<The Law on Anti-money Laundering> which receives much domestic and abroad attention was finally adopted at the 24th meeting of the Standing Committee of the 10th National People’s Congress of the People’s Republic of China through two and half years’ discussion. It is hereby promulgated and shall come into force on January 1, 2007. This law has magnificent significance reflecting in the following five aspects:

I.Establish client’s identity identification system

<The Law on Anti-money Laundering> requests a financial institution and a special non-financial institution to establish a client’s identity identification system, to prudently identify, check and register identity information of a client, his agent and his beneficiary and not to provide service to any client who cannot clarify his identity. Article 16 of <The Law on Anti-money Laundering> regulates “A financial Institution shall establish a client’s identity identification system according to the relevant provisions. Where a financial institution establishes any business relationship with a client or provides such one-off financial services as cash remittance, cash conversion and bill payment beyond the prescribed amount, it shall require the client to show its/his authentic and effective identity certificate or any other identity certification document and make relevant verification and registration. Where a client entrusts an agent to handle the transaction on its/his behalf, the relevant financial institution shall make verification and registration of the identity certificates or any other identity certification documents of the agent and the principal thereof. Where a financial institution establishes a business relationship of personal insurance or trust with his client yet if the contractual beneficiary is not the client himself, the financial institution shall make verification and registration of the identity certificate or any other identity certification document of the beneficiary as well. A financial institution shall not provide any service to or have trade with any client who cannot clarify his identity or establish any anonymous or pseudonymous account therefor. Where a financial institution has any doubt about the authenticity or effectiveness or completeness of any client’s identity materials, it shall check out the client’s identity again. Where any entity or individual establishes any business relationship with any financial institution or requires a financial institution to provide a one-off financial service, it/he shall provide its/his authentic and effective identity certificate or any other identity certification document.”

It is easy for offenders to take false bank account and stock account as money laundering tool. In some crimes of manipulating securities in our country, dealers behind curtain reach the object of highly control and confusing supervision department through borrowing others’ account.

Identity identification system is the first regulation on anti-money laundering prevention system. In order to establish correspondence among client’s identity, fund and transaction when crime income first enters transaction field and establish basis for identifying real character of fund, real object of transaction and chasing actual owners and beneficiaries, <The Law on Anti-money Laundering> remarkably inducts identity identification system.

Client identity identification generally includes three situations: typical (when developing new business) client and his agent identity identification; client identity identification of large sum transaction and doubtful transaction; simplification and exemption identity identification of low risk client.

In order to create feasible condition for client’s identity identification, Article 18 of <The Law on Anti-money Laundering> regulates Where a financial institution and non-financial institution conduct the clarification of its clients’ identity, they may verify the relevant identity information with such departments as the public security organ and the administrative department for industry and commerce.

In consideration of providing materials for analysis, investigation and detection of anti-money laundering information, Article 19 of <The Law on Anti-money Laundering> regulates clients’ identity materials and transactional records shall be preserved for some time. According to the regulation of prescription of prosecution in our country and the international current rules, <The Law on Anti-money Laundering> regulates that clients’ identity information and transaction information shall be preserved at least for five years since the completion of business relationship and transaction relationship. If it is involved in doubtful transaction, it shall be preserved for twenty years.

II. Define the reporting system of large sum transactions and doubtful transactions

Illegal cash flow generally has the characteristic of large sum and abnormal transaction. Reporting system of large sum transactions and doubtful transactions shall usually be regarded as the core of prevention and supervision system of anti-money laundering.

Article 20 of <The Law on Anti-money Laundering> inducts the reporting system of large sum transactions and doubtful transactions. It requests that a financial institution and a special non-financial institution shall report abnormal transactions which go beyond the prescribed sum or lack obvious economical and legal purpose to Anti-money Laundering Information Center in a timely manner as clues for finding and chasing criminal activities.

Per introduction, most countries regulate lower limit of large sum in laws and cash transactions going beyond the lower limit shall be reported to national financial information institution. Besides, in order to restrict range of cash use in economic and society, each country regulates cash transaction standard of large sum in laws and regulations on anti-money laundering. If surpassing such standard, bank transferring system or payment system shall be used and reported.

It is complicated to set standard of doubtful transaction. Some countries regulate principle standard in laws and concrete standard shall be regulated in regulations, rules or industry guidance. Currently, some countries adopt transaction appraisal method on the basis of risk.

<Measures on the Administration of Reporting Large and Doubtful Payment Transactions in Renminbi> and <Administrative Measures for the Financial Institutions’ Report of Large-sum Transactions and Doubtful Transaction> promulgated and implemented by People’s Bank of China have inducted such system. Current laws and regulations have also set the standard of “large sum” and “doubtful transactions”. Three following situations shall belong to renminbi large payment transactions: single payment by transfer of account between legal persons, other organizations and individual industrial and commercial businesses with the amount at 1 million Yuan or more; single cash receipt and payment, including cash deposit, cash disbursement and cash remittance, cash draft, cash promissory note collection, with the amount at 200,000 Yuan or more; transfer of money between banking settlement accounts for individuals or between a banking settlement account for individual and a banking settlement account for entity, with the amount at 200,000 Yuan or more.

III. Obligation subject of anti-money laundering involves special non-financial institution

As the principal channel of current society finance, financial system of bank, security and insurance is an easy happening and high-risk field for money laundering. But financial institution is not the sole channel for money laundering. With the strictness and perfect of finance supervision system, money laundering gradually infiltrates in non-financial institution.

It is extremely dangerous for criminal groups to hold a large amount of cash. Therefore, some criminals transfer the form of cash through purchasing jewel, antique and noble artwork and at the same time it is easy to smuggle and sell off.

Currently, in order to respond to increasingly complicated and rampant money laundering activities, every country enlarges range of reporting subject of large sum and doubtful transaction. Some non-financial institutions with high risk and large sum transactions also become reporting subjects, such as attorneys, accountants and tax counselors, real estate agents, auction barterers of highgrade goods (including jewel, precious metal and artwork etc) and gambling operators etc.

Therefore, <The Law on Anti-money Laundering> (draft) which is submitted for discussion not only regulates financial institutions of bank, security, insurance are obligation subject of anti money laundering, but also regulates special non-financial institutions of real estate sales institutions, precious metal and jewel transaction institutions, auction enterprises, law firms, public certified accountants and etc shall bear the obligation of preventing and supervising money laundering.

<The Law on Anti-money Laundering> regulates, besides financial institutions, special non-financial institutions shall establish inner control system, set special organization or designate special principal and carry out training and propaganda of anti-money laundering.

IV. Make clear that the competent authority is entitled to conduct anti-money laundering investigation

Money laundering activities mainly depend on cash allocation and cash transfer. With the development of technology method of payment and settlement, cash transfer and cash withdrawal are very convenient and prompt whatever domestic or trans-regional, especially trans-regional transfer, if the transfer succeeded, it is difficult to supervise and chase criminal funds.

In order to effectively solve the problems of transfer and fleeing of criminal funds in emergency, <The Law on Anti-money Laundering> regulates that the administrative department of anti-money laundering of the State Council is entitled to conduct anti-money laundering investigation and adopt measures of inquiry, inspection, replication, sealing up and temporary freezing etc.

At the same time, in order to avoid abusing of power and protect lawful property rights of entities and individuals, <The Law on Anti-money Laundering> strictly regulates the conditions, subjects, approval procedure and term of conducting part of investigation measures: i. Any document and material that may be transferred, concealed, tampered or destroyed can be sealed up. Where the account capital as involved in the investigation may be transferred to a foreign country, temporary freezing measures may be adopted; ii. Only the administrative department of anti-money laundering of the State Council can adopt temporary freezing measures subject to approval of the principal of the administrative department of anti-money laundering of the State Council; iii. A temporary freeze shall not exceed 48 hours. Where any notice on continuing freezing from the investigation organ is not received within 48 hours, it shall immediately lift the freeze.

Anti-money laundering information center which is responsible for accepting, analyzing and transferring relevant information of anti-money laundering is the bridge between prevention and supervision of anti-money laundering and criminal penalty and also is an important organ to develop anti-money laundering. <The Law on Anti-money Laundering> regulates the administrative department of anti-money laundering of the State Council shall establish anti-money laundering information center. In actual, People’s Bank of China has established finance information center in our country in 2004 i.e. Anti-money laundering supervision and analysis center.

V. Measures of Anti-money Laundering are suitable for combating financing of terrorism

“Anti Financing of terrorism” consists of anti-money laundering. In current China, “Anti Financing of terrorism” has become one of the important tasks of anti-money laundering. Therefore, Article 36 of <The Law on Anti-money Laundering> specially regulates “The supervision over any funds suspected of being involved in any terrorism activity shall be governed by the present Law.”

After “9·11” event, the most influential anti-money laundering organ in the world i.e. Financial Action Special Working Group submits eight new suggestions regarding “anti financing of terrorism”--<Eight Special Suggestion of Beating Financing of Terrorism>, which specially beats and cuts off fund chain of supporting terrorism.

In our country, the attitude and standpoint towards anti-money laundering are very striking and obdurate. Currently, our country is devoted to anti financing of terrorism, and sets up “EAG” as original member in 2004.

Our country has formed a complete set of legal system regarding anti-money laundering. Article 191 of <The Criminal Law> regulates crime of money laundering; <Provisions on Anti-money Laundering through Financial Institutions>, <Measures on the Administration of Reporting Large and Doubtful Payment Transactions in Renminbi> and <Administrative Measures for the Financial Institutions’ Report of Large-sum Transactions and Doubtful Transaction> made by People’s Bank of China first define administrative management system of anti-money laundering, establish all-around anti-money laundering management system, be effective on prevention and beating money laundering and then form the arm of the law of prevention and beating crime of money laundering. <The Law on Anti-money Laundering> will make legal system of anti-money laundering more perfect. After implementation of <The Law on Anti-money Laundering>, it will cooperate with <The Criminal Law>, <The Commercial Bank Law>, <The Trust Law>, <The Security Law>, <The Insurance Law>, a series of related financial rules and regulations and rules for implementation thereof to form a safety net to prevent and beat crime of money laundering.