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15 July 2015

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More Supervision for Overseas Bank Branches

2017-08-03 Download Print Comment

Joint efforts needed to tackle money laundering

Chinese monetary regulators and banks will step up efforts to scrutinize major banks' overseas branches and severely fight money laundering, experts said.

The comments came after more and more overseas branches of Chinese State-owned banks in recent years are reportedly getting investigated on money laundering charges, including Bank of China (BOC), Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (ABC).

In Italy, Florence prosecutors alleged that nearly 300 people including some BOC employees smuggled more than 4.5 billion euros ($5.3 billion) to China from the country from 2006-10, Reuters reported in February.

ICBC's Madrid branch was also investigated on suspicions of money laundering, according to media reports.

The New York State Department of Financial Services announced in November last year that ABC would pay a $215 million penalty and install an independent monitor for violating New York's anti-money laundering laws.

The People's Bank of China (PBC) and the China Banking Regulatory Commission (CBRC) did not immediately comment when contacted by the Global Times on Wednesday.

Several factors inside Chinese banks' overseas branches led to their involvement in these cases, including undesirable regulatory compliance management, lack of vigilance in business expansion and a lack of professionals to preventing money laundering, according to Yan Lixin, acting director of the China Center for Anti-Money Laundering Studies of Fudan University.

Some managers of overseas branches of Chinese banks have inadequate awareness on how to improve regulatory compliance and fight money laundering. This together with flaws in internal anti-money laundering measures and procedures, especially in the area of "know your customer," may result in supervision loopholes, Yan told the Global Times on Wednesday.

Insufficient training as well as some staff members' lack of professional ethics is another factor, he said, noting that some mangers may take risks in order to develop business overseas.

The fact that regulations cannot follow the pace of financial product and service innovation also contributes to money laundering, Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, told the Global Times on Wednesday.

Tighten supervision

Overseas branches should carry out self-examination and correction, sort out the characteristics of a country's money laundering cases and formulate specific measures to tackle money laundering, experts noted.

"Commercial banks should set up new anti-money laundering models - self-define standards of suspicious transactions that a bank should report to China's central bank, to identify money laundering practices based on analysis and reasonable suspicion and then fight money laundering," Yan said.

In December last year, the central bank required financial institutions to report large and suspicious transactions and receive the regulator's supervision and inspection.

It lowered the reporting threshold for yuan-denominated cash transactions to 50,000 yuan ($7,440) from the previous 200,000 yuan.

In addition, Chinese banks should also adopt advanced anti-money laundering systems and increase the number of anti-money laundering professionals, Yan said.

The proportion of anti-money laundering professionals required in a domestic bank's overseas arm has increased to 20 percent, in response to several anti-money laundering cases, according to Yan.

The Bank of Communications (BOCOM) has won recognition from local regulators for its regulatory compliance management and anti-money laundering work at overseas branches.

Despite rising economic uncertainties and increasingly strict financial supervision, the BOCOM is accelerating its global expansion, with the establishment of 65 business units in 16 countries and regions, it said in a note sent to the Global Times on Tuesday.

Meanwhile, regulators should also strengthen supervision at the source over issues such as residents' illegal income, tax evasion and improper cross-border mergers and acquisitions, in order to nip money laundering in the bud, Dong said.


Source: Global Times