This is to reflect progress on regulating online lending, guidance issued to online lending and other DNFBP sectors, and China’s prohibition on virtual asset activities.
The FATF (Financial Action Task Force) has announced it has re-rated China on two recommendations, in response to efforts made by the country to strengthen its AML/CFT framework.
The FATF adopted the mutual evaluation report on China in May 2019, following which the country has been in an enhanced follow-up process.
China has reported back to the FATF on the actions it has taken since then. In the 1st enhanced follow-up report, the FATF has re-rated China on two Recommendations.
Recommendation 26 (Regulation and supervision of financial institutions) – re-rated from partially compliant to largely compliant, to reflect new measures that make the online lending sector subject to AML/CFT requirements. The online lending sector is now supervised by the PBOC (People’s Bank of China), in collaboration with NIFA (National Internet Finance Association) and industry self-regulatory bodies .
Recommendation 34 (Guidance and feedback) – re-rated from partially compliant to largely compliant, to reflect guidance to assist online lending institutions, real estate agents, dealers in precious metals and accountants in applying AML/CFT requirements. However, guidance for lawyers and notaries is outstanding.
The report also looks at whether China’s measures meet the requirements of FATF Recommendations that have changed since the 2019 mutual evaluation. As such, the FATF agreed to:
Recommendation 2 (National cooperation and coordination) – maintained the rating of compliant, to reflect China’s AML Joint Ministerial Conference (AMLJMC), a mechanism that allows co-operation, co-ordination and domestic exchange information concerning the development and implementation of AML/CFT policies and activities, at both policymaking and operational levels, and including on data protection and privacy
Recommendation 15 (New technologies) – re-rated from partially compliant to largely compliant, to reflect the fact that new requirements for virtual asset activities or VASP operations are not applicable to China and therefore not assessed because such activities are prohibited in the country. China has also taken steps to address other remaining criteria including to require payment institutions to identify and assess ML/TF/Proliferation risks that may arise in relation to the development of new products, or in relation to the application of new technologies on existing products.
China is now largely compliant on 18 of the 40 Recommendations; compliant on 7; partially compliant on 9; and not compliant on 6.
The country remains in enhanced follow-up and will report back to the FATF on progress to strengthen its implementation of AML/CFT measures in October 2021.
China’s 1st enhanced follow-up report is available here.