Chinese official warns money laundering, online scams outpacing capacity for containment

To properly grapple with money laundering – an increasing threat to the country and Southeast Asia – China needs to remedy multiple shortcomings in its financial system, a senior central bank official has cautioned.

Taking a strong stance on money laundering, which has been on the rise in mainland China and Southeast Asian economies at the same time as online scams, is “[important] to maintain national security and financial security”, Wang said at the 13th China Anti-Money Laundering Summit Forum in Shanghai.

Mainland China and Singapore both reported higher risks of money laundering and terror financing compared with last year – though also had slightly improved rankings – on the 2023 Anti-Money-Laundering Index by the Basel Institute on Governance non-profit organisation, indicating others had seen more substantial relative increases.

Hong Kong showed improvement in the global ranking and its own score for risk exposure during the same period of time.

China will also soon face stricter scrutiny of its anti-money-laundering efforts, as the inter-governmental Financial Action Task Force has scheduled a review of the country for next year after narrowly passing it through its fourth round of assessment in 2019.

02:17

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“The amounts involved in the cases continue to rise, and financial risks are gradually increasing,” he noted.

However, Chinese financial institutions generally have a low level of risk management and carry vast individual differences in their risk control capabilities, Wang said.

They also lag behind fintech in terms of technology, especially in light of the rapid changes happening to the industry, he said. The rise of virtual assets, the digital economy and the platform economy, he added, has led to higher risks in turn.

“Increased efforts [against] money laundering from China are of great significance to curb crimes in Southeast Asia,” as the region is one of the world’s hardest hit areas for money laundering and illegal financial activities, said Han Dongping, a lawyer specialising in financial crimes at Yingke Law Firm in Beijing.

“Since money laundering activities often involve cross-border transactions, close cooperation between countries is required to effectively combat such crimes,” he said. “However, in some cases, cross-border cooperation may be hindered by political, economic and other factors.”

Apart from enlarging their own operations and bribing officials, the illicit profits are laundered typically through money transfers, legitimate businesses and various investment portfolios, it said.

Prosecutors across the country brought actions against over 1,700 people for money laundering in the first three quarters of the year, up by nearly 15 per cent over the same period last year, the Supreme People’s Procuratorate said in a statement late last month.

03:02

Hong Kong scam victim recounts how she lost HK$270,000 to criminals

Hong Kong scam victim recounts how she lost HK$270,000 to criminals

Over 62,000 people sued for other offences – including concealment of criminal proceeds – were allegedly involved in money-laundering, up by over 90 per cent compared to last year.

The surge is “closely related to the high frequency of telecoms scams and cross-border gambling”, it said.

More than 2.25 billion yuan (US$312 million) in proceeds from telecoms scams and online gambling were laundered by a 21-person gang via cryptocurrency in five consecutive months between late 2020 and early 2021, according to a case recently made public by a court in western China’s Chongqing municipality.

The gang was paid over 22 million yuan for its services, and last month all its members were sentenced to jail terms ranging between one year and six years, the court said.