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August 29, 2005
ANNOUNCEMENT: IPR Conference in Guangzhou
[Editor's Note: Over the past year, Chinese government offices have shown greater willingness to appear at panels within the P.R.C. that are hosted by foreign governments. A similar IP panel was convened with AmCham Shanghai in the fall of 2004, and although the presentation material from the Chinese side did not lead to the revelation of much useful information not already publicly available, the question and answer session and mixer allowed for a back and forth (and the trading of name cards) rarely available. The inclusion of the Shenzhen IPO, Customs and Court system representatives in this upcoming conference may prove interesting.]
2005 Intellectual Property Rights Cooperation Conference
“Building IPR Cooperation In the PRC”
Monday, September 12, 2005
9:00 A.M. – 5:00 P.M.
Grand Ballroom (3/F), Shangri-la Hotel, Shenzhen, PRC
Cost: free to Members, RMB 150 for non-members
Guest: Chris Israel, Coordinator of International Intellectual Property Enforcement, U.S. Government
Event focus: Cooperation among the United States Government, the Shenzhen Municipal Government, Hong Kong SAR and both United States and Chinese Rights Holders in recognizing and combating the theft of Intellectual Property and its effect on all business in China.
Expected presentations from United States Patent and Trademark Office, (USPTO); the Department of Justice (DOJ); the United States Consulate General, Guangzhou; Hong Kong Customs and the Hong Kong IP Committee from Hong Kong Special Adminstration Region; Shenzhen Intellectual Property Office on the state of enforcement for Shenzhen; Shenzhen Customs on border protection and fake product identification; as well as the Shenzhen Intermediate Court on IPR Cases.
To register:
RSVP by fax to 20 8332-1642 or by e-mail to events@amcham-guangdong.org. Registration without chamber confirmation is considered unacceptable. If you have any questions, please contact the Chamber office: 20 8335-1476.
Organizers:
Consulate General of the United States of American, Guangzhou
American Chamber of Commerce in Guangdong
Shenzhen Intellectual Property Office
Co-organizer:
American Chamber of Commerce in Hong Kong
August 25, 2005
Audio: New Anti-Money Regulation in the PRC
Click the little triangle to hear today's post.
New Anti-Money Laundering Regulation in the PRC
We've heard many stories, told second and third hand, usually over a cocktail or two (or three), of outrageous sums of Chinese cash, laundered transnationally. The "invoice trick," a common and ancient method, involves a domestic company purchasing overpriced product sold by an overseas "seller." The outflow of cash over and above the instrinsic value of the product, being, of course, the laundered sum. Taiwanese authorities in the 1980s became rather expert at spotting these value discrepancies.
Of greater concern are the major cases -- and in China there have been an extraordinary number. Take the train shipments case as an example. Originating at the Luo Wu station in Shenzhen, cardboard boxes filled with RMB 8 Million (US$ 1 million) were transported daily to a Hong Kong bank for nearly a year. A cool million a day for a year. One can hear the clinking of the glasses and shouts of "A toast to China Rail!"
But only within the past few years has the Chinese government placed an emphasis on anti-money laundering (AML) legislation and its implementation. Why?
As Herbert Morais and Guang Yang of the International Law Institute state in "Anti-Money Laundering -- General Analysis and Recommendations:"
"Published reports indicate that money laundering in the PRC has increased to about RMB 200 billion (US$25 billion) annually, representing about 2% of the nation’s GDP. This is roughly equivalent to the PRC’s total export earnings (US$22.5-24.0 billion) in 2001-02."
[The report is also available in Chinese.]
In other words, what's coming in is going out. Government corruption, business impropriety, cash outflow, loss of tax revenue...all point to major defects in the financial system and its regulatory regime.
That said, Chinese banks, such as the Bank of China in 2002, have begun to establish Anti-Money Laundering committees at the executive levels to monitor and report suspicious transactions. In August, 2004, Zhou Xiao-chuan (周小川) claimed some success:
"Since the implementation of the three Rules in March 2003, the Head Office of the PBC has altogether received 3,061 reports of suspicious RMB payment transactions through screening by its branches while the SAFE has received 170,500 reports of suspicious foreign currency payment transactions with an amount of USD9.720 billion. After cross-examination, suspect cases of money laundering have been referred to the public security departments for investigation. The Ministry of Public Security, the PBC and the SAFE have also joined in cracking down on underground money centers. Since 2002, in operations of combating underground money centers, 73 cases have been solved, 57 underground money centers and 96 underground banking outlets destroyed, 240 suspects detained or arrested, illegal funds and assets equivalent to more than RMB80 million yuan confiscated. The total amount involved in the cases was as high as several billion yuan, effectively holding in check the momentum of money laundering through underground money centers. At present, there are still some pending cases of money laundering referred by the PBC and the SAFE to the public security departments for investigation."
In a recent article entitled, 专访央行反洗钱局局长, the journal Caijing （财经）interviewed Ling Tao （凌涛）, Director of the People's Bank of China Anti-Money Laundering Section. Director Ling -- interestingly the former head of the aforementioned Bank of China committee -- lays out the basic elements of China's AML efforts，and provides an insight into the drafting process.
The upshot is this: Chinese legislators are in the process of expanding the bases upon which one may be prosecuted for money laundering.
[Editor's translation follows.]
专访央行反洗钱局局长
An Exclusive Visit with Director Ling Tao of the PBOC's Anti-Money Laundering Section
Caijing: Only in the last two years has the development of China’s anti-money laundering legal regime picked up gear. Where are we in that development?
Ling Tao: There are three layers to China’s anti-money laundering legal regime. The first layer comprises law passed by the National People’s Congress, as for example, the Criminal Law 《刑法》 and the Anti-Money Laundering Law 《反洗钱法》, currently being enacted. The second layer comprises Executive Regulation issued by the State Council, such as the Regulation on the Use of Real Names on Individual Savings Accounts 《个人存款账户实名制规定》. The third layer comprises rules issued on order of the State Council by anti money laundering departments and the People’s Bank of China (PBOC), including the Financial institutions Anti Money Laundering Regulation 《金融机构反洗钱规定》, first issued in 2003 and effective from March 1 of this year, the Rules for the Administration of Reporting Large Amounts of RMB and Suspicious Payment Transactions 《人民币大额和可疑支付交易报告管理办法》 and the Rules for Administration of Reporting Financial institutions Large Amounts and Suspicious Foreign Exchange Capital Transactions 《金融机构大额和可疑外汇资金交易报告管理办法》.
These three regulations clear up the anti-money laundering supervisory requirements towards financial institutions with banking functions, and clearly establish China’s basic framework for anti-money laundering reporting and information monitoring system.
Drafting of the Anti-Money Laundering Law began in March, 2003. The National People’s Congress, Standing Committee, Budget Work （全国人大常委会预算工作委员会）members convened a drafting conference, with participants from 18 departments, including the Supreme Court, Supreme Procuratorate, Public Security, the Ministry of Finance and the People’s Bank. Thereafter, they several times convened discussion meetings, including international seminars, and moreover requested opinions from each departmental participant. Work was very tense, with workers refraining from taking time away even for vacations. According to the plan, the Anti-Money Laundering Law draft was presented this year to the National People’s Congress Standing committee for deliberation. We hope that this law will come out as soon as possible.
Strengthening anti money laundering means that each layer of the legal regime must be added to consistently, with existing law being amended, and this is an ongoing process.
Caijing: According to the law, is money laundering criminal?
Ling Tao: Money Laundering crime and money laundering behavior can be distinguished. In Article 191 of the current Criminal Law, the predicate crimes for the crime of money laundering are drug crimes, organized crime, terrorist activities and smuggling. That is to say, currently the only recognized criminal behaviors [for money laundering] are these four crimes.
Caijing: In recent years, there have been many domestic incidents in which corrupt officials have fled the country, and the majority of these have involved money laundering. People are especially concerned whether or not the Anti Money Laundering Law will include corruption and bribery as predicate crimes.
Ling Tao: The crime of money laundering requires a predicate crime. There must be a predicate crime existing, such as smuggling, drug trafficking, terrorism, etc., for there to be the crime of money laundering. What we can say is, predicate crime laws are overly narrow, which is precisely what the PBOC feels is an obvious problem with regard to anti-money laundering work.
Financial Institution Anti-Money Laundering Regulations, recently issued by the PBOC, give a rather wider berth to the predicate crimes for money laundering behavior, that is, drugs, organized crime, terrorist activities, smuggling and “other crimes.” However, this is only a departmental regulation, and delineates but a kind of an administrative illegality for money laundering crime, not a judicially recognized basis for money laundering crime.
Central to the legislation of the Anti Money Laundering Law, is the expansion of predicate crimes to Money Laundering. As I understand it, I can take the examples of corruption and bribery and other serious crimes and include them as predicate crimes for money laundering. This point is extremely important.
Caijing: We understand that the level of international cooperation with regard to anti money laundering is extremely high. If corrupt behavior is legally recognized to be a predicate crime for anti money laundering, will this assist in pre-crime monitoring and post-crime follow up of this kind of behavior. As, for example, in the Yang Xiu-zhu and Xu Zhaofan cases?
Ling Tao: Exactly so. Anti money laundering is an important function, by monitoring capital transactions, as well as preventing crime and corruption. In recent years, several very big cases have developed, such as the Xu Zhaofan case, the Gao Shan case, the Yang Xiuzhu case, all of which involved money laundering. However, since China’s current Criminal Law narrowly defines the predicate crime of money laundering, it was unable to follw up on them for the crime of money laundering. When China issued international warrants for them, it was not possible to receive expanded international cooperation. This was regretful.
In the Criminal Law of 1997, organized crime, smuggling and drug trafficking were the predicate crimes for money laundering. Internationally, money laundering became a crime in the 1998 United Nations Vienna Treaty. After China joined the Vienna Treaty, in 2001, terrorist activity was made a predicate crime for money laundering. But together these four alone are still narrow.
Each country defines money laundering differently. Some define it as any laundering offense with a term of at least one year’s punishment where the benefit of the capital has been received; others, such as the U.S., have over 100 money laundering crimes; and in some countries, regardless of the predicate crime, it only requires the characteristic, origin, place or tendency toward the hiding or covering up of criminally procured assets, [making it] rather expansive.
[...to be continued...]
Posted by Richard at 1:05 PM | Comments (0)
