China has tightened surveillance on abnormal capital inflow and outflow, and is studying the experiences of foreign countries to find ways to strike harder at cross-border money laundering.
In recent years, some milestone achievements have been made in fighting money laundering, particularly in terms of constructing detection mechanisms and implementing regulations. In tracking down large-sum or suspicious foreign exchange transactions, the State Administration of Foreign Exchange has worked with the police to crush underground banks. Numerous suspects have been arrested and large sums of Chinese and foreign currencies have been seized.
However, the absence of a money laundering law has hindered all the best efforts of the financial governance departments, law enforcement authorities and customs.
The domestic criminal law refers only to money-laundering involving capital derived from drug trafficking, terrorist financing, organized crime and smuggling.
As China now turns its attention to striking corruption on the financial battlefield, legislators and legal experts say it is essential to enact a money laundering law as quickly as possible. The legislatures of most countries have enacted such fundamental laws, and China's use of administrative regulations instead of laws is out of step with international practice.
Song Chengbin, a researcher in the Law Department at the Capital University of Economics and Business, said a money laundering law, once enacted, would lay a legitimate foundation for international cooperation and promote China's international image.
He suggested that China should learn from other countries' successes and failures and follow the advice of the Financial Action Task on Money Laundering (FATF): that the crime of money laundering be applied not only to banks and other financial institutions such as securities and insurance companies, but also to non-financial businesses and professions that may handle large capital flows, such as real estate companies.
Foreign countries with money laundering laws that focus narrowly on the financial sector have quickly found that launderers have no problem moving their funds to industries that are outside the jurisdiction of the law.
Thus far, attempts to quell money laundering have had to rely on industry regulations, such as those governing financial institutions or reporting of large-sum or suspicious foreign currency exchange or capital flows.
But this method has proved ineffective as money launderers develop more sophisticated techniques that are applicable in more industries, said legislator Yang Shengmin of the National People's Congress.
"It is necessary to establish a money laundering law with legitimate effects at a higher level," said Yang.
Legislator Hu Pingxi said that China should research the laws of other nations relevant to money laundering and review the experiences of those nations. This would enable it to write an appropriate law that allows for effective enforcement. It should require all financial institutions and relevant non-financial businesses and professions to implement internal controls such as client identification and suspicious case reporting systems. Independent governance bodies should be established to coordinate interdepartmental criminal investigations and an international cooperation mechanism should be created.
(China.org.cn by Xu Zhiquan May 26, 2004)
