The government of China is tightening its anti-money laundering (AML) laws to curb the exploitation of regulatory blind spots by criminals, and digital assets are in sharp focus.
Prime Minister Li Qiang recently chaired a meeting of the State Council—the country’s chief administrative authority—and according to local media outlets, the key agenda includes amendments to China’s AML laws.
China has been working on revising its AML framework since 2021, when the first revised version was drafted. According to Jiemian News report, this is the first major raft of amendments to the country’s AML laws since 2007. The outlet further revealed that the amendments will take effect next year.
While the amendments are broad and extend to banking, insurance, and other financial service providers, they also target digital assets.
“The most important, most urgent, and most necessary issue to be resolved at the legal level is the money laundering problem involving virtual assets,” says Wang Xin, a professor at Beijing-based Peking University. Xin was among the legal experts tapped by the government to draft the amendments.
China has cracked down hard on digital assets and was among the first countries to ban digital currency payments. Its crackdown has been relentless, from outlawing ICOs and trading to purging miners back when it was the world’s largest block reward mining hub.
However, according to the law professor, China lacks a specific and comprehensive regulatory framework for digital assets. This leaves room for regulatory ambiguity, which criminals exploit to launder money. He further noted that even when offenders are arraigned before the country’s courts, judges struggle to convict them as they can only apply the existing laws.
The amendments to the AML laws are a great start, but they still need to cover all the aspects of digital assets, Xin says. For instance, digital currency seizure and confiscation aren’t covered, leaving grey areas and regulatory blind spots that criminals are bound to exploit.
This week, a Chinese woman was arraigned in a London court under accusations of laundering $6.3 billion through digital assets. The 42-year-old laundered the money for a major Chinese scam, although U.K. prosecutors have not accused her of being involved in the scam.
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