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News / China Modifies The Anti-Money-Laundering Legislation To Take Into Account The Risks Associated With Cryptocurrencies

China Modifies The Anti-Money-Laundering Legislation To Take Into Account The Risks Associated With Cryptocurrencies

China has put forward a proposal for anti-money-laundering law revision that takes into consideration the risks involved in the use of cryptocurrencies and virtual assets.

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China is going to adopt an amendment to its outdated Anti-Money-Laundering Law, in a few weeks, and legal experts consider, it would be aimed at tackling the ever-increasing threats linked with cryptocurrencies and other similar virtual assets, reported by state-run news agency Xinhua.

State Council meeting led by Premier Li Qiang, proposed a draft amendment to the Anti-Money Laundering law, which was enacted in 2006 and took effect in 2007, and sent it for review by the national legislature, reported by the same source.

However, the whole text of the revised amendment has not been released publicly but this modification aims to combat money laundering in digital assets, as per the report carried out on the 31st of January by Chinese digital news media Jiemian.

China’s Advanced Measures To Control AML Crime 

China’s ambition to curb AML risks by focusing on virtual assets has generally followed the path of other major countries worldwide which have expressed the need to speed up the procedures, said Fei, a partner at law firm King & Wood Mallesons in Hong Kong, says South China Morning Post.

As per a media report, this new move of Beijing’s against money-laundering activities emphasizes its eagerness to keep up with Web3 development to address vulnerable points such as non-fungible tokens and other virtual assets willingly while demonstrating perseverance with the Chinese ban on crypto transactions in the form of trading and mining.

Chinese news agency Jiemian reported, these new amendments to the program will be adopted in the next year that aimed to address new money-laundering threats, based on the opinion of Peking University Law School Professor Wang Xin, who is involved in the talks on the changes to AML laws.

Promising to take a more aggressive stance against money laundering and illicit foreign exchange activities, Zhang Xiaojin, a senior prosecutor from the Supreme People’s Procuratorate, has announced plans to ramp up enforcement measures. As the leader of the Fourth Procuratorial Office, Zhang emphasized the priority of prosecuting offenses linked to the utilization of digital currencies for overseas asset transfers.

Chinese authorities have taken a more vigilant stance towards investigating cases of crypto-related money laundering in recent years. For instance, in 2022, law enforcement in the northern Inner Mongolia Autonomous Region apprehended 63 individuals who had laundered a staggering 12 billion yuan (US$1.7 billion) through the use of cryptocurrencies.

Unchanged AML Regulations For 17 Years

China’s AML legislation has remained largely unchanged for over 17 years, despite significant advancements in the world at large. Notably, the creation of Bitcoin had not even taken place when the law first went into effect, further highlighting the need for revision.

In light of the ever-changing landscape of international AML standards and best practices, it is wise to update China’s AML law to combat risks associated with virtual assets, a viewpoint shared by Andrew Fei, a partner at law firm King & Wood Mallesons in Hong Kong.

The Paris-based watchdog, Financial Action Task Force has already provided specific guidelines for addressing virtual assets in proposed amendments to the AML law.

In their assessment report for 2020, the FATF rated China as “largely compliant” with their AML recommendations related to virtual assets. However, due to the country’s strict ban on cryptocurrency activities, certain criteria do not apply in China.

As per FATF recommendations, China’s AML law should be reviewed in terms of its compliance with FATF stipulations, as noted by Fei. A mitigation measure that he suggested was “surely the possibility that the new AML amendment in China refers to virtual assets, and authorizes the supervisory bodies with additional powers and tools in their cell of virtual assets and innovative technology”.

“While the digital currencies and everything associated with them are illegal in China, however the borderless and decentralized nature of virtual transactions means that they can be considered as a direct or indirect weapon against China, especially when used for criminal purposes,” says Fei.

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Published Date

February 16, 2024

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