The following suggestions concern China’s measures to counter money laundering in accordance with China’s present legislation and measures, with the European practice as reference.
1. Increase public awareness of the seriousness of money laundering
In society today, the damage resulting from money laundering is endless because it is inextricably linked to the serious crime that plagues the world, within every country and transnationally: smuggling, drug trafficking, corruption at all levels of administration, and the increasing incidence of traditional gangland organised crime, not to mention the current explosion of terrorist acts and the fear they engender. It is so far-reaching and so devastating that it may undermine the foundation of government and, indeed, the national and international financial order. International society has therefore taken money laundering very seriously since 1980. The September 11 attacks made international society much more aware of money laundering because
it seemed that such a highly organised event might not have taken place if terrorists were unable to be financed through money laundering. The US government has already demanded of the international community that it control and prevent money laundering in order to block the financing of terrorism.
In China, the problem of money laundering deserves special attention. China is vulnerable to the harmful effects of money laundering for the reasons given earlier: incomplete financial laws, a less than ideal financial order, no high-level financial expert staff, illegal private loans and the large amount of competition that is manipulative and unfair. The nation and all its people will be inestimably damaged if the religious extremists and separatist groups arm themselves rapidly by access to laundered money. China must therefore learn to appreciate the damage money laundering can do. It must hasten the passage of new legislation and set up sound anti-money laundering measures.
In addition, public awareness of the seriousness of the issue should be increased through education – the
‘laundering’ of illegal money is a new concept to most Chinese and the necessary counter-measures will not succeed without the support of the people.
2. Perfect anti-money laundering legislation
In recent years, China has passed some anti-money laundering laws and regulations. The Criminal Code adopted by the People’s Congress defined the crime of money laundering and the relevant departments also promulgated regulations such as Real Name Rules for Individual Savings, Rules for Remittance of Foreign Exchange Abroad by Domestic Citizens, and Large Amount Cash Payment Registration. Yet in comparison with the legislation of the EU, Belgium and the UK, there are many gaps in China’s legislation. The three areas of criminal legislation, preventive legislation, and professional regulations all need improvement.
As we have seen, many aspects in Article 191 of the Criminal Code which defines the crime of money laundering are inadequate. First, the Article limits predicate crimes to drugs, gangland organised crime, smuggling and terrorism, while the EU, Belgium and the UK have broadened the scope of predicate crimes to embrace all serious crimes. We in China should use their experience for reference and broaden the scope of predicate crimes to ensure that the laundering of any serious criminal proceeds is regarded as a crime.
Second, as the article defines it, the subjective aspect of money laundering is the knowledge of the illegal proceeds from drugs crime, gangland organised crime and smuggling crime, and collaboration to launder money. In the EU, Belgium and the UK, the culpable mental state of this crime is ‘know or suspect criminal proceeds’. The scope of ‘to know’ in Article 191 is also too narrow and should be changed to ‘ought to know’ or ‘know or suspect’. Third, the Article prescribes that the act aspect of the crime is restricted to a narrow list of predicate crimes in money laundering, while the EU, Belgium and the UK also embrace the mischief of divulging information and misprision (concealing information). The law will be more able to prevent serious crimes such as money laundering if the current prescription is broader.
So far, China does not have laws as specific as those in the EU, UK and Belgium, though the People’s National Congress representatives have proposed drafts of anti-money laundering legislation. Specific departments have promulgated some regulations, for example prescriptions on the cash payment of large sums, and foreign exchange administration guidelines published by the PBOC and Foreign Exchange Bureau.
The present difficulties are first, that since these regulations are not particularly aimed at money laundering, they have no actual force against money laundering, and second, that because of finance workers’ ignorance
about the need to fight money laundering coupled with large-scale disordered competition, the existing regulations have not been enforced. Hence it is necessary for the financial system to formulate specific regulations to prevent money laundering and enforce them effectively.
3. Establish a valid anti-money laundering mechanism
It is necessary for China to establish specific working mechanisms to fight against money laundering home and abroad. Specific departments such as the Central Political and Law Committee are examining this problem. We consider that an information agency should be established while a valid mechanism is being put in place. This may meet the requirements of both domestic anti-money laundering measures and international cooperation. Many countries have established systems like the Financial Intelligence Processing Unit in Belgium and the Criminal Intelligence Centre Economy Crime Office in the UK. Fifty-eight member states of the Egmont Group have established such institutions. We have two proposals: one is that these institutions must be dedicated to countering money laundering and that no part-time agency or person may accomplish the task; the other is that these institutions must be independent, for example the UK Economy Crime Office was set up in the police department and later transferred to an independent institution after the enactment of the appropriate legislation.
Towards the goal of establishing a specific department collecting information on money laundering, we should speedily set up and perfect the reporting of suspicious transactions of financial and other departments and appoint examining and reporting officials in the relevant departments with explicit powers and obligations.
Only in this way can our anti-money laundering institutions play important roles.
4. Strengthen international cooperation against money laundering
Because of the transnational characteristics of money laundering, international cooperation among the law enforcement agencies fighting it must be enhanced. This is certainly the international consensus. There are already two international avenues we can use: FATF and the Egmont Group. Twenty-nine countries participate in FATF. The European Committee and the Gulf Cooperation Organisation also joined the working team. Since the Recommendations were promulgated by the G-7 Summit, most of the developed countries become members of FATF and have in principle adopted its Forty Recommendations.
The working team has significant influence in the international anti-money laundering field. When we visited the EU, many officials, including EU External Relationship Department Asian Department head Mr Yades, expressed their hope that China would join the working team and adopt the Forty Recommendations.
They also stated they were expecting all countries attending the Asian Europe Conference to join the team and implement the Forty Recommendations. We suggest that our country should weigh the advantages and disadvantages of participating on the working team and make a decision to join because we need international assistance more urgently than many others. If China can trace the enormous sums illegally remitted abroad through this channel, it may significantly benefit the domestic fight against crime and corruption.
Established in 1995, the Egmont Croup is an informal cooperative organisation between some countries’
financial intelligence centres. Its purposes are broadening the scope of financial intelligence exchange and systematising it, meanwhile improving its technological capability, enhancing staff expertise in financial intelligence, and using modern high technology to strengthen the communication among different countries’
financial intelligence centres. The Group held three meetings in its year of establishment and since 1996 has held one meeting a year. According to UK Criminal Intelligence Centre Economic Crime Division and the Belgian Financial Intelligence Processing Unit, the Egmont Group is an effective channel for different countries’ money laundering intelligence institutions and personnel in exchanging intelligence and developing cooperation. The communication among the team members may avoid many unnecessary procedures and is highly efficient and convenient. As well as Hong Kong SAR China and Taiwan, there are at present 58 countries and regions in the Egmont Group. We suggest that China does further research on the Group and joins it at the proper time. Since the Group was established in Belgium, the president of Belgium’s Financial Intelligence Processing Unit has invited China to join it many times.
Besides these two avenues of cooperation, China should use bodies such as the International Criminal Police Organisation to extradite criminals and trace criminal proceeds. Anti-money laundering should also be noted in bilateral criminal judicial assistance.