The People's Bank of China, the National Financial Regulatory Administration, and the China Securities Regulatory Commission jointly issued the "Measures for Customer Due Diligence and Retention of Customer Identity Information and Transaction Records by Financial Institutions" (hereinafter referred to as the "Measures") on November 28. The new rules eliminate the mandatory requirement to register the source or purpose of cash deposits and withdrawals above a specified amount, aligning with the draft version released months earlier. The Measures emphasize a risk-based approach to customer due diligence, striking a balance between anti-money laundering (AML) controls and optimized financial services.
**Risk-Oriented Due Diligence** The Measures adopt a risk-focused framework, avoiding a "one-size-fits-all" approach. Financial institutions are required to conduct customer due diligence based on client profiles, transaction nature, and risk levels, ensuring measures are proportionate to money laundering risks while maintaining service efficiency.
Simplified due diligence applies to low-risk scenarios, whereas enhanced measures are mandated for higher-risk cases. For instance, routine banking transactions with clear income sources and stable fund flows typically require only basic identity verification. However, sudden large or suspicious transactions—such as abrupt transfers of hundreds of thousands of yuan or cross-region cash withdrawals—trigger deeper scrutiny, including verification of transaction backgrounds and potential AML reporting.
A market expert noted, "For high-risk scenarios, relying solely on stored client data or backend monitoring may fail to detect suspicious activities promptly. Financial institutions must proactively inquire about transaction purposes and fund sources, sometimes requesting supporting documents, to assess legitimacy and prevent criminal exploitation of the financial system."
The expert stressed that customer due diligence is central to AML compliance, serving as a critical barrier against money laundering. As criminals increasingly employ complex methods—such as bulk account openings, controlled transfers via third-party payment platforms, and layered transactions—financial institutions face heightened demands to refine their AML frameworks.
**Balancing Security and Convenience** While customers often prioritize seamless transactions, excessive convenience can compromise security, especially amid rising telecom fraud and online gambling. The Measures address this tension by advocating risk-proportionate due diligence, ensuring financial services integrate safety and efficiency.
The expert added, "Greater security entails tolerating reasonable inconveniences. If banks ignore blatantly abnormal transactions, customers suffering losses may later accuse them of negligence."
The Measures clarify that due diligence does not conflict with privacy protection. Under China’s AML laws, financial institutions must safeguard client data and only collect necessary information within legal bounds—a practice consistent with global standards.
In jurisdictions like the U.S., U.K., and Germany, stricter due diligence—including fund source verification for large cash transactions—is commonplace, with public acceptance of such "necessary constraints for public interest."
**Distinguishing AML from Anti-Fraud Efforts** The Measures also differentiate AML from anti-telecom fraud efforts. While AML focuses on preventing money laundering under the AML Law, anti-fraud targets telecom scams under the Anti-Telecom Network Fraud Law. AML measures emphasize preventive due diligence and risk-adjusted monitoring, whereas anti-fraud actions are more incident-specific.
Comments