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Money laundering laws and regulations China and Hong Kong


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Money laundering laws and regulations: China and Hong Kong
Alain Sham (Shen Zhongping)
HKSAR, Hong Kong, People’s Republic of China
Abstract
Purpose – To examine the criminal laws and regulations on money laundering control in China and Hong Kong and to call for legal and institutional reforms in China. Design/methodology/approach – This paper provides a comparative analysis and critically reviews the laws and regulations on money laundering control in China and Hong Kong. Findings – China has shown a ?rm determination to combat money laundering since 2002. Reforms on Article 191 of the Criminal Law of the People’s Republic of China (1997) and the institutional framework are called for to comply with the international standards of the FATF recommendations, the UN Convention against Transnational Organized Crime (2000) and the UN Convention against Corruption (2003) to control money laundering. Practical implications – This paper highlights the problems and proposes both legal and institutional reforms on money laundering control in China. Originality/value – This paper initiates the analytical research on the legal and institutional problems of money laundering control in China which had not been adequately explored. Keywords China, Hong Kong, Money laundering, Law Paper type Research paper

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1. Scope of study Globalisation and rapid economic development lead to increasing money laundering activities in all jurisdictions. China started to open up the market and economy since 1978. It has been considered as more vulnerable to potential abuse by the organised crime groups and the ?nancial sector due to inadequate legal and institutional safeguards under the socialist regime. In 1997, China extensively revised both the Criminal Procedures Law and Criminal Law which created for the ?rst time an offence of money laundering in Article 191 of the Criminal Law (CLPRC) of China. Between 13 and 15 January 2003, the central People’s Bank of China issued three sets of Administrative Rules for Anti-Money Laundering by Financial Institutions, the Reporting of Large Value and Suspicious Renminbi Payment and Foreign Exchange Transactions which came into operation on 1 March 2003. The focus of this study is on China. This paper will address on the following issues: . What were the major changes leading to the introduction of anti-money laundering policy and related legislation in China? . What are the problems and methods of money laundering in China? . What are the existing legislation and institutional framework of anti-money laundering in China and Hong Kong? . What are the differences between anti-money laundering laws and regulations of China and Hong Kong?

Journal of Money Laundering Control Vol. 9 No. 4, 2006 pp. 379-400 q Emerald Group Publishing Limited 1368-5201 DOI 10.1108/13685200610707635

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What are the major shortcomings of the anti-money laundering legislation and regulations in China? What are the recommendations for reform in China?

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2. De?nition of money laundering Like the concept of corruption, there are different de?nitions of the term “money laundering”[1]. All of them in common refer to the legitimatisation and the concealment of the origin, source and identity of the proceeds of crime. The concept of money laundering offence was originated from the United Nations Convention against Illicit Traf?c in Narcotic Drugs and Psychotropic Substances (the Vienna Convention) adopted on 20 December 1998. Article 3(1)(b)(i) of the Vienna Convention provides that each Contracting Party shall adopt necessary measures to establish as criminal offences under its domestic law, when committed intentionally, the conversion or transfer of property, knowing that such property is derived from an offence relating to narcotic drugs or psychotropic substances for the purpose of concealing or disguising the illicit origin, true nature, source, location, disposition, movement, rights with respect to, or ownership of the property. Along the line of the Vienna Convention, Article 6 of the United Nations Convention against Transnational Organized Crime (UNCTOC)[2] adopted on 15 November 2000 speci?cally refers to money laundering as intentional conducts of: . the conversion or transfer of property, knowing that such property is the proceeds of crime, for the purpose of concealing or disguising the illicit origin of the property; or . the concealment or disguise of the true nature, source, location, disposition, movement or ownership of or the rights with respect to property, knowing that such property is the proceeds of crime. The scope of application extend s beyond the property which “is derived from” narcotic drugs-related offences to “the proceeds of crime”. Article 2(e) de?nes “proceeds of crime” as “any property derived from or obtained, directly or indirectly, through the commission of an offence”. In simple words, as the Financial Action Task Force (FATF) puts it, money laundering is the processing of the criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to enjoy the illegal proceeds as legitimate pro?ts, and provide funds and ?nancial resources to further criminal activities. 3. The historical framework Politics takes command in China since 1949. According to the Constitution of the People’s Republic of China (CPRC), the basic task of the nation is to concentrate its effort on socialist modernisation under the leadership of the Communist Party of China (CCP) and the principle of the dictatorship of the proletariat. Article 6 of CPRC provides that: “The basis of the socialist economy system of the People’s Republic of China is socialist public ownership of the means of the production, namely, ownership of the whole people and collective ownership by the working people”[3]. Under the Chinese centrally planned economy, everything was under the control of the State – production, price, distribution, consumption and the market. The economy, laws and institutions were intended to be instruments of policy enforcement to promote state

and social interests. The CCP retained the authority to determine, direct and supervise all policy and political matters. The movement of assets and money were restricted. Under such a closed system, there was little room for the development of ?nancial or organised crimes. The pre-conditions for money laundering activities simply did not exist. The fall of the Gang of the Four in October 1976 and the return of Deng Xiaoping marked the beginning of a new political and economic era in China. After the Third Plenary Session of the Eleventh Chinese Communist Party Congress in 1978, China adopted a policy of “Reform and Opening Up the Economy”. In 1988, the Constitution was amended to permit the private sector of the economy to exist and develop as a complement to the socialist public economy[4]. In 1993, the Constitution was further amended to include:
The State practises planned economy on the basis of socialist public ownership. It ensures the proportionate and co-ordinated growth of the national economy through the overall balancing by economic planning and the supplementary role of regulation by the market [and that] ‘the State practises socialist market economy’[5].

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The most important legal amendment to the Constitution came in 1999, where a new paragraph was added to Article 5 of the Constitution which provides: “The People’s Republic of China governs the country according to law and makes it a socialist country ruled by the law”[6]. It was under this new constitutional framework that China started to undergo a process of economic transformation which facilitates the development of a socialist market economy where created the pre-conditions for large-scale economic and organised crimes, and as a consequence, the demands for money laundering. 4. The problem of money laundering By its secret and criminal nature, there cannot be of?cial economic statistics for underworld money laundering activities. The International Monetary Fund (IMF) estimated that the aggregate size of global money laundering could be between 2 and 5 per cent of the world’s gross domestic product[7]. It would indicate that, for example, in 1996, money laundering ranged between 590 billion and 1.5 trillion US dollars. The lower ?gure is almost equivalent to the value of the total output of an economy of Spain. According to the Economic Times in China, it was estimated that the money laundered each year in China was about 200 billion Renminbi (approximately US$ 25 billion), which included 70 billion Renminbi from smuggling and 30 billion Renminbi from corruption of public of?cials[8]. China did not recognise the problem until very recently. As Guo (2002) observed:
In the process of setting up the socialist market economy, the ?nancial infrastructure [of China] was too weak to prevent money laundering. Many factors of Chinese characteristics contribute to the further deterioration of money laundering.

The problems contributed to the increasing demand of money laundering includes: the revival of narcotic drugs trade, inadequate law and weak institutions, corruption of public of?cials, disorder in ?nancial market competition, unlawful loan businesses in the rural areas, inadequate supervision and the low quality of inexperienced of?cials in banking and ?nancial industry. It was also reported that Hong Kong is being used on as massive scale for money laundering in and out of China[9].

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Hong Kong has several attractive features to money launderers: the absence of foreign exchange control, a stable ?nancial system and good banking facilities, ef?cient communication system, and an international ?nancial and transportation network. Hong Kong has been alleged to be the “Chinese money laundry” for triads and drug syndicates since 1980 (Gaylord, 1992, pp. 84-6). The drug syndicates, whose pro?ts are usually in the form of cash in small denominations, evaded law enforcement by diverting cash to overseas banks. These institutions then deposited the funds in US banks via wire transfers in accounts with ?ctitious names. This volume of small denomination bills exceeded the total volume of all currency transactions with any European country. In 1982, for example, the total transfer of US currency to and from Germany amounted to US$ 12 million, and from France, US$8.8 million, while from Hong Kong, it was more than US$100 million, between 1980 and 1984, the amount of cash ?owing to USA from Hong Kong increased by ten times to US$ 1.7 billion. In October 2002, the Hong Kong Police estimated that the proceeds generated from criminal activities in Hong Kong each year to be in excess of HK$ 930 million. As at 1 March 2006, a total of HK$1 billion and 385 millions (approximately US$176 million) of proceeds of crime was under restraint. In addition, HK$105 million had been ordered to be con?scated. Another HK$413 million had been con?scated since the enactment of the drug traf?cking (recovery of proceeds) ordinance and the organized and serious crime ordinance[10]. 5. Forms of money laundering Money laundering is a complex process. As the Australian National Crime Authority (1991) reports:
Such a scheme would take the raw proceeds of crime, held by the offender, manoeuvre them through a process that would conceal their source and confuse or break the money trail, and then return them to the offender legitimised and ready for further safe use.

The process can be expressed by reference to three stages: (1) Placement Stage – where cash derived directly from criminal activities is ?rst placed either in a ?nancial institution or used to purchase an asset. (2) Layering Stage – where the proceeds of crime is concealed or disguised of the source or ownership of the funds or property. (3) Integration Stage – the money is integrated or re-enters into the legitimate economic or ?nancial system and is assimilated with all other assets in the system. Money laundering techniques are “innumerable, diverse, complex, subtle and secret” (Gilmore, 1999, p. 30). They all have three common features: (1) the need to conceal the true ownership and origin of the proceeds; (2) the need to maintain control of the proceeds; and (3) the need to change the form or identity of the proceeds (Gilmore, 1999). The FATF points out that the most common methods of money laundering includes “structuring, U-turn transactions, shell company, using secretarial company as a signatory in bank account or using another person’s account”[11]. Zhang (2000)

described the seven modus operandi commonly used by criminals to launder illicit money obtained from fraud, smuggling, embezzlement, corruption and drug-related offences in China as: . Use of interchanges between underground banks of China and other countries[12]. . False import contracts outside China and ?nanced by letter of credits to launder the proceeds of crime. . Using false or other’s identity cards to open bank accounts and launder money through ?nancial institutions. . Loans to borrow money to be paid by proceeds of crime. . Foreign exchange black markets and smuggle out of China. . Laundering through the stock market or investment in which the capital turnovers quickly. . Laundering through projects of ?xed investments in, for example, entertainment business so as to mix up the origin of the proceeds of crime with the income from investment. It is also a common practice to invest in real estate which involves large sums of money. Other forms of money laundering scheme includes the smuggling of cash by couriers across the border[13], and the “currency exchange operation” where a bank account was opened and Hong Kong currency deposited in Hong Kong in the name of the bene?cial owner of the proceeds of crime and his agent in turn paid Renminbi in China[14]. The opportunities for money laundering develop hand in hand with the economic growth in China. As an of?cial of the Administration of Foreign Exchange observed:
Various money laundering activities by domestic and overseas money launderers are relatively concentrated in economically prosperous regions along the coast; dirty money that is involved in money laundering has a broad array of resources, including various economic crimes like embezzlement, bribery, forex ?ight and fraud, tax evasion and proceeds from illegal operations[15].

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The problem of money laundering is further aggravated by the fact that the economy of China remains to be largely cash-based transactions. It is dif?cult to trace and monitor the money ?ow. There is also a noticeable trend of increasing money laundering activities in less developed regions with weak administrative control and inexperienced or incompetent of?cials. Globalisation and China’s integration with the world economy, the diversi?cation of business transactions, the increase in direct foreign investment and the rapid development of more sophisticated forms of communication technology had all inevitably contributed to intensify the scale and complexity of the process of money laundering in China. 6. The law and regulations against money laundering in China and Hong Kong 6.1 China There was no provision for an offence of money laundering in the ?rst Criminal Law of the People’s Republic of China in 1979. Money laundering simply did not exist before

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China opened up the economy in 1978. The legal sanctions of money laundering in China started with the rati?cation of the UN Convention against Illicit Traf?c in Narcotic Drugs and Psychotropic Substances (1988) at the Ninth Meeting of the Standing Committee of the Seventh National People’s Congress (NPCSC) on 4 September 1989. As a result, the NPCSC passed the resolution on “The Decision of the Prohibition of Narcotic Drugs” (“The Decision”) on 28 December 1990. Article 4(1) of the Decision provides that:
Any person who harbours the criminals to smuggle, sell, transport or manufacture narcotic drugs, or stores, transfers or conceals narcotic drugs or the property or money derived therefrom for criminals, or disguises or conceals the illicit nature or source of the property or money obtained from the sale of narcotic drugs, shall be guilty of an offence and liable to be sentenced to a ?xed term of less than seven years imprisonment and a ?ne.

This was the ?rst statutory provision against money laundering in China. It was intended to give effect to the Vienna Convention (1988) and restricted to apply only to the proceeds of crime relating to and connecting with offences of narcotic drugs. For the ?rst time in the criminal legislation of China, Article 12 of the decision also made a speci?c and mandatory provision for the con?scation of drug proceeds and illicit pro?ts derived from narcotic drug offences[16]:
All seized narcotic drugs, illicit proceeds obtained from narcotic drug crimes, and pro?ts derived or obtained from such illicit proceeds shall be con?scated to the State.

On 20 December 1994, the Supreme People’s Court of China further quali?ed the scope of application in Article 4 of the decision and speci?cally introduced a mental element into the offence. Article 6 of the “Supreme People’s Court Judicial Interpretation on Some Questions relating to the Application of the NPCSC Decision on Prohibition of Narcotic Drugs” (the “SPC Interpretation”) singled out the concealment of drug proceeds of Article 6(1) into a separate offence and provides that:
According to Article 6(1) of the Decision, the offence of disguise or concealment of the nature or source of drug proceeds refers to conducts of knowingly conceal or disguise the illicit nature or source of the property or money obtained by the sale of narcotic drugs, through the intermediary of transfer, investment or other means by ?nancial institutions; or while having knowledge that the property or money was obtained by the sale of narcotic drugs, intentionally conceal the illicit nature or source of drug proceeds to the judicial authorities.

Article 6(2) of the SPC Interpretation also distinguished the offence with the handling of property which was derived from drug proceeds and emphasised that this offence deals with the conduct of concealing the illicit nature and source of the drug proceeds, and not the property itself. The additional requirement of knowledge as a mental element for the offence suggests that it is not suf?cient to prove anything short of an intentional act. It also appears that it is necessary to prove in a prosecution, in accordance with Article 11 of the now repealed Criminal Law of China (1979), that the accused “knowing that his conduct will cause a consequence harmful to the society, and nevertheless hope or being reckless to allow such consequence to happen” so as to commit a crime. Since, the implementation of the NPCSC decision and the SPC interpretation, there were international and regional instruments formulated to combat the problem of money laundering. The most important one is the FATF Forty Recommendations

which was issued in 1990 and revised in 1996. China did not join as a member of the FATF. During the next few years, China has implemented some ad hoc administrative regulations which, to a certain extent, facilitated to indirectly discourage money laundering activities. Some of these regulations are: . Provisional rules on cash management (1 October 1988): issued by the PRC State Council which encourages the use of cheques, money orders, and account transfers and to reduce the abuses arising from cash transactions in personal or unit economic activities. . Foreign exchange management regulations of PRC (1 April 1996, amended in 1997): issued by the PRC State Council which strengthens the control and management of foreign exchange transactions. . Basic principles on counter-money laundering for Bank of China Of?ces Abroad (1998). . Administrative rules on the use of real name in personal deposit accounts (1 April 2000): issued by the PRC State Council and implemented by the People’s Bank of China which regulates the use of real name in accordance with the veri?cation of of?cial identi?cation documents of customers by ?nancial institutions. The most signi?cant statutory instrument against money laundering was introduced in 1997 when China extensively revised both the Criminal Procedure Law and the Criminal Law. It is for the ?rst time that a new provision on an offence of money laundering was formally written into the criminal law and came into operation on 1 October 1997. Article 191 of the Criminal Law (1997) provides[17]:
Whoever, while clearly knowing that the funds are proceeds illegally obtained from drug-related crimes or from crimes committed by Ma?a or smugglers and gains derived therefrom, commits any of the following acts in order to cover or conceal the source or natures of the funds shall, in addition to being con?scated of the said proceeds and gains, be sentenced to ?xed-term imprisonment of not more than ?ve years or criminal detention and shall also, or shall only, be ?ned not less than give per cent but not more than 20 per cent of the amount of money laundered; if the circumstances are serious, he shall be sentenced to ?xed-term imprisonment of not less than ?ve but not more than 10 years and shall also be ?ned not less than ?ve per cent but not more than 20 per cent of the amount of money laundered:
. . . . .

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providing fund accounts; helping exchange property into cash or any ?nancial negotiable instruments; helping transfer capital through transferring accounts or any other form of settlement; helping remit funds to any other country; or covering up or concealing by any other means the nature or source of the illegally obtained proceeds and the gains derived therefrom.

Where a unit commits any of the crimes mentioned in the preceding paragraph, it shall be ?ned, and the persons who are directly in charge and the other persons who are directly responsible for the crime shall be sentenced to ?xed-term imprisonment of not more than ?ve years or criminal detention.There is no report of conviction of money laundering of a substantive scale in China since the implementation of Article 191 of

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the Criminal Law. The effectiveness of the new provision cannot therefore be assessed. As a matter of law, an offence of money laundering in China consists of four elements: (1) pre-condition: that the property concerned is in fact the proceeds of one of the three categories of predicate offences[18]; (2) the mental element: the accused clearly knows that property concerned was the proceeds of one of the three categories of crime, namely, drug-related offences, Ma?osi or triad-related organised crime or smuggling; (3) the purpose: that the accused intends to cover up or conceal the source of nature of the proceeds; and (4) the act: that the accused performs or takes part in one of the ?ve conducts as speci?ed by Article 191. There are some problems in the interpretation and application of Article 191. The ?rst question is: what is the requirement of clearly knowing in Article 191? There is no statutory de?nition of knowledge in the Criminal Law (1997). The mental element of knowledge is referred to in Article 14 of the Criminal Law (1997), which is a reproduction of the exact words in the repealed Article 11 of the Criminal Law (1979). The test appears to be one of actual knowledge. The words of “ought to have known” do not appear in the de?nition. It is argued that if the legislature intends constructive knowledge to be suf?cient to be the mental element of a crime, it can expressly say so. Article 219 of the Criminal Law, for example, expressly provides that a person “clearly knows or ought to know” shall be deemed to have infringed on business secret and commits an offence. The term “clearly knowing” was, however, considered by the Supreme People’s Court and the Supreme People’s Procuratorate in a different context of handling stolen property. Article 8(1) of the Judicial Interpretation on Some Questions Relating to the Substantial Application of Law in Dealing with Theft Cases (1992)[19] provides that:
In order to con?rm “clearly knowing” in handling of stolen goods cases, . . . it is only necessary to prove that the accused actually knows or ought to have known the proceeds are stolen property.

The Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security further considered the mental requirement of knowledge in the Administrative Regulation of the State Administration of Industry and Commerce on Dealing with Theft and Robbery of Motor Vehicles (1998)[20]. Article 17 of the Regulations provides that clearly knowing includes actual knowledge and constructive knowledge. On the balance of these authorities, it appears that the courts are prepared to give a liberal rather than literal interpretation on the term “clearly knowing” to include both actual and constructive knowledge in money laundering cases. This interpretation is also consistent with the objectives in Article 5 of the FATF Forty Recommendations and Article 6(f) of the UNCTOC (2000) which provides that the knowledge, intent and purpose required as an element of an offence in money laundering may be inferred from objective factual circumstances. The second question is: does the offence of money laundering in Article 191 also apply to the person who actually commits the predicate offence? The Chinese legal academics are divided on this issue. Zhao (2001, p. 562) is of the view that the

perpetrator of a predicate offence can also be convicted of money laundering under Article 191 if, after he obtains the property, he takes further steps to conceal the nature or source of the proceeds of crime. We shall see that this view is in line with the decision of the judicial authorities in Hong Kong. Gao (2000, p. 728; Guo, 2002, p. 20) and Qiu (1998, p. 22), however, argued that the subject matter of money laundering is intended to aim at persons other than the perpetrator of the predicate offence and that the requirement of “clearly knowing” in Article 191 can only refer to an accused’s knowledge in relation to property belonging to another[21]. None of these arguments was tested in the courts of China. Four of the ?ve conducts referred to in Article 191 are concerned with providing assistance and facilities by others to deal with the proceeds of crime after the commission of the predicate offence. On the proper construction of the drafting language of Article 191, it also appears that the conduct referred to in sub-paragraph 5, namely, “to disguise or conceal the proceeds of crime and its nature and source by other means” is capable and wide enough to cover the situation where the perpetrator also seeks to legitimatise the proceeds of crime derived from the predicate offence. The third problem of Article 191 is applicability. This has recognised as the major obstacle to the effective and ef?cient enforcement of the money laundering law in China[22]. Article 4 of the FATF Forty Recommendations suggests that each country should extend the offence of drug money laundering to one based on serious offences, which would be designated as money laundering predicate offences. Article 191, however, speci?es in unequivocal terms that it only applies to proceeds of crime derived from three categories of predicate offence: drug-related crimes[23], ma?a or triad-related organised crimes[24] and smuggling[25]. Although it is appreciated that Article 191 was originally derived from the Vienna Convention against narcotics substances, the limited scope of its application inevitably and seriously undermines the effectiveness of the law. This situation is far from satisfactory. It leaves with a lacuna in law that the dealings with the proceeds of other serious and organised crimes such as corruption, fraud, traf?cking in human being, and tax evasion are not within the purview of money laundering offences. China took the opportunity to re-consider the scope of application of Article 191 after the terrorist attack on New York on 11 September 2001. On 29 December 2001, the NPCSC passed the Third Amendment to the Criminal Law of China. Article 7 extends the predicate offence to include a fourth category of terrorist activities. It has also increased the penalty of serious cases of money laundering which involved the units or persons directly in charge or responsible to a sentence of at least ?ve years imprisonment to ten years imprisonment. Despite the amendment and efforts made by the legislature, it can be seen that Article 191 of the Criminal Law is still not suf?cient to satisfy the international standards as speci?ed by Article 6(1) of the UNCTOC (2000), Article 23 of the United Nations Convention against Corruption (2003) and Article 4 of the FATF Forty Recommendations (1990). Article 191 further creates an offence of corporate crime[26]. Article 191(2) provides that where a unit or a corporate commits an offence of money laundering, it can be ?ned in the same manner as a natural person. The criminal liability of a corporate further extends to “the persons directly in charge and other persons who are directly responsible” for the crime. On 29 December 2001, the penalty for such persons in a

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corporate was increased from a term of not more than ?ve years imprisonment to a term of not less than ?ve years imprisonment to ten years imprisonment. This can be seen as an indication of the Chinese legislature to recognise money laundering to be committed by a corporate as a serious offence. Article 30 of the Criminal Law (1997) de?nes a unit to include “a company, enterprise, department organ and an association”. It appears that the criminal net is suf?ciently wide enough to cover any senior executives or directors of a corporate who are in a position to acquire information and with actual or constructive knowledge that money laundering activities are carried out. In addition, to the forfeiture of the proceeds and gains from money laundering pursuant to Article 191, the court also has jurisdiction to make an order pursuant to Article 59 of the Criminal Law (1997) to con?scate in whole or in part the personal property of the convicted director or directly responsible person of the corporate involved in money laundering offences. Apart from Article 191, there are some other provisions in the Criminal Law which can assist in the control of unauthorised ?nancial institutions and their money laundering activities. Article 174 provides that it is an offence punishable in serious cases with ten years imprisonment to establish a commercial bank or ?nancial institutions without the approval of the People’s Bank of China. Article 312 deals with the complicity in the handling of stolen property which mitigates the inadequate sanction of money laundering derived from those predicate offences not covered by Article 191. Any party concerned in money laundering can also be charged with a joint enterprise or accomplice under Articles 25, 26 and 27 of Part I of the General Provisions of the Criminal Law of China. It is quite obvious that Article 191 is a deterrent and not a preventive provision. It does not include any reporting conditions by the vulnerable ?nancial institutions, professional bodies or other market participants. The gap is only recently being partly ?lled by the administrative rules of the People’s Bank of China. Between 13 and 15 January 2003, the central People’s Bank of China (PBC) issued three sets of administrative rules to combat money laundering: (1) Administrative Rules for Anti-Money Laundering by Financial Institutions (AML Rules) (PBC Order No. 1 of 2003, issued on 13 January 2003). (2) Administrative Rules for the Reporting of Large Value and Suspicious Renminbi Payment Transactions (RMB Rules) (PBC Order No. 2 of 2003, issued on 14 January 2003). (3) Administrative Rules for the Reporting by Financial Institutions of Large Value and Suspicious Foreign Exchange Transactions (Forex Rules) (PBC Order No. 3 of 2003, issued on 15 January 2003). These three sets of administrative rules were adopted on 17 September 2002 at the Seventh General Meeting of the People’s Bank of China. They were only promulgated in January 2003 and came into operation on 1 March 2003. The administrative rules were made pursuant to Article 56 of the Legislative Law of China (2000)[27] for the enforcement of the law and the ef?cient management of the ?nancial industry. The responsible authorities for the enforcement of anti-money laundering laws and regulations are vested with the public security bureau, the People’s Banks of China and the State Administration of Foreign Exchange (SAFE). Where a public of?cial is

involved in an alleged abuse of authority or misconduct in public of?ce, it shall be investigated and prosecuted by the people’s procuratorate at the appropriate level[28]. The AML rules apply to all ?nancial institutions including state banks, commercial banks, credit co-operatives, postal saving institutions, ?nancial companies, trust investment companies, ?nancial leasing companies and foreign-funded ?nancial institutions legally established within the territory of China. As a signi?cant improvement to Article 191 of the Criminal Law, Article 3 of the AML Rules extends the de?nition of money laundering beyond the four categories of predicate offence to include:
. . . any action that legalize the illicit income and yields generated from criminal activities like drug traf?cking, Ma?a or triad-related organised crimes, terrorist act, smuggling or other crimes through various means in which the source and origin of such income and yields and disguised.

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The AML rules therefore apply to transactions relating to or connecting with the proceeds and gains of corruption, fraud, tax evasion and other forms of organised crimes. The AML rules strengthens the Administrative Rules on the Use of Real Name in Personal Deposit Accounts (2000) and provides for the ?rst time the mandatory requirements of reporting suspicious transactions and the veri?cation of the identity of new customers. Records of customer accounts and transactions should also be kept for at least ?ve years. Pursuant to Article 7 of the AML Rules, the People’s Bank of China has established in 2002 an Anti-Money Laundering Division[29] and a supervisory centre to investigate suspicious cases. The of?ce consists of representatives from the Bank of China, Public Security Bureau and other government departments. The staff of this of?ce was sent to participate in international law enforcement meetings to gain experience from other jurisdictions[30]. The Bank of China is also launching a training programme for the staff to identify suspicious transactions. The RMB Rules and the Forex Rules are speci?cally designed to require and regulate the reporting of all large value and suspicious transactions in Renminbi (RMB) to the People’s Bank of China[31] and foreign currency to the SAFE[32]. The administrative authorities should also report and assist the public security bureau in the investigation of money laundering offences[33]. Article 2 of the RMB rules de?nes suspicious transactions as “any RMB payment transactions with abnormality in amount, frequency, direction, use or nature”. Article 8 of the RMB Rules lists out 15 types of suspicious transactions including the frequent fund transfer within ten business days to and from customers located in regions with serious drug traf?cking, smuggling and terrorist activities. Article 9 and 10 of the Forex Rules identify 11 types of suspicious cash transactions and 20 types of suspicious non-cash foreign currency transactions which include the use of offshore accounts and non-resident frequently receiving remittance in large amount from abroad, especially from countries or regions with serious problems of narcotics production and drug traf?cking. All these rules become ineffective when a money launderer avoids the of?cial banking system and procedures. Obtaining illegal loans at a high interest rate from underground banks are still very common in the rural areas of China[34]. It is too early to give a review or assessment on the successfulness of the three administrative rules since their implementation on 1 March 2003. These rules are a good indication of the recognition of the seriousness of the problem in China and the determination of the Chinese Government to combat money laundering. The introduction of the reporting

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system and customer identity veri?cation is de?nitely a positive and important step forward to the integration with the international standard. 6.2 Hong Kong Hong Kong is a member of the FATF since 1990. Money laundering are investigated by the Hong Kong Police and the Customs and Excise Department. A Joint Financial Intelligence Unit (JFIU)[35] was also set up in 1989 by the two law enforcement departments to receive suspicious transaction reports (STR) on ?nancial activities. The reports will then be passed to the appropriate investigative unit such as the Narcotics Bureau or the Organised Crime and Triad Bureau of the Hong Kong Police, or the Customs Drug Investigation Bureau of the Customs and Excise Department. Apart from the relevant legislation, the ?nancial and insurance regulatory authorities also issued guidance notes to the respective service industries. In June 1999, Hong Kong was commended by the FATF for the overall progress and success in combating money laundering. The ?rst Hong Kong legislation against money laundering is the Drug Traf?cking (Recovery of Proceeds) Ordinance (DTROP)[36], which was passed in 1989 to create an offence of dealing with property known or believed to represent proceeds of drug traf?cking. It applies to property whether it is situated in Hong Kong or elsewhere[37]. Section 4 of DTROP de?nes “proceeds of drug traf?cking” as “any payment or rewards received by a person at any time in connection with drug traf?cking carried out by him or another”. A drug traf?cker can therefore be charged at the same time with both the drug-related offence and the dealing with the proceeds offence. The DTROP was substantially amended by the Drug Traf?cking (Recovery of Proceeds) Amendment Ordinance 1995 which came into operation on 1 September 1995. Section 25 of DTROP makes it an offence for a person to deal with any property which he knows or having reasonable grounds to believe that such property represents any person’s proceeds of drug traf?cking. Section 25A further provides that it is an offence for a person who fails to disclose that he knows or suspects that any property represents the proceeds of drug traf?cking or is connected with drug traf?cking. Section 25A(3)(a) also protects the person who provides the information that such disclosure will not be treated as a breach of any duty of con?dentiality whether imposed by contract, enactment or the common law. In order to facilitate the ef?cient and effective investigation into organised crimes and money laundering, Hong Kong enacted the Organised and Serious Crime Ordinance (OSCO) in 1994[38]. Section 25 of OSCO provides that it is an offence to be punishable with 14 years imprisonment for a person to deal with any property which he knows or having reasonable grounds to believe that such property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence. Section 25(4) further provides that the references to an indictable offence include conduct in another jurisdiction which would constitute an indictable offence if it had occurred in Hong Kong. Similar to the provisions in DTROP, section 25A of OSCO also makes it an offence for any person who fails to disclose that he knows or suspects that any property in whole or in part directly or indirectly represents any person’s proceeds of, or was used in connection with, or is intended to be used in connected with an indictable offence.

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The OSCO was amended in 2000 to include a preventive provision to require money changers and remittance agents in transactions over HK$20,000 or equivalent in value to verify the identity of customers and to keep records of the transactions for not less than six years[39]. In addition to prosecution, the criminals must be deprived of the enjoyment and bene?t from the proceeds of crime. Section 8(1) of OSCO and section 3(1) of DTROP empower the court to make a con?scation order against a convicted person or an offender who has died or absconded. To prevent a suspect from removing property and assets out of Hong Kong, section 15 of OSCO and section 10 of DTROP further empower the court to make a restraint order to prohibit any person from dealing with any speci?ed realisable property. The prosecution can also apply to the court for a charging order to be imposed on the realisable property for the purpose of securing payment to the Government[40]. Criminalizing money laundering is just one of the means to combat the problem. The effective prevention and detection of money laundering activities must also involve the vigilant efforts of other regulators in the business sector. In addition to the legislation, the Hong Kong Monetary Authority (HKMA) issued Guidelines of Money Laundering[41] pursuant to section 7(3) of the Banking Ordinance to require ?nancial institutions to report to the JFIU any suspected transaction to be related to or connected with drug traf?cking and indictable offences. Taking into consideration of the recommendations in the Basel Committee Paper on “Customer Due Diligence for Banks” the HKMA in March 2003 issued a supplement to the guidelines which include new provisions on terrorist ?nancing, correspondent banking, non-cooperative countries and territories, and politically exposed persons (PEP). Article 6 of the new guidelines also ensures that the intermediary which introduces a customer to the ?nancial institution is ?t and proper, and has exercised adequate due diligence process to identify the customer. The intermediary is also required to submit an intermediary certi?cate to be supported with all relevant identi?cation data and documentation. The Securities and Futures Commission (April 2003)[42], the Of?ce of the Commissioner for Insurance (November 2000)[43], the Law Society of Hong Kong (1995)[44] and the Hong Kong Bar Association (2003)[45] also issued guidance notes or guidelines to their members on organised crimes and money laundering. These guidelines require those concerned to exercise due diligence and to implement effective measures and procedures for record keeping, customer identi?cation and suspicious transactions reporting. There were 138 prosecutions of money laundering cases since 1998, between 1998 and 31 October 2002, there were 32,904 STR made to the JFIU. Most of these reports were made by banks and ?nancial institutions and only about 1 per cent or 331 cases were reported by non-?nancial institutions. 7. Comparison between China and Hong Kong Comparing with China, Hong Kong legislation on money laundering differs in ?ve aspects. 7.1 The mental element What is required in section 25 of OSCO or DTROP is either actual knowledge or a reasonable belief that the property concerned is the proceeds of crime. The mental

Money laundering laws and regulations 391

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element to be proved, whether in terms of knowledge or belief on reasonable grounds, is directed at the property being dealt with[46]. “Having reasonable grounds to believe” involves subjective and objective elements. As Mayo JA observed in HKSAR v. Shing Siu Ming [1999] 2 HKC 819 at 825:
Knowledge if proved would simply resolve the matter. Dif?culty, however, arises from the use of the words “having reasonable grounds to believe”. This phase . . . contains subjective and objective elements. In our view it requires proof that there were grounds that a common sense, right thinking member of the community would consider suf?cient to lead to person to believe that the person being assisted was a drug traf?cker or had bene?ted therefrom. That is the objective element. It must also be proved that those grounds were known to the defendant. That is the subjective element.

392

Article 191 of the Criminal Law of China requires the proof of knowledge. By applying the standard of constructive knowledge, an accused may be convicted of an offence of money laundering on the same facts in China if the court ?nds that he ought to have known that the property is the proceeds of one of the four predicate offences. 7.2 The criminal conduct of dealing The OSCO does not specify or enumerate the kinds of prohibited conduct in money laundering cases. Section 2(1) of OSCO de?nes in very wide terms the word “dealing” in relation to the property referred to in section 25 to include: . receiving or acquiring the property; . concealing or disguising the property; . disposing of or converting the property; . bringing into or removing from Hong Kong the property; or . using the property to borrow money, or as security. Unlike Article 191 of the Criminal Law of China, the de?nition of “dealing” in OSCO is not restricted to any speci?ed conducts. It is ?exible and wide enough to cover the existing and future forms of money laundering activities. 7.3 The commission of the predicate offence Article 191 of the Criminal Law of China requires the property to be the de facto proceeds of one of the four predicate offences. Section 25 of OSCO does not de?ne the criminal conduct as dealing with the proceeds of an indictable offence. It de?nes the criminal conduct as dealing with the property which the accused knows or has reasonable grounds to believe represents the proceeds of an indictable offence. The prosecution therefore does not have to prove the commission of the predicate offence or that the property is actually the proceeds of crime. The obtaining of a conviction of the predicate offence is not a pre-requisite for a conviction for dealing with the proceeds of crime[47]. The essential question for determination is whether an accused had knowledge or reasonable grounds to believe that the property was indeed the proceeds of an indictable offence[48]. The rationale is obvious. Money laundering has now become an international crime. It has no border. The property concerned does not therefore have to represent the proceeds of crime in Hong Kong. It can represent the proceeds of crime in different

parts of the world[49]. As Mr Justice Litton PJ of the Hong Kong Court of Final Appeal observed in Lok Kar Win and Others v. HKSAR[50]:
It is plain from the wordings of section 25 [of OSCO] that the section aims at criminalizing dealing in Hong Kong with property derived from the conduct which is indictable here, regardless of where the conduct occurred. The determining factor is the conduct complained of as judged by Hong Kong law, not whether that conduct is an offence in the foreign country where the conduct took place.

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In Hong Kong, if the property is transferred or originated from a foreign country, it is not necessary for the prosecution to prove that there has been a conviction of the predicate offence in that foreign jurisdiction. There is no express provision to that effect in China. Article 191 is silent on this point. The position is not clear. 7.4 Corporate crime of money laundering Unlike Article 191(2) of the Criminal Law of China, there is no express provision of an offence of money laundering to be committed by a corporate in Hong Kong. It appears that the word “a person” in section 25 of OSCO is suf?ciently wide to cover a corporate or incorporate body under section 3 of the Interpretation and General Clauses Ordinance which de?nes the word “person” to include “any body of persons, corporate or incorporate . . . and shall apply notwithstanding that the word ‘person’ occurs in a provision creating or relating to an offence”. There is no reason why a corporate cannot be charged with an offence under section 25 of OSCO or DTROP. The issue is, however, one of the evidential burden of the prosecution to prove the intent and knowledge of the corporate suspected to be involved in a money laundering case. 7.5 The perpetrator and money laundering In China, the general view is that a perpetrator of the crime cannot at the same time be charged with money laundering of the proceeds of that offence under Article 191 of the Criminal Law. In Hong Kong, it can. The expression “any person’s proceeds” is suf?ciently wide to include the criminal himself. It refers to the property represents the proceeds of his own crime or other person’s crime[51]. 8. Reforms in China 8.1 Legal reform Money laundering is a growing problem in China. The current trend is the laundering of proceeds of crimes within the territory or removing the property out from China. The existing laws and regulations in China are inadequate to combat money laundering activities due to restrictive application, insuf?cient details and weak institutional framework. The only anti-money laundering provision is Article 191 of the Criminal Law. It is considered to be ineffective to combat money laundering. The major obstacle is its restrictive application to only the proceeds of four predicate offences related to smuggling, drugs, triad organized crime and terrorism. China must address all forms of organised and serious crimes which generate the proceeds to be laundered in China or elsewhere. Such crimes will have to include at least the prevalent offences of corruption, serious ?nancial crimes, traf?cking in human beings and tax evasion. China has recognised the urgent need of legislative reform on money laundering. On 22 March 2004, in accordance with the Legislative Programme of the 10th National

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People’s Congress Standing Committee (NPCSC), the Steering Committee and Working Committee on the Drafting of Anti-Money Laundering Law )[52] were established. The relevant legal issues and ( practical implications to be considered are complex. They would include: . whether it is proper and appropriate to extend the predicate offence to all organised and serious crimes[53]; . whether the ?ve kinds of criminal conduct can be extended and expressed in general terms such as “dealing with” the proceeds of crimes or predicate offences; . whether offences committed outside China shall constitute predicate offences in all cases, or only when the relevant conduct is a criminal offence in China; . whether the proceeds of crime can come from cross border crimes or crimes being committed outside China; . that, if the property is moving into China, whether it is necessary to prove that the property is actually the proceeds of an offence in that jurisdiction; and . to review the de?nition of knowledge and whether it should be revised or speci?ed to include constructive knowledge, or that the knowledge, intent or purpose may be inferred from objective factual circumstances. 8.2 Institutional reform The public is generally ignorant of money laundering in China. There is still a lack of understanding of the nature and operation of money laundering among the ?nancial and legislative authorities. The quality and experience of government and judicial of?cials also vary with city and region. The problem is aggravated by the disorderly and unfair competition between ?nancial institutions, and the rapid development of the advanced cyber technology. The Asia Paci?c Group on Money Laundering had criticized China for the lack of requirement to report all transactions over threshold, the non-establishment of a central reporting agency and inadequate training for bank personnel. Since, 2002, China has shown a ?rm determination to combat money laundering. In May 2002, the State Council of the Central People’s Government approved the establishment of Inter-Ministerial Working Conference System on Anti-money Laundering (IMWCS) )[54]. The People’s Bank of China[55] is responsible ( to provide guidance to combat money laundering activities and monitor the ?nancial institutions. In April 2004, the central ?nancial intelligence unit (FIU) – China Anti-Money Laundering Monitor and Analysis Centre (AMLMAC)[56] ) was established. In May 2004, the membership of the ( IMWCS was extended to 23 government organs[57]. In 2004, the People’s Bank of China, the SAFE and the Public Security Bureau had successfully detected more than 50 cases of money laundering involving 570 million Renminbi and US$ 447 million[58]. China should further consider to improve the institutional framework and adopt comprehensive measures to establish the appropriate mechanisms for the prevention, detection and prosecution of money laundering offences. In this regard, China would have to consider: . to strengthen the steering group at the central and regional levels to review the current policy, monitor the ef?cient allocation of resources, and oversee the

.

.

.

.

implementation and enforcement of legal and administrative measures on money laundering; to strengthen the central FIU to receive and assess the STR from ?nancial institutions and the private sector; to establish a task force at regional levels and rural areas to stamp out the underground banking systems and unauthorised loans business; to design and provide specialised training programmes on money laundering and technical supports for judicial of?cers, prosecutors, the police, customs of?cers and other public of?cers involving in the enforcement of anti-money laundering legislation or the supervision of the ?nancial institutions; and to launch an education programme and publicity campaign on money laundering for the general public so as to enhance their awareness of the problem.

Money laundering laws and regulations 395

8.3 Regulatory reform Strategies to ?ght money laundering do not reside solely with criminal justice but rather should also be co-ordinated with the economic and social policies and the development of civic political culture[59]. Money laundering, like corruption, cannot be dealt with effectively without the support and co-operation of the private sector and the civic society. On the other hand, there must be adequate sanction and control. China started to reform the economy in 1978. China’s accession to the World Trade Organisation will no doubt create new opportunities for business such as insurance, project ?nancing and foreign direct investment. The growing volume and complexity of business transactions will also increase the risks and vulnerability of the ?nancial and servicing industries in money laundering. The goals of an enterprise are pro?t and sustainable growth. The disorderly and keen competition in the socialist market economy will continue to indirectly encourage the ?nancial institutions to relax customers identi?cation and suspicious transactions reporting for keeping their business clients at the expense of the public interest. The administrative rules issued by the People’s Bank of China must also be reinforced to cope with new development. In this regard, it is recommended that appropriate measures should be taken: . to extend the STR system to lawyers, accountants, auditors, the insurance industry and intermediaries; . to strengthen the supervision on the due diligence process and standardise the procedures in relation to record keeping, customer identi?cation, and the reporting of suspicious transactions in the private sector; . to improve the People’s Bank of China administrative rules against money laundering to include, for example, the assessment of political exposed persons (PEP), correspondent banking and risk management; and . to provide specialised training programmes to bank personnel and the business sector on the international standards and recent developments of the prevention and detection of money laundering. 8.4 International co-operation Money laundering is an international crime. No country can act alone to combat money laundering. Unlike the law and the enforcement agencies, crime has no boundary. The

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proceeds of crime can transfer easily and quickly by electronic means out of a jurisdiction to another jurisdiction before it is known or traced. It is dif?cult to detect, investigate and prosecute because of its secrecy. It is therefore important and necessary for all jurisdictions, irrespective of their political interests, to unite and co-operate to combat money laundering. This will involve the exchange of information and intelligence, joint investigation, mutual legal assistance and extradition. As a socialist regime, China had the tradition and practice to keep information as classi?ed materials or state secrets. China has now recognized that the battle against money laundering must be fought at an international front. There are some recent remarkable moves towards this direction. On 6 October 2004, China actively participated in the forming of the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG). In January 2005, China became an observer of the FATF[60]. On 2 September 2005, the IMWCS at the second working conference in Beijing positively discussed the way forward for the assessment prior to become a member of the FATF. By the end of 2004, China has entered into 32 mutual legal assistance agreements and 21 bilateral extradition agreement with other member states. In order to combat money laundering in an international perspective, China should consider to take further measures: . to strengthen the FIU to work closely with counterparts in other jurisdictions in the collection, assessment, dissemination and exchange of information and intelligence on money laundering and other forms of organised crimes; . to actively participate, co-ordinate and assist in the joint investigation of international money laundering activities; . to review the current policy and practice and to formulate new measures with reference to the practical needs of China and the international standards to combat anti-money laundering; . to update the law enforcement agencies with the recent development of international trends and techniques in money laundering; and . to strengthen regional and international co-operation with other jurisdictions by a network of bilateral and multinational agreements and international conventions.

Notes 1. The Money Laundering Prevention Act of India (1998), for example, de?nes money laundering as “(a) Engaging directly or indirectly in a transaction which involves property, i.e. the proceeds of crime; or (b) Receiving, possessing, concealing, disguising, transferring, converting, disposing of within the territory of India, or removing from or bringing into the territory of India the property, i.e. the proceeds of crime”. See, Masahiro Tauchi, Fraud in Asia: Problems and Countermeasures (1998), p. 13. An exhaustive list of the conducts of money laundering will, however, only limit the scope of the legislative application. 2. The convention is referred to as the “Palermo Convention”. It was adopted by resolution A/RES/55/25 of 15 November 2000 at the 55th Session of the General Assembly of the United Nations.

3. Art 6, Constitution of the People’s Republic of China (1987, Foreign Languages Press, Beijing), as amended in 1988, 1993, 1999 and 2004. 4. Art 11, CPRC. Adopted at the First Session of the Seventh National People’s Congress (NPC) on 12 April 1988. 5. Art 15, CPRC. Adopted at the First Session of the Eighth NPC on 29 March 1993. 6. Art 5, CPRC. Adopted at the Second Session of the Ninth NPC on 15 March 1999. 7. FATF, Money Laundering: What is the Scale of the Problem. 8. See, Asiaweek, 3 February 2003, p. 36. 9. Hong Kong Becoming China’s Money Laundering Machine, in Far Eastern Economic Review (13 June 2001). 10. See JFIU information and Arthur Luk, Money Laundering: Recent Developments in Hong Kong, China, conference paper at the 16th International Conference on Technology and Its Effect on Criminal Responsibility, Security and Criminal Justice, 6-10 December 2002 (Charleston, USA). 11. FATF on Money Laundering XIII: Hong Kong and China. Available at: www.info.gov.hk/nd/ fatf/money.htm 12. In 2001, the public security bureau and judicial authorities discovered an underground bank involving 100 billions Renminbi in Swatow, Guangdong Province. Between April and December 2004, the law enforcement joint operation crashed 155 underground banks and unlawful foreign exchange centres involving a total turnover of 12.5 billion Renminbi (approximately US$ 1.5 billion). See, Report on Anti-Money Laundering (2005), published by the People’s Bank of China, at pp. 17-18. 13. Cross-border cash movement has been identi?ed by the FATF as an important element to the world’s counter-terrorist ?nancing defences. See, FATF “Special Recommendation IX: Cash Couriers” 22 October 2004. 14. This form of money laundering also facilitates a 11.9 million Renminbi fraud: HKSAR v. KONG Kwong Por, CA 657 of 1996 (22 May 1997). 15. Bank Cleans Up Cash Laundering, in China Daily (16 January 2003). 16. Art 171 of the Criminal Law of PRC (1979) provides that the property may be con?scated in large-scale sale, manufacturing or traf?cking of narcotic drugs. 17. There are different translations in English on Criminal Law of PRC (1997). The version used is based on Criminal Law of the PRC, translated by the Legislative Affairs Commission of NPCSC of PRC, published by the China Procuratorial Press (1998). 18. “Predicate offence” is de?ned as any offence as a result of which proceeds have been generated that may become the subject of an offence of money laundering. See, Article 6, UNCTOC (2000). 19. Implemented on 11 December 1992. 20. Implemented on 8 May 1998 (PSB Issue no. 31 of 1998). 21. Also see discussions in Yuan (2002, pp. 225-8). 22. See, for example, Yuan (2002, pp. 223-4), Gao (2000, p. 723) and Xian (1999, pp. 396-8). 23. Art 347-357, Criminal Law of PRC (1997). 24. Art 294, Criminal Law of PRC (1997). 25. Art 151-157, Criminal Law of PRC (1997). 26. This is consistent with Art 6 of FATF Forty Recommendations (1990).

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27. Adopted at the Third Session of the Ninth National People’s Congress on 15 March 2000 and came into operation on 1 July 2000. 28. Art 18 of the Criminal Procedure Law of China (1997). 29. See, Central Bank Builds Line of Defense against Money Laundering, in China Today, September 2002. 30. China Active in International Efforts to Combat Money Laundering, Xinhua New Agency: 27 March 2003. 31. Art 4, RMB Rules (2003). 32. Art 3, Forex Rules (2003). 33. Art 18, RMB Rules (2003); Art 15, Forex Rules (2003). 34. See, People’s Bank of China Noti?cation to Eradicate Underground Banks and Illegal Loansharking Business (25 February 2002). 35. See, JFIU information. Available at: www.info.gov.hk/police/j?u 36. Chapter 405, Laws of Hong Kong. 37. Section 2(3), DTROP. 38. Chapter 455, Laws of Hong Kong. 39. Section 24C, OSCO. 40. Section 16 of OSCO and section 11 of DTROP. 41. Guideline no. 3.3: Prevention of Money Laundering (1997), updated on 22 December 2000. 42. Guidance Notes on the Prevention of Money Laundering and Terrorist Financing. 43. Guidance Notes on Prevention of Money Laundering. 44. Hong Kong Law Society Circular No. 95-294, 20 November 1995. 45. Hong Kong Bar Association Circular 27 of 2003. 46. HKSAR v. Wong Ping Shui Adam and Another [2001] 1 HKLRD 346, at 348 (CFA). 47. See, HKSAR v. Shing Siu-ming [1992] 2 HKC 818, at 824 (CA). 48. See, Seng Yuet Fong v. HKSAR [1999] 2 HKC 833, at 836 (CFA). 49. See, Secretary for Justice v. Liu Xiu Nian [2001] 2 HKLRD 851, at 860- 861 (CA). 50. Lok Kar Win, Kevin and Others v. HKSAR [1999] 4 HCC 796 (CFA). 51. Lok Kar-win Kevin and Others v. HKSAR [1999] 4 HKC 796 at 798 (CFA). 52. The Committee consists of representatives from12 central government organs including the People’s Bank of China, Ministry of Public Security, Supreme People’s Procuratorate, and the Supreme People’s Court. 53. Taiwan uses “major offence” punishable with not less than ?ve years imprisonment as a criteria for a predicate offence. See Art 3(1) of Money Laundering Control Act (1997). 54. The leading department was the Ministry of Public Security in 2002. After the structural reform of the state organs in 2003, the People’s Bank of China took the lead. 55. As amended by the 6th Plenary Session of the 10th National People’s Congress on 27 December 2003. 56. The AMLMAC consists of 13 departments and two regional of?ces at Shanghai and Shenzhen. 57. These 23 government organs are: Supreme People’s Court, Supreme People’s Procuratorate, Of?ce of the State Council, Ministry of Foreign Affairs, Ministry of Public Security, Ministry of National Security, Ministry of Supervision, Ministry of Justice, Ministry of Finance,

Ministry of Construction, Ministry of Trade, People’s Bank of China, Customs Department, Revenue Department, Department of Commerce, Department of Broadcast and Television, Legislative Affairs Of?ce of the State Council, Monetary Commission, Securities Commission, Insurance Commission, Post Of?ce Bureau, Foreign Exchange Bureau and the General Staff Bureau of the People’s Liberation Army. 58. Report on Anti-Money Laundering, (12 July 2005), published by the People’s Bank of China, at p. 15. 59. UNODCCP Global Programme against Corruption (2001), and Draft United Nations Manual on Anti-Corruption Policy, at p. 101. 60. The President of the People’s Bank of China undertook to comply with the FATF “40 ? 9” Recommendations in October 2004. References Gao, M. (Ed.) (2000), Research on New Types of Economic Crimes ( ), Fanjing Publishers, Beijing. Gaylord, M.S. (1992), “The Chinese laundry: international drug traf?cking and Hong Kong’s banking industry”, in Traver, H.H. and Gaylord, M.S. (Eds), Drug, Law and The State, Hong Kong University Press, Hong Kong. Gilmore, W.C. (1999), Dirty Money: The Evolution of Money Laundering Countermeasures, 2nd ed., Council of Europe Publishing, Strasbourg. Guo, J. (2002), “Current situation and countermeasures of money laundering in China”, Conference paper at 3rd Annual Symposium of “Crime and Its Control in Greater China” 21-22 June, Hong Kong University, Hong Kong. National Crime Authority (1991), Taken to the Cleaners: Money Laundering in Australia, National Crime Authority, Canberra, p. 31, note 4. Qiu, Z. (1998), “On money laundering crimes and countermeasures”, Journal of Politics and Law, Vol. 4. ), People’s Xian, T. (1999), Financial Crimes: Conviction and Sentence ( Court Press, Beijing. ), China Public Security University Yuan, F. (2002), Xiqianzui Bijiao Yanjiu ( Press, Beijing. ), China People’s University Zhao, B. (2001), The New Textbook of Criminal Law ( Press, Beijing. Zhang, J. (2000), “Basic countermeasures against money laundering crime in China”, paper presented at Conference on the Combat against Money Laundering and Financial Crimes, October, Vancouver, p. 2. Further reading Gao, M. and Zhao, B. (Eds) (2000), Xinzhonguo Xingfashe Wuxinin ( ),Vol. 3, Zhongguo Fanjing Publishers, Beijing. ),Vol. I, China Legal He, B. (2002), Research on Organized Crime in China ( Institution Press, Hong Kong. Judicial Interpretations (2001), Judicial Interpretations of the People’s Republic of China ( ), 2001 ed., Jinin People’s Press, Hong Kong. Lui, J. (2000), Xingfa Fenze ( ),Vol. 3, People’s Court Press, Beijing.

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Potter, P.B. (2001), The Chinese Legal System: Globalization and Local Legal Culture, Routledge Studies on China, Beijing. Schurmann, F. (1968), Ideology and Organization in Communist China, 2nd ed., University of California Press, Berkeley, CA. Hanming, X., Jidong, J. and Hui, Z. (2005), Research on the Legislation of Money Laundering Control in China ( ), Law Press China. Yan, J. (2000), Xiqian Fanxui Yu Duice ( ), Dongfang Publishers, Beijing. Zagaris, B. (1995), “The emergence of an international anti-money laundering regime”, in Atkins, R.D. (Ed.), The Alleged Transnational Criminal: The Second Biennial International Criminal Law Seminar, International Bar Association, Washington, DC, pp. 127-218. Corresponding author Alain Sham (Shen Zhongping) can be contacted at: alainsham@doj.gov.hk

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with respect to applicable anti-money laundering laws and regulations. ...1994 年,中国银行香港分行在香港首次成功发行了港元钞票,成为 在香港参与港元发行...
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