US and Chinese financial intelligence units sign memorandum of understanding to facilitate information sharing

Following high-level meetings in September which set the objective of strengthening bilateral regulatory, supervisory and law enforcement co-operation, the US Financial Crimes Enforcement Network (FinCEN) and the China Anti-Money Laundering Monitoring and Analysis Center (CAMLMAC) have entered into a Memorandum of Understanding (MOU) that will result in additional levels of co-operation between the two Financial Intelligence Units (FIU).

Enhanced co-operation on money laundering and terrorist financing

On 11 December 2015, FinCEN announced that it had signed the MOU with CAMLMAC, a unit overseen by the People's Bank of China. Only limited information regarding the MOU has been made available to the public. The brief release from FinCEN states that the MOU will "provide a mechanism for sharing information on money laundering and the financing of terrorism in order to prevent illicit actors from abusing either country’s financial systems.” FinCEN's announcement also notes that the information exchanged will be used only in an authorised and confidential manner.

According to an announcement made by CAMLMAC, the MOU covers, among other things, the collection and analysis of financial information related to money laundering, terrorist financing, and related crimes on a reciprocal basis, as well as mutual assistance.

On terrorist financing, it is noteworthy that Bank of China, a major Chinese bank with operations in multiple countries, has faced a series of recent civil actions in the US, in which the plaintiffs alleged that Bank of China served as a conduit for terrorists. These cases, together with China's continued responsibilities to the Financial Action Task Force, a global anti-money laundering body, have no doubt contributed to the Chinese authorities' increased willingness to work with the US to tackle these issues.

Enhanced international regulatory co-operation

The MOU is one of an increasing number struck between domestic regulatory bodies in a drive to minimise the impact of financial crime. CAMLMAC has signed memoranda of understanding on the exchange of money laundering-related information with several foreign regulators, including FIUs in France, Korea, Macau, Hong Kong and Belgium. Hong Kong's Securities and Futures Commission last month gained greater powers to provide supervisory assistance to overseas regulators (see our e-bulletin). Regulators are working more closely than ever before which has implications for international firms and businesses in terms of their operations and compliance.

Conclusion

What impact the MOU will have on cross-border regulatory and criminal enforcement actions remains to be seen. It clearly suggests a continued focus by authorities in both countries on money laundering and terrorist financing, particularly in the wake of recent global security threats.

In the meantime, the identification and confiscation of proceeds of crime overseas will be important in president Xi Jinping's ongoing battle against corruption.

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