Notice of China on Strengthening the Client Identification for Anti-money Laundering

 2018-05-22  19


Notice of China on Strengthening the Client Identification for Anti-money Laundering


· Document Number:No. 235 [2017] of the People's Bank of China

· Area of Law: Banking & Finance

· Level of Authority: Departmental Regulatory Documents

· Date issued:10-20-2017

· Effective Date:10-20-2017

· Status: Effective

· Issuing Authority: People's Bank of China

 

Notice of China on Strengthening the Client Identification for Anti-money Laundering
(No. 235 [2017] of the People's Bank of China)
Shanghai Head Office of the People's Bank of China (“PBC”); all branches and business management departments of the PBC; all central sub-branches of the PBC in capital cities of provinces (autonomous regions) and sub-provincial cities; China Development Bank; all policy banks, state-owned commercial banks and joint-stock commercial banks; Postal Savings Bank of China; China UnionPay Co., Ltd.; Rural Credit Banks Funds Clearing Center; and Clearing Center for City Commercial Banks:
For the purpose of carrying out the risk-oriented work methods and directing the obligated institutions of anti-money laundering (hereinafter referred to as “obligated institutions”) to further enhance the efficiency of client identification for anti-money laundering, the issue on strengthening the client identification for anti-money laundering is hereby announced as follows:
I. Strengthening the identification of non-natural person clients
An obligated institution shall, in accordance with the Measures for the Administration of Client Identification and Preservation of Client Identity Materials and Transaction Records of Financial Institutions (Order No. 2 [2007], PBC, CBRC, CSRC and CIRC), effectively conduct the identification of non-natural person clients, enhance the information transparency of beneficial owners, strengthen risk assessment and categorized management, and prevent the risks of money laundering and terrorist financing caused by complicated equity or control right structure.
(1) An obligated institution shall strengthen the identification of non-natural person clients, and, when establishing or maintaining business relations, take reasonable measures to know the business nature and equity or control right structure of non-natural person clients, and obtain the relevant information on beneficial owners.
(2) An obligated institution shall, in light of the actual circumstances and the relevant information or data obtained from reliable channels and in a reliable manner, identify the beneficial owners of non-natural person clients, and continuously pay attention to information modification of beneficial owners during the existence of business relations.
(3) For the beneficial owner of a non-natural person client, the obligated institution shall conduct in-depth identification level by level until the natural person who has the control right or obtains proceeds is finally identified. The identification standards are as follows:
(a) The beneficial owner of a company shall be identified according to the following standards in sequence, a natural person who directly or indirectly owns more than 25% of the company's stock rights or voting rights, a natural person controlling the company by personnel, financial affairs or any other form, and a senior executive of the company.
(b) The “beneficial owner of a partnership enterprise” means a natural person who owns more than 25% of the rights and interests of the partnership.
(c) The “beneficial owner of the trust” means the trustor, trustee, beneficiary and other natural persons who have ultimate valid control over the trust.
(d) The “beneficial owner of a fund” means a natural person who owns more than 25% equity shares or any other natural person controlling the fund.
For a non-natural person client with a relatively high risk, the obligated institution shall adopt stricter standards to identify the beneficial owner.
(4) An obligated institution shall verify the information on the beneficial owners, which may be conducted by inquiring about non-natural person clients, requiring non-natural person clients to provide certification materials, consulting the disclosed information or authorizing the relevant institution to conduct investigation.
(5) An obligated institution shall register the name, address, ID card or the type, number and valid term of the identity certificate of the beneficial owner of the client.
(6) An obligated institution may, on the basis of sufficiently assessing the risk status of the following non-natural person clients, regard their legal representatives or actual controllers as the beneficial owners:
(a) Individual industrial and commercial households, sole proprietorship enterprises, and professional service institutions without legal person status.
(b) Non-corporate farmers' professional cooperative organizations engaged in agriculture, forestry, fishing and animal husbandry.
The aforesaid standards shall apply, mutatis mutandis, to enterprises and public institutions controlled by the government.
(7) An obligated institution is not required to identify the beneficial owners of the following non-natural person clients:
(a) Party authorities, state authorities, administrative authorities, judicial authorities, military authorities, and political consultative authorities at all levels, the People's Liberation Army, armed police forces, and public institutions governed, mutatis mutandis, by the Civil Servant Law.
(b) International intergovernmental organizations, foreign embassies and consulates, offices and other institutions and organizations of foreign governments in China.
(8) An obligated institution shall, in the process of identifying the beneficial owner, obtain, collect and appropriately retain the following information and materials:
(a) The information on the equities or control right of a non-natural person client, mainly including the registration certificate, certificate document on good standing, partnership agreement, trust agreement, memorandum, the company's bylaws and other documents that may verify the client's identity.
(b) The registration information of the shareholders or members of the board of directors of a non-natural person client, mainly including the lists of the board of directors, the senior management and the shareholders, the number of shares held by each shareholder, and the type of shareholding (including the relevant types of voting rights).
(9) Banking financial institutions shall submit the information on beneficial owners registered and retained to the relevant information database operated and managed by the Credit Information Center of the People's Bank of China. An obligated institution may consult the information on beneficial owners of non-natural person clients in accordance with the relevant provisions. The measures for the registration, consultation, use and confidentiality of information on beneficial owners shall be separately developed by the People's Bank of China.
II. Strengthening the identification of specific natural person clients
When establishing or maintaining business relations with clients, an obligated institution shall effectively conduct the identification of the following specific natural person clients in accordance with the provisions of the Measures for the Administration of Client Identification and Preservation of Client Identity Materials and Transaction Records of Financial Institutions.
(1) For foreign dignitaries, the obligated institution shall, in addition to adopting the normal client identification measures, take the following intensified identification measures:
(a) Establishing an appropriate risk management system to determine whether clients are foreign dignitaries.
(b) Obtaining the approval or authorization of the senior management before establishing (or maintaining existing) business relations.
(c) Having further in-depth understanding of the source of clients' property and funds.
(d) Increasing the frequency and intensity of transaction monitoring during the existence of business relations.
(2) For the senior executives of international organizations, if the obligated institution provides services for them or conducts business at a relatively high risk, it shall take the intensified client identification measures as listed in sub-items (b) to (d) of item (1) of this Article.
(3) The requirements for the identification of the aforesaid specific natural person clients shall also apply to their specific interested parties.
(4) If the beneficial owner of a non-natural person client is any of the aforesaid specific natural person clients, the obligated institution shall take corresponding measures to intensify the identification of the non-natural person client.
III. Strengthening the measures for the identification of clients in specific business relations
An obligated institution shall, based on the risk assessment results of products and businesses, conduct client identification in light of the features of their business relations, and take the client identification work as a basis for effectively preventing money laundering and terrorist financing risks.
(1) For life insurance and property insurance business with investment functions, an obligated institution shall take into full account the risk status of the beneficiary of the insurance policy, and decide whether to take the measure to intensify the identification of the beneficiary. If the beneficiary is a non-natural person client, and the obligated institution considers that its equity or control right is relatively complicated and has relatively high risks, it shall, before repaying the relevant funds, take reasonable measures to obtain the information on the equity and control right structure of the beneficiary of the insurance policy, and strengthen the client identification of the beneficiary under the risk-oriented principle.
Where the beneficiary or the beneficial owner of the insurance policy is a specific natural person listed in Article 2 and the obligated institution determines that the insurance policy is at a high-risk grade, the obligated institution shall obtain the approval of the senior management before repaying the relevant funds, and conduct intensified examination of the insurance business relations as a whole. If the obligated institution fails to complete the aforesaid measures, the suspicious transaction report shall be submitted on the basis of reasonable suspicion.
(2) Where an obligated institution fails to complete client identification after taking effective measures, or if it exceeds the risk management capability of the institution after appraisal, it shall not establish any business relation or conduct any transaction with the client. If it has established business relations, it shall suspend the transaction and consider submitting a suspicious transaction report, and may terminate the business relations when necessary.
When the obligated institution suspects that the transaction is related to money laundering or terrorist financing, but it will be impossible to be confidential if it conducts client identification once again or on a continuous basis, it may terminate the identification measure, and shall submit the suspicious transaction report.
(3) For a client from a high-risk country or region designated by the Financial Action Task Force on Money Laundering (FATF), the Asian-Pacific Group on Anti-Money Laundering (APG), the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG) or any other international anti-money laundering organization, the obligated institution shall, in light of its risk status, take corresponding measures to intensify the identification.
(4) Where an obligated institution authorizes an overseas third party institution to conduct client identification, it shall fully assess the risk status of the country or region where the third party institution is located, and take it as the basis for client identification, risk assessment and categorized management.
Where an obligated institution and the overseas third-party institution it authorizes belong to the same financial group, and the client identification and other anti-money laundering internal control measures adopted at the group level can effectively reduce the risk level of the overseas country or region, the obligated institution is not required to include the overseas risk status in the category of client identification, risk assessment and categorized management.
(5) For the purpose of anti-money laundering and anti-terrorist financing requirements, a group (or company) shall establish an internal information sharing system and procedures, and specify information security and confidentiality requirements. The regulatory compliance, auditing and anti-money laundering departments of the group (or company) may legally require branch offices and affiliates to provide client, account and trading information and other relevant information.
(6) Banking financial institutions shall comply with the Measures for the Administration of Client Identification and Preservation of Client Identity Materials and Transaction Records of Financial Institutions and other relevant rules and regulations, and, in light of the relevant requirements of the Financial Action Task Force and the Wolfsburg Group on the business of agency banks, strictly perform the obligation of client identification.
IV. Miscellaneous
(1) An obligated institution shall further improve the internal control rules and operating specifications for the identification of clients, and retain the aforesaid identification work records and identity materials obtained in accordance with the Measures for the Administration of Client Identification and Preservation of Client Identity Materials and Transaction Records of Financial Institutions, and effectively perform the obligation of protecting individual financial information.
(2) An obligated institution shall fully explain to its clients the identification obligation that it needs to perform, and shall not explicitly or implicitly advise or help any client to conceal any identity information.
(3) An obligated institution shall, in accordance with the requirements of this Notice, effectively conduct the identification of clients with whom it has established new business relations. At the same time, it shall organize the inspection of existing clients in an orderly manner, and complete the identification of existing clients before June 30, 2018.
(4) For the purpose of this Notice, the International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation: the FATF Recommendations and the relevant international standards shall apply, mutatis mutandis, to the determination of foreign dignitaries and senior executives of international organizations.
This Notice shall come into force on the date of issuance, unless it is otherwise provided for by any relevant law, administrative regulation or rule.
People's Bank of China
October 20, 2017