AML Compliance in China: Chinese Banks Required to Strengthen Due Diligence for One-Off Withdrawals Exceeding 50,000 Yuan

Chinese banks will be required to strengthen due diligence on individual customers who deposit or withdraw more than 50,000 yuan ($7,864) in cash in one go, as regulators step up efforts to clamp down on money laundering and fraud.

An official of the People’s Bank of China (PBOC), the central bank, said the new rule aims to curb criminal activities such as telecoms fraud, illegal fundraising, illegal pyramid schemes and cross-border gambling, according to a report released by state-run broadcaster CCTV on Wednesday.

Starting March 1, commercial banks will need to verify the identity of such customers, according to regulations jointly released in late January by the PBOC, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission. Banks will also need to record the source or intended use of the money.

The rule will also apply to retail customers’ one-off deposits or withdrawals of more than $10,000 worth of foreign currencies in cash.

Many criminals prefer to use cash for transactions related to illegal activities such as telecoms fraud, making it difficult for the authorities to track the flow of the funds and identify the criminals, the PBOC official said.

Financial institutions should strengthen management of cash deposit and withdrawal services to protect the security of customers’ money, the official said.

In China, many pyramid schemes make money by selling health care products. In September, an elderly couple went to a bank in Zhengzhou city to withdraw 95,000 yuan. After learning that the money would be used to purchase health products, bank employees contacted local police, and finally helped the couple avoid a potential loss, the official said.

Meanwhile, the PBOC will try to ensure convenience in cash deposits and withdrawals, and will require banks to protect personal information and customer privacy, the official noted. Currently, the number of cash deposits and withdrawals of more than 50,000 yuan only account for about 2% of all cash deposit and withdrawal business in China. Thus, the new rule will have limited impact on banks’ cash services, the official said.

China’s financial regulators have stepped up crackdowns on money laundering in recent years. In 2020, the central bank handed out a record amount of penalties to institutions and their employees who had failed to adequately guard against money laundering.

This year, 11 state departments including the PBOC have started a nationwide crackdown on money laundering and other related crimes from 2022 to 2024.