Last Updated: 28/12/2014
CENTRAL AUTHORITY FOR REPORTING.
China Anti-Money Laundering Monitoring & Analysis Centre (the “China AML MAC”)
Anti-Money Laundering Bureau
Both authorities are within the People’s Bank of China(the “PBC”)
OTHER ANTI-MONEY LAUNDERING REGULATOR(S).
ARE LAWYERS COVERED BY MONEY LAUNDERING LEGISLATION?
According to the Financial Action Task Force Report released in February 2012and current legislation, China has not applied specific anti-money laundering (“AML”) measures to lawyers.
However, lawyers may be covered by the AML provisions in the Criminal LawAct (1997 revision) and the amendments), which applies to all natural persons who commit crimes within the territory of the PRC and all PRC citizens who commit crimes outside the territory of the PRC. Lawyers should note that many of the services they provide could give rise to liability by nature of their work as a lawyer; specifically under Article 349 of the Criminal Law Act 1997 and 191 of the Criminal Law Act, Amendment VI, 2006.
Penalties for the offenses mentioned above include fixed term imprisonment of between 3 to 10 years, fines, criminal detention and public surveillance. Article 191 specifies that fines will be established on the basis of a percentage of the money laundered. Accomplices will have a lesser punishment than the principal offender.
Article 49 of the PRC Law on Lawyers[BMCK1] also allows the State Department to revoke a lawyer’s practicing certificate if a criminal penalty is imposed on the lawyer for an intentional crime (e.g., any of the above mentioned sections).
LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.
A non-exhaustive list of the laws regarding AML is listed below. All applicable laws for lawyers have been previously mentioned above:
Administrative Measures for Identifying the Financial Institutions' Clients and Preserving Their Identity Information and Transaction Records 2007 (Joint Order of PBC, CBRC, CSRC, CIRC  No.2, issued on 2007.6.21 and effective on 2007.08.01) (“Regulations on Customer Identification”)
Administrative Measures for on-site Anti-money Laundering Inspections (for Trial Implementation), [EE1] 2007
Administrative Rules for the Reporting by Financial Institutions of Large Value and Suspicious Transactions, 2007
Anti-Money Laundering Law of the People’s Republic of China, 2007 (“AML Law”)
Anti-Money Laundering Work Guideline for Members of the China Futures Association (issued and effective on 2008.5.19)
Anti-money Laundering Guidelines for Securities Companies(issued and effective on 2014.4.28)[BMCK2]
Criminal Law, 1997 - Articles, 312and 349(applicable to lawyers as natural persons) (Amendment VI, 2006 in respect of 191 and 312)
Detailed Rules for Anti-money Laundering Investigations (Trial Implementation), 2007[EE3]
Insurance Law of the People’s Republic of China, 2009(as amended in 2014)[EE4]
Notice of the China Insurance Regulatory Commission on Issuing the Measures for the Administration of Anti-money Laundering Work in the Insurance Sector(No. 52  of the China Insurance Regulatory Commission)[BMCK5]
Law of the People’s Republic of China on the People’s Bank of China,2003(as amended by “Decision of the National People's Congress Standing Committee on Amending the Law of the People's Republic China on the People's Bank of China (Order of the President No. 12), issued on 2003.12.27 and effective on 2004.2.1)
Law of the People’s Republic of China on Banking Regulation and Supervision, 2003(as amended by “Decision of the Standing Committee of the National People’s Congress on Amending the Banking Supervision Law of the People’s Republic of China” (Order of President No. 58, issued on 2006.10.31 and effective on 2007.1.1.)
Measures for the Administration of Financial Institutions’ Reports on Suspicious Financing Transactions for Terrorist-related Activities, 2007
Off-site Anti-Money Laundering Supervision Measures (Trial Implementation), 2007
PBC Notice on Strengthening the Anti-money Laundering Work in the International Remittance Agency Business, 2008
Circular of the People’s Bank of China on Further Strengthening AML work of Financial Institutions, People’s Bank of China, PBC Doc. No. 391 (2008)
Provisions on Anti-Money Laundering Through Financial Institutions 2006
Securities Law of the People’s Republic of China, Decree No.43, 2005 (as amended and 2014 )[BMCK6]
Detailed Implementing Rules for the Measures for the Administration of Payment Services of Non-Financial Institutions (issued and effective 12.01.2010)
Measures for the Administration of Payment Services of Non-Financial Institutions (Decree  No. 2 of the People's Bank of China)
Circular of the People’s Bank of China on Clarifying Implementation Issues of Suspicious Transaction Reporting Regime, People’s Bank of China, PBC Doc. No. 48
State Security Law of the People’s Republic of China
Circular of the People’s Bank of China on Further Improving Requirements of Filling Large-Value and Suspicious Transaction Reports, People’s Bank of China, PBC Doc. No.2009
The Rules for Anti-money Laundering by Financial Institutions
Notice of the People's Bank of China on Strengthening the Anti-money Laundering Work of Financial Institutions in their Cross-border Business Cooperations (No. 201  of the People's Bank of China)
Notice of the People's Bank of China on Strengthening the Anti-Money Laundering in Cross-Border Remittances(No. 199  of the People's Bank of China)[BMCK7]
ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?
Visiting lawyers are also subject to the AML provisions in the Criminal Law.
LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.
There is currently no money laundering guidance for lawyers.
IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?
Although the Ministry of Justice Department responsible for supervising lawyers and lawyers must respect the Code of Ethics issued by the All China Lawyer Association(the “ACLA”), the Ministry of Justice Department the ACLAare not specifically required by the PRC Law on Lawyers or the Code of Ethics to supervise lawyers in respect of AML obligations.
However, Article 49 of the PRC Law on Lawyers allows the State Department to revoke a lawyer’s practicing certificate if a criminal penalty is imposed on him for an intentional crime.
DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.
There are currently no AML client due diligence ("CDD") requirements that must be specifically undertaken by lawyers.
However, Article 11 of the Rules on Legal Counsel for Lawyers issued by the ACLA indicates that for clients who are legal persons, lawyers are required to determine whether the legal person is a “legal establishment or legal existence”, its current conditions, the scope of its business as confirmed in its business license and its actual major business scope. For customers who are natural persons,lawyers are required to determine their nationality, residence, vocation and “other natural conditions”. Lawyers are required to keep a working diary of legal services provided. Lawyers engaging in securities work are required to keep their working papers for 10 years (see para. 537 & 538 of the FATF Report 2007). The same FATF report notes that the provisions under Article 11, in respect of CDD and record keeping, are not fit for the purpose of AML as per the guidance provided by FATF.
According to the FATF Report 2012(see para. 181, 191, 209 and 211), China has significantly strengthened the AML/ counter-terrorist financing ("CFT") requirements in industries such as real estate, however China has not yet extended these comprehensive requirements to lawyers.
Law firms may execute the above forms of client due diligence for financial institutions, as they can rely on third party due diligence (Article 17 of the Anti-Money Laundering Law PRC). Accountability for whether sufficient customer due diligence has been performed will fall to the financial institution rather than the law firm.
DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?
There are currently no AML client due diligence requirements that must be undertaken by lawyers, on a risk-based approach or otherwise.
ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?
There is no information available in respect of whether lawyers have to undergo enhanced due diligence for certain types of clients.
ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?
There is no information available in regards to whether lawyers have to undergo simplified due diligence for certain types of clients.
ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.
There is currently no law permitting lawyers to rely on third party due diligence.
WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?
There is currently no law specifically obliging a lawyer to report suspicious transactions.
However, Article 108 ofthe PRC Criminal Procedure Law(as amended in 2012)provides that "…[a]ny entity or individual which discovers any facts of a crime or a criminal suspect shall have the right and the obligation to report the crime or criminal suspect to a public security authority, a people's procuratorate, or a people's court…". Therefore, lawyers have a general obligation to report a money laundering crime.
In addition, under Article 38 of the PRC Law on Lawyers,lawyers are under a duty to reveal information obtained from a client, which pertains to endangering state/public security (e.g., suspicions of terrorist financing). Article 38 should be read in conjunction with Article 17 of the State Security Law of the People’s Republic of China,which requires any citizen that finds an act which endangers state security to without delay report directly or through work channels to a state security or public security organ.
Lawyers are therefore required to promptly report any information obtained from their clients pertaining to suspicions/knowledge of terrorist financing.
DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENSE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?
There is currently no specific law which provides that attorney/client privilege and/or duties of confidentiality provide a defense or partial/total exception to reporting suspicious transactions.
In fact, Article 38 of the PRC Law on Lawyers provides that as an exception to client confidentiality, lawyers must reveal information that relates to the commissioning/preparation of an offense which will endanger state or public security or seriously endanger another person’s personal safety or safety of property.
As such, knowledge/suspicions of financing for terrorism would need to be reported.
DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?
There is no law providing for indemnity as no specific legislation exists in relation to lawyers and reporting of suspicious activity.
In addition, it is arguable that Article 38 of the PRC Law on Lawyers be relied on by a lawyer as a defense to any claims pertaining to a breach of client confidentiality.
ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?
There is currently no law which allows a lawyer to proceed with legal advice or a transaction once a suspicious transaction report has been filed. Article 17 of the State Security Law does not provide advice on what to do after the relevant authorities have been notified.
IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.
There is currently no tipping-off prohibition
DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.
There are currently no restrictions on accepting a new client.
ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.
Under Article 9(3) Decree No.1, Financial institutions are required to re-identify a customer’s identity when detecting any abnormal phenomenon or questioning the authenticity of any identity documents previously obtained.
DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.
There are currently no restrictions for lawyers in respect of accepting a new client within anti-money laundering legislation
However, Articles 32 and 48 of the PRC Law on Lawyers provide that lawyers can refuse to take on a client if they believe that the nature of the work would violate the law or the lawyer’s services would be used to engage in illegal activities (Article 32), thus qualifying as a justifiable reason (Articles 48 and 32). Accordingly, lawyers would be permitted to refuse clients based on the knowledge or belief that the work would involve facilitating money laundering or terrorist financing.
HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?
There are no known cases in the PRC territory of lawyers being implicated in money laundering.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
FATF’s first mutual evaluation took place in 2006. The feedback by the FATF in relation to designated non-financial businesses and professions (DNFBP’S), which includes lawyers, was that the PRC had not implemented any measures in relation to AML/CFT.
However since then, the PRC has had 8 follow up evaluations and the latest report released in February 2012 indicates that the PRC has not sufficiently addressed AML/CFT legislation in relation to lawyers. The feedback indicates there is insufficient customer identification and record keeping requirements, no procedures addressing countries with poor AML/CFT compliance, no internal AML/CFT for lawyers, and thus no supervision/monitoring is in place (Recommendations 12, 24 &17).
In February 2013, China attended the FATF Plenary and Working Groups Meetings in Paris. The member states approved the new methodology for evaluating the national AML/CFT systems and expressed their desire to begin the fourth round of mutual evaluations in early 2014.During and after the plenary, China discussed strengthening bilateral cooperation on supervising money laundering with member states including the US, Russia, Singapore and Italy. However, no specific AML/CFT compliance measures for lawyers were discussed or adopted by China according to the report on the plenary.
In addition, the Anti-Money Laundering Bureau PBC releases annual reports on AML, which cover the AML/CFT legislation development, international cooperation and practice. According to the latest 2013 China Anti-Money Laundering Report, the PBC has been putting great effort on AML/CFT legislation for financial/non-financial institutions. However, the report does not mention any legislation for lawyers. It indicates that the PBC has not launched special AML/CFT supervision/monitoring.
Information provided by:
Simon Hui Simon.Hui@bakermckenzie.com
Baker & McKenzie LLP
Unit 1601, Jin Mao Tower
88 Century Avenue
Pudong, Shanghai 200121
People's Republic of China
Gillian Lam Gillian.Lam@bakermckenzie.com
Baker & McKenzie LLP
23rd Floor, One Pacific Place
Hong Kong SAR
Ying Wu email@example.com
Baker & McKenzie LLP
Suite 3401, China World Office 2
China World Trade Center
1 Jianguomenwai Dajie
Beijing 100004, PRC
Asian Legal Information Institute
US Department of State
Anti-Money Laundering Bureau PBC
Go to news page.
Back to Asia.