Laws of the People's Republic of China

No. 1

The Provisions on Anti-money Laundering through Financial Institutions, which was instituted by the People's Bank of China under the Anti-money Laundering Law of the Peoples' Bank of China, Law of the People's Republic of China on the People's Bank of China and other laws, has been adopted at the 25th executive meeting of the president of the People's Bank of China on November 6, 2006, are hereby promulgated and shall go into effect as of January 1, 2007. Present of the People's Bank of China, Zhou Xiaochuan

November 14, 2006

Provisions on Anti-money Laundering through Financial Institutions

Article 1

With a view to preventing money laundering activities, regulating anti-money laundering supervision and administration acts and anti-money laundering work of financial institutions, and maintaining the financial order, the present Provisions are formulated according to the Anti-money Laundering Law of the People's Republic of China, Law of the People's Republic of China on the People's Bank of China and other relevant laws and administrative regulations.

Article 2

The present Provisions shall be applicable to the following financial institutions established within the territory of the People's Republic of China according to law,

(1)

commercial banks, urban credit cooperatives, rural credit cooperatives, postal savings agencies, policy banks;

(2)

securities companies, futures brokerage companies, fund management companies;

(3)

insurance companies, insurance asset management companies;

(4)

affiance investment companies, financial asset management companies, finance companies, financial leasing companies, auto financing companies, currency brokerage companies; and

(5)

other financial institutions determined and announced by the People's Bank of China.

The present Provisions regarding the anti-money laundering supervision and administration through financial institutions shall be applied to institutions undertaking foreign exchange, payment and settlement businesses and sale of funds.

Article 3

The People's Bank of China shall be the administrative department for anti-money laundering of the State Council, which shall supervise and administer the anti-money laundering work of financial institutions under law. China Banking Regulatory Commission (hereafter referred to as CBRC), China Securities Regulatory Commission (hereafter referred to as CSRC) and China Insurance Regulatory Commission (hereafter referred to as CIRC) shall, in light of their respective functions, exercise their duties of anti-money laundering supervision and administration.

During the process of performing its functions of anti-money laundering, the People's Bank of China shall cooperate with the relevant departments, institutions, judicial organs of the State Council.

Article 4

The People's Bank of China shall, in pursuance of the authorization of the State Council, develop international cooperation in respect of anti-money laundering on behalf of the Chinese Government. The People's Bank of China may establish cooperation mechanism with anti-money laundering institutions of other countries or regions and carry out transnational anti-money laundering supervision and administration.

Article 5

The People's Bank of China shall fulfill the following functions of anti-money laundering supervision and administration,

(1)

instituting regulations on anti-money laundering through financial institutions solely or jointly with the CBRC, CSRC and CIRC;

(2)

taking charge of monitoring on anti-money laundering of funds in RMB and in foreign currencies;

(3)

supervising and inspecting the performance of anti-money laundering obligations by financial institutions;

(4)

investigating the doubtful transactions within its scope of functions;

(5)

making report to the investigation organ on any transaction involved in any anti-money laundering crime;

(6)

exchanging the relevant anti-money laundering information and materials with overseas anti-money laundering institutions according to relevant laws and administrative regulations; and

(7)

other functions as prescribed by the State Council.

Article 6

The People's Bank of China shall establish China Anti-money Laundering Monitoring and Analyzing Center, which shall exercise the following functions under law:

(1)

accepting and analyzing reports on large-sum transactions in RMB or in foreign currencies, and reports on doubtful transactions;

(2)

establishing a national anti-money laundering database to properly preserve the information on large-sum transactions and doubtful transactions as reported by financial institutions;

(3)

making reports on the analysis results to the People's Bank of China according to the relevant provisions;

(4)

requiring financial institutions to timely supplement and correct the reports on large-sum transactions in RMB or in foreign currencies as well as on doubtful transactions;

(5)

exchanging information and materials with relevant overseas institutions upon approval of the People's Bank of China; and

(6)

other functions as prescribed by the People's Bank of China.

Article 7

The People's Bank of China and its functionaries shall keep confidential of the information that they have obtained during the process of fulfilling the anti-money functions, and may not provide the said information externally in violation of provisions.

China Anti-money Laundering Monitoring and Analyzing Center and its functionaries shall keep confidential the clients' identity materials and information on large-sum transactions and doubtful transactions, which have been obtained during the process of fulfilling their anti-money laundering functions, and may not provide the aforesaid materials or information to any entity or individual unless it (he) is required to do so by law.

Article 8

Financial institutions or its branch institutions shall establish a sound internal control system of anti-money laundering under law, establish a special anti-money laundering department or designate an internal department to be responsible for the anti-money laundering work, formulate internal operating procedures and control measures for anti-money laundering and conduct training on the staff members in anti-money laundering so as to enhance the anti-money laundering capability.

The person-in-charge of a financial institution or its branch shall be responsible for the effective implementation of the internal control rules of anti-money laundering.

Article 9

Financial institutions shall establish and implement client ID identifying system according to relevant provisions.

(1)

Identifying the ID of any client who requires to establish the business relationship or transacts an one-off financial business above the prescribed amount, requiring the client to show its (his) genuine and valid identity certificate or any other identity certification document, checking against and registering it, and timely updating the client's ID information if it is changed;

(2)

realizing the purpose and nature of the transaction of the client and effectively identify the beneficiary of the transaction;

(3)

re-identifying the ID of the client if it finds any evidence of abnormity or if it has any doubt about the genuineness, validity and completeness of the client's identity materials it has obtained; and

(4)

guaranteeing that any overseas financial institution, with which it has an agency relationship or similar relationship, can effectively identify the ID of clients and may obtain the clients' identity information from the said overseas financial institution.

The concrete implementation measures as prescribed in the preceding paragraph shall be formulated by the People's Bank of China in conjunction with the CBRC, CSRC and CIRC.

Article 10

Financial institutions shall, within the prescribed time limit, properly preserve the clients' identity materials, as well as the relevant materials which can reflect each transaction, such as the data, business vouchers, account books and etc.

The concrete implementation measures as prescribed in the preceding paragraph shall be jointly formulated by the People's Bank of China and the CBRC, CSRC and CIRC.

Article 11

Financial institutions shall make reports to China Anti-money Laundering Monitoring and Analyzing Center on any large-sum transaction in RMB or in a foreign currency or on any doubtful transaction.

The concrete implementation measures as mentioned in the preceding Paragraph shall be formulated by the People's Bank of China separately.

Article 12

The People's Bank of China shall, jointly with the CBRC, CSRC and CIRC, direct the self-disciplinary organization of the financial sector to formulate guidelines on the anti-money laundering work.

Article 13

Where any financial institution finds any suspected crime during the process of fulfilling the anti-money laundering obligations , it shall timely report it to the local branch of the People's Bank of China and to the local public security organ.

Article 14

Financial institutions and their staff members shall assist the judicial organ and administrative law enforcement organ to crack the money laundering activities.

Overseas branch institutions of financial institutions shall keep to the anti-money laundering provisions of the countries or regions where they are located and cooperate with the anti-money laundering institutions of the countries or regions.

Article 15

Financial institutions and their staff members shall keep confidential the clients' ID materials and transaction information that they have access to during the process of fulfilling the anti-money laundering obligations, and may not provide any material or transaction information any entity or individual unless it is provided for in any law.

Financial institutions and their staff members shall keep confidential the anti-money laundering information on reporting doubtful transactions and assisting the People's Bank of China to investigate doubtful transactions, and may not violate the provisions to provide such information to its clients or any other person.

Article 16

A financial institution or any of its staff members, who makes any report of large-sum transaction or doubtful transaction, shall be protected by law.

Article 17

Financial institutions shall, in accordance with the provisions of the People's Bank of China, submit the anti-money laundering statistical statements, information materials as well as the anti-money laundering contents in the audit reports.

Article 18

The People's Bank of China and its branch institutions may, in light of the demands for fulfilling the anti-money laundering functions, take the following measures to carry through on-the-spot anti-money laundering inspections:

(1)

to carry through the inspection by entering into a financial institution;

(2)

to inquire the staff members of a financial institution about the relevant information and require them to make explanations on the inspection items;

(3)

to consult and copy the documents and materials related to inspection items of a financial institution, and seal up and preserve the documents and materials that are likely to be moved away, destroyed, concealed or altered; and

(4)

to check the system by which a financial institution mange the business data through computer.

The People's Bank of China or any of its branch institutions shall, before conducting an inspection on the spot, fill out an examination and approval form for on-the-spot inspection, which shall state the inspection object, contents, time arrangement, etc. and which may not be implemented until it is approved by the person-in-charge of the People's Bank of China or of its branch.

To conduct an on-the-spot inspection, there shall be not less than 2 inspectors, who shall show their law enforcement certificates and inspection notices. In case the number of inspectors is less than 2, or the inspectors fail to show their law enforcement certificates or inspection notice, the financial institution shall be entitled to reject the inspection.

The People's Bank of China or its branch shall, after an on-the-spot inspection, make a written document of opinions on the on-the-spot inspection, affix its seal to it and serve it on the institution inspected. The inspection information, evaluation, improvement suggestions and measures shall be included therein.

Article 19

The People's Bank of China or any of its branch institutions may, in light of the demands for performing the anti-money laundering functions, make conversations with the directors and senior managers of the financial institution and require them to make explanations on the important items in respect of the financial institution's fulfilling the anti-money laundering obligation.

Article 20

After the People's Bank of China conducts an on-the-spot inspection over a financial institution, it may, where it is necessary, notify the CBRC, CSRC and CIRC of the inspection result.

Article 21

Where the People's Bank of China or any of its branch institutions at the provincial level finds any doubtful transaction and needs to investigate and verify it, it may consult the client's account, transaction records and other relevant materials on financial institution. The financial institution and its staff members shall be cooperative.

The term ˇ°the People's Bank of China or its branch institutions at the provincial levelˇ± includes the headquarters of the People's Bank of China, Shanghai Headquarter of the People's Bank of China, the branches, business departments, central sub-branches in provincial capitals and central sub-branches in deputy-provincial cities.

Article 22

When the People's Bank of China or any of its branch institutions at the provincial level investigates any doubtful transaction, it may inquire the staff members of the financial institution on the relevant information and require them to make explanations about the inspection items, consult and copy the financial institution's documents and materials related to the inspection items, and seal up and preserve the documents and materials that are likely to be moved away, destroyed, concealed or altered.

To investigate a doubtful transaction, there shall be not less than 2 inspectors, who shall show their law enforcement certificates and the investigation notice issued by the People's Bank of China or its branch institution at the provincial level. The consultation, copying or sealing up of the client's account information, transaction records and other relevant information on the financial institution under investigation shall be subject to the approval of the person-in-charge of the People's Bank of China or of its branch institution at the provincial level. In case any of the investigators violates the prescribed procedures, the financial institution may have the right to reject the investigation.

Inquiry notes shall be made for inquiries and shall be delivered to the interviewees for verification. Where there is any omission or error, the interviewees may request for supplement or correction. After the interviewees confirm the transcripts as inerrant, they shall affix their signatures or seals to the notes, so do the investigators.

When sealing up any document or material for preservation, the investigators shall, jointly with the on-the-spot staff members of the financial institution, make careful check and issue a checklist in duplicate on the spot, which shall bear the signatures or seals of the investigators and of the staff members of the financial institution on the spot. And one copy shall be kept by the financial institution and the other be attached to the case file for reference.

Article 23

Where the doubt of money laundering still exists after investigation, the case shall be reported to the spying organ which has jurisdiction immediately. Where the client requests for an outbound transfer of the fund in the account involved in the investigation, the financial institution shall report it to the local branch institution of the People's Bank of China immediately. Upon approval of the pincipal of the People's Bank of China, the People's Bank of China may take temporary freezing measures and shall make a written notice to the financial institution, which shall execute the aforesaid notice as soon as it receives it.

Where the investigation organ believes it necessary to continue the freezing after it receives the report of the case, the financial institution shall be cooperative after it receives from the investigation organ a notice of continuing the freezing. Where the investigation organ deems it unnecessary to continue the freezing, the People's Bank of China shall notify the financial institution to cancel the temporary freezing as soon as it receives from the investigation organ a notice of lifting the freezing.

The temporary freezing may not exceed 48 hours. If the financial institution fails to receive a notice of continuing the freezing within 48 hours after it takes temporary freezing measures as required by the People's Bank of China, it shall immediately lift the temporary freezing.

Article 24

Where any of the staff members of the People's Bank of China or of its branch institutions, who is engaged in anti-money laundering work, commits any of the following acts, he shall be given an administrative sanction,

(1)

violating the provisions to make any inspection or investigation or take any temporary freezing measure;

(2)

divulging any state secret, commercial secret or personal privacy, which he has accessed to during the process of his anti-money laundering work;

(3)

violating the provisions to impose any administrative punishment on any relevant institution or personnel; or

(4)

any other act contrary to his duties.

Article 25

Where a financial institution violates the present Provisions, the People's Bank of China or its branch institutions and sub-branches at the prefecture level or above, shall punish it according to Articles 31 and 32 of the Anti-money Laundering Law of the People's Bank of China. And in light of different circumstances, the CBRC, CSRC or CIRC may be proposed to take the following measures,

(1)

to order the financial institution to stop the business for rectification, or to revoke its business license;

(2)

to disqualify the directly liable directors, senior managers and other directly liable persons from assuming their respective positions, and to prohibit them from working in the financial sector; and

(3)

to order the financial institution to give a disciplinary sanction to the directly liable directors, senior managers and other directly liable persons.

Where a sub-branch of the People's Bank of China of a county (city) finds any financial institution violating thee present Provisions, it shall report to the People's Bank of China's branch institution at the next higher level, which shall punish the violators or advance a proposal according to the provisions of the preceding Paragraph.

Article 26

In case the People's Bank of China or any of its branch institutions and sub-branches at the prefecture level or above, gives an administrative punishment to a financial institution in violation of the present Provisions, it shall abide by the Procedural Provisions of the People's Bank of China on Administrative Punishments.

Article 27

The present Provisions shall enter into effect as of January 1, 2007. The Provisions on the Anti-money Laundering through Financial Institutions, which was promulgated by the People's Bank of China on January 3, 2003, shall be abolished simultaneously.