FROM A
DIFFERENT ANGLE by Kenneth Rijock
Financial Crime Consultant, for World-Check
More about the Author
Chinese banks moving into US markets could pose AML dangers
17 June 2007

The announcement that major Chinese financial institutions have branch applications pending in the United States is not good news for America's compliance officers. Unless AML and CTF programmes at the Chinese banks' headquarters are upgraded to meet both US best banking practices and USA PATRIOT Act standards, there will be money laundering and terrorist financing problems down the road. Can they be avoided?.

The reported applications of Industrial & Commercial Bank of China and China Merchants Bank to open branches in the United States raise these following questions:

  • Will the Chinese banks moving into the US upgrade their AML and CTF programmes at home to the point where they are effective?
  • What about those tens of thousands of bearer-share British Virgin Islands companies now owned by businessmen in China, will they be operating inside the US banking structure? What about other suspect offshore centres that shield Chinese corporate income from domestic taxation, will we be dealing with them as well?
  • How on earth can US regulators discipline Chinese-based banks and their senior officers, when politics dominates the Chinese judicial system? Will fines & penalties be unenforceable?
  • Will this become a new portal into the US banking structure for trans-global money launderers?
  • How will "nested" banks, those high-risk banks in China or elsewhere that could gain access to US markets through the Chinese banks, be barred?
These issues, and many more involving the interdiction and deterrence of fraud and other forms of financial crime, must be resolved before America allows China's banks entry into our financial neighborhood.

The facts and opinions stated in this article are those of the author and not those of World-Check. World-Check does not warrant the accuracy of any facts and opinions stated in this article, does not endorse them, and accepts no responsibility for them.

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