China Pushes Amendment to Anti-Money Laundering Law to Address Virtual Asset Risks

Authorities Move to Revise After 17 Years of Fermentation

China is pushing for an amendment to its Anti-Money Laundering Law (AML) for the first time in 17 years. This move is interpreted as a response to the risks associated with virtual currencies and virtual assets, as well as the potential for new types of money laundering.

According to Chinese state media Xinhua News Agency and Hong Kong's South China Morning Post (SCMP), a draft amendment to the AML law was discussed at a State Council executive meeting chaired by Premier Li Chang last month. The AML law, enacted in 2006 and effective from 2007, is expected to be submitted to the National People's Congress (NPC) soon and passed next year.

[Image source=Yonhap News]

Local media Jiemian News reported last month that the specific goal of the amendment is to prevent money laundering through virtual assets. Yan Lixin, Executive Director of the Anti-Money Laundering Research Center at Shanghai Fudan University, told Jiemian News, "The issue of money laundering related to the use of virtual assets is the most urgent and necessary problem to be resolved at the legal level." Wang Xin, a professor at Peking University Law School who is involved in the law revision discussions, also explained to the outlet that "the AML law amendment will address new types of money laundering risks."

Authorities have recently been strengthening crackdowns on money laundering cases involving virtual currencies. Zhang Xiaojin, Director of the Fourth Procuratorate of the Supreme People's Procuratorate, said earlier this month, "We will intensify efforts to eradicate money laundering and illegal foreign exchange transaction crimes," adding, "We will focus on prosecuting crimes that use digital currencies to transfer assets overseas." In 2022, the public security authorities of the Inner Mongolia Autonomous Region arrested 63 people on charges of laundering 12 billion yuan (approximately 2.2 trillion KRW) using virtual currencies.

Andrew Pay, a partner lawyer at the law firm King & Wood Mallesons, explained, "Since international standards and cases have advanced considerably, amending the AML law is the most reasonable way to address risks related to virtual assets." Pay emphasized, "There have been no significant amendments since the AML law was enacted 17 years ago. At that time, Bitcoin had not even been invented, and the world is completely different now."

The Financial Action Task Force (FATF), an international anti-money laundering organization headquartered in Paris, France, is also known to have provided recommendations on how China’s amendment should address virtual asset issues.

Pay explained, "Although activities related to virtual assets are banned in China, the borderless and decentralized nature of virtual asset transactions can be exploited, meaning China will still be indirectly affected," adding, "China’s focus on eliminating risks generally aligns with the approaches of other countries around the world."