Banks in China will start checking the source and legitimacy of funds from March 1, 2022
From March 1, 2022, the "Administrative Measures
for Due Diligence of Customers of Financial Institutions and Preservation of
Customer Identity Information and Transaction Records" (hereinafter referred to
as "Order No. 1") issued by the central bank and three other departments will be
formally implemented.
These measures stipulate that commercial banks, rural cooperative banks, rural
credit cooperatives, rural and settlement banks and other financial institutions
must identify and verify the identity of customers, as well as the source of
funds, when they make deposits and withdrawals of cash in the amount of 50,000
RMB or more, or in foreign currency equivalent to more than 10,000 US dollars
for individual customers.
In this regard, the head of the relevant department of the People's Bank of
China said that the implementation of the rules by financial institutions will
not affect the normal activities of residents to deposit and withdraw cash, and
the degree of business convenience will not be affected.
The above person in charge pointed out that the activities of depositing and
withdrawing the legitimate income of residents have always been strictly
protected by law in China. “Voluntary deposits” and “free withdrawals” are
clearly defined in the Commercial Banking Law, which financial institutions must
follow when dealing with deposits and cash withdrawals.
In recent years, in order to prevent telecommunications fraud, money laundering
and other illegal and criminal activities, many financial institutions have made
the necessary reminders of the source and use of funds when processing large
amounts of cash and withdrawing money from the account. Therefore, when studying
and developing Order No. 1 by the Financial Management Department, the relevant
practices of financial organizations were generalized and unified, which also
contributes to maintaining the consistency of business standards of various
financial organizations.
Under normal circumstances, financial institutions do not require customers to
complete information or provide supporting materials. Financial institutions can
directly provide cash deposit and withdrawal services for customers and register
relevant information after a simple request. Only in the event that a
transaction is found to be clearly abnormal and there are reasonable grounds to
suspect that illegal and criminal activities such as money laundering are taking
place will additional information be requested from customers.
In the next phase, the People's Bank of China will guide financial institutions
to develop detailed implementation rules. While fulfilling their anti-money
laundering obligations in good faith, they must strictly adhere to the minimum
and necessary principles for understanding registered customer information and
not increase the burden on customers. Especially for the elderly and other
groups who use cash more, financial institutions should take the lead in
providing friendlier and more convenient services. At the same time, banks
should pay attention to strengthening fraud prevention.
The above-mentioned responsible person indicated that the main purpose of
implementing Order No. 1 is to prevent and suppress illegal and criminal
activities such as money laundering, as well as to protect the security and
interests of the public's funds.
In recent years, illegal and criminal activities such as telecommunications
fraud, illegal fundraising, illegal pyramid schemes, cross-border gambling and
underground banking have flourished, seriously threatening the interests of the
people. In 2021 alone, public security authorities investigated more than
370,000 telecom fraud cases with victims across the country.
Among them, a characteristic feature is that criminals prefer to use cash for
transactions, taking advantage of the anonymous and untraceable properties of
cash. Financial institutions are properly strengthening the management of cash
deposits and withdrawals in accordance with the law, which contributes to the
prevention of illegal and criminal activities and the protection of the
fundamental interests of the general public.
The aforementioned person in charge pointed out that "secrecy for depositors" is
the main principle established in the Commercial Banking Law, and financial
institutions must strictly maintain the personal information and confidentiality
of customers obtained in the course of business processing. In addition to
complying with the requirements of general laws such as the Civil Code and the
Law on the Protection of Personal Information, financial institutions must also
establish accurate and complete customer information in accordance with the
requirements of the Commercial Banking Law, the Money Laundering Law. The
disclosure of personal information and confidentiality of customers by the bank
and its employees should be subject to legal and criminal liability in serious
circumstances.
The above-mentioned responsible person pointed out that strengthening the
management of cash deposits and withdrawals is a requirement for financial
institutions to fulfill their anti-money laundering obligations, which is in
line with international anti-money laundering standards.
The relevant provisions on deposits and withdrawals of cash by individuals in
Order No. 1 comply with the requirements of current international standards on
combating money laundering and are internationally recognized practices for
preventing money laundering activities
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TPL_IN
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Created: 10 February 2022