FATF Mutual Evaluation Scorecard

China

China’s domestic AML/CFT framework is well-established, but important gaps remain on its overall understanding of ML/TF risks. While FIs have adequate understanding of their AML/CFT obligations, their understanding of risks need development.
FIUs have a high potential to produce solid financial intelligence, but have a decentralised arrangement, making data access, analysis and dissemination fragmented, incomplete and unholistic. This also waterfalls to financial intelligence not driving ML investigations by law enforcement agencies (LEAs).
With a large amount of illicit funds flowing out of China annually based on previous NRAs, the deficiencies in the implementation of TF and PF targeted financial sanctions have negative impact.
AML/CFT supervision is mostly focused on the financial sector, lacking preventive or supervisory measures for designated non-financial businesses and professions (DNFPBs) and non-profit organizations (NPOs).

There were several technical compliance deficiencies that had already been addressed in this Follow-Up Reports (FUR), some of which were related to limited predicate ML offences and the lack of thresholds. Progress has been made since the Mutual Evaluation Reports (MERs) with remaining deficiencies deemed minor, improving R3 re-rating.
With NPOs being recognised as vulnerable to TF abuse, China needed to identify their subset of NPOs, including its donor community, and to implement risk-based monitoring, which roots from the lack of investigative expertise and capabilities. This has since been addressed, together with stronger monitoring and supervision policies, upgrading R8.
Deficiencies in R18 of the MER identified that FIs’ obligations on internal controls did not require the consideration of ML/TF risks and the size of the business, and that there is a general lack of clarity on AML/CFT program requirements. This has since been addressed by an amendment to the existing administration and supervision measures.
FIU data has been consolidated into a new platform and now accessible to relevant agencies, resulting to an improved R29.
China has made significant progress in expedited seizing, freezing, and confiscation of foreign assets, re-rating R38.