Securities and futures industry faces strengthened anti-money laundering regulation

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Strengthened Anti-Money Laundering Rules
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The Anti-money Laundering in the Securities and Futures Industry Implementing Measures, published by the China Securities Regulatory Commission (CSRC), came into force on 1 October. They detail the duties of regulatory bodies and trade associations in respect of anti-money laundering, and the obligations of the securities and futures operators (securities companies, futures companies and fund management companies). These obligations are primarily set out as below.

Policies and systems

In the Implementing Measures, securities and futures operators are required to establish various anti-money laundering policies and systems, comprising

  1. An internal anti-money laundering control system. The staff in charge must ensure that the system is implemented effectively, while the headquarters of securities and futures operators must supervise and manage the implementation of the system by their branches;
  2. A customer risk rating system, under which customer ratings are monitored on a continuing basis and revised in a timely manner;
  3. An anti-money laundering confidentiality policy, under which the inspection and duplication of classified files must be recorded in writing; and
  4. A policy for conducting training programmes in anti-money laundering and publicizing the anti-money laundering message.

Reporting and filing

Securities and futures operators are required promptly to report or file details on the establishment and implementation of the above policies and systems to the local CSRC offices, and submit relevant information to these offices, such as the set-up of an internal anti-money laundering department, and the contact details of the head of the department and the staff specially assigned to take charge of anti-money laundering. Securities and futures operators are also required to report to local CSRC offices in writing within five working days of becoming aware that they have been inspected or penalized by an anti-money laundering administrative department in connection with any major anti-money laundering issue.

Customer identification

The Implementing Measures provide that if a securities and futures operator is suspicious of the personal identification documents or corporate information supplied by its customers during the course of handling their business, it must ask the customers to provide additional evidence. If the customers fail to do so, it should not handle the business for them. In addition, if a securities and futures operator sells funds or other financial products to its customers through a sales agency, it must specify in a contract, an agreement or other written documents the anti-money laundering responsibilities and procedures of each party in customer identification, customer identification information, the maintenance of transaction records and information exchange as well as the reporting of block and suspicious transactions.

The introduction of the Implementing Measures is expected to help regulate
anti-money laundering activities in the securities and futures industry, encourage securities and futures operators to conduct anti-money laundering in a serious manner, and prevent the risks associated with money laundering and terrorist financing in the securities and futures sector.

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