Threats:

The main proceeds-generating predicate crimes in China are illegal fundraising, fraud, trafficking in illicit drugs, corruption and bribery, tax crimes, counterfeiting of products, and illegal gambling. China also faces a serious threat from terrorism.

Sector Vulnerabilities & Risks: 

Banks (based on the nature of their products/services and volume of activity), no effective arrangements in place for registering and retaining beneficial ownership (BO) information, the lack of coverage of designated non-financial businesses and professions (DNFBPs) by the AML/CFT framework is a significant vulnerability, large underground financial sector with broad international connections, a rapid growth in the use of Fintech products, particularly in the non-bank payment sector

The main sector residual risks are: High – Banks, Internet Finance Sector, Dealers in Precious Metals, Online Lending institutions, Payment Institutions & Small and medium sized urban, rural, credit banks and cooperatives. Medium High – Terrorist Financing. Medium – Life Insurance, Real Estate. Not Rated in MER but included: Fintech Sector and Underground Banking (as per FATF MER 2019).

Responses:

China remains in enhanced follow up but has made progress in addressing some of its technical compliance deficiencies from the 2019 FATF MER and Follow Up Reports in 2020, 2021 & 2022. China is compliant 9/40 Recommendations, Largely Compliant in 22/40 Recommendations, Partially Compliant in 5/40 Recommendations and Non Compliant in 4 Recommendations.

Recommendations for Partially Compliant Ratings are R6  (Targeted Financial Sanctions related to Terrorism/Terrorism Finance), R7 (Targeted Financial Sanctions related to Proliferation), R12 (Politically Exposed Persons), R24 (Transparency & BO of Legal Persons), & R 35 (Sanctions) & Non Compliant for R22 (DNFBP CDD), R 23 (DNFBP Other Measures), R25 (Transparency of BO of Legal Arrangements) & R28 (Regulation & Supervision of DNFBP).

On Effectiveness, China received 0/11 Highly Effective Ratings, 3/11 Substantially Effective Ratings & 4/11 Moderately Effective Ratings & 4/11 Low Effective Ratings.  The ME ratings were for IO2 (International Co Operation),IO3 (Supervision), IO6 (Financial Intelligence), IO7 (ML Investigations & Prosecutions and Sanctions). The LE ratings were for IO4 (Preventative Measures), IO5 Legal Persons & Arrangements), IO10 (TF Prevention including NPOs) & IO11 (WMD Proliferation Prevention).

Key Outcomes Performance Data for China:

FIU Staffing: NA

SARs Reported: 5.4M

SAR Conversion Rate: NA

PPP: No

NRA: Yes latest AML in 2018 but not publicly available

ML Convictions: 82 in 2017 (note taken the smaller number available for true ML convictions)

Human Trafficking Convictions: 2,355 in 2019

Foreign Bribery Convictions: 0 between 2018-2021

Assets Seized: NA 

Assets Confiscated: US$5-1B (1.1% of estimated financial crime proceeds @ 3.6% of GDP) in 2017.