasion and avoidance in combating money laundering shall be maximized, and the anti-money laundering mechanisms shall be effectively used to continuously improve the precision of combat against tax evasion and avoidance.
VII. Creating a good social atmosphere
(26) Strengthening self-regulation and maximizing the positive role of self-regulatory organizations: All appropriate departments shall guide relevant industry associations in vigorously participating in the "three combats," developing self-regulatory anti-money laundering rules and guidelines, strengthening self-regulation, reinforcing the obligated institutions' sense of compliance with the law, honesty, and self-discipline, propelling the obligated institutions to vigorously participate and cooperating in the "three combats," and promoting exchange of information and experience among the obligated institutions, so as to create a positive and sound anti-money laundering compliance environment.
(27) Continuously conducting publicity and education to raise the public awareness of participation and cooperation: Routine "three combats" publicity and education mechanisms shall be established to widely disseminate the basic "three combats" knowledge in the general public, caution them against risks, and improve their self-protection capability. The publicity and education shall be conducted in a variety of flexible forms to raise the public awareness of the "three combats," boost their willingness to voluntarily cooperate in the "three combats" work, and create a good atmosphere for the "three combats" work.
General Office of the State Council
August 29, 2017