Special measures to curb funding for terrorism, other illicit activities

China's latest rules on anti money laundering (AML) special preventive measures mark a key milestone in safeguarding national and financial security, while further aligning the country's regulatory framework with advanced international standards to strengthen cross-border enforcement, experts said.

Compared with routine anti money laundering supervision, they stressed that the special measures will play a forceful, indispensable role in cutting off funding chains linked to the financing of terrorism, proliferation of weapons of mass destruction and other activities that could induce severe outcomes.

Earlier this month, the People's Bank of China, the country's central bank, released a set of administrative rules for anti-money laundering special preventive measures, effective from Feb 16. The rules were jointly released by seven other central departments, including the Ministry of Foreign Affairs, the Ministry of Public Security and the Ministry of State Security.

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The rules require all entities and individuals to apply special preventive measures to targets on three lists: the terrorism list identified by the national counterterrorism leading body; lists tied to United Nations Security Council resolutions on targeted financial sanctions; and organizations or individuals with high risks of money laundering, identified by the PBOC, where inaction could lead to serious consequences.

The special measures include immediately halting financial services or the provision of funds and assets to the above listed targets and their agents or controlled entities, and promptly restricting related transfers.

Financial institutions must establish internal controls for these measures and must not provide prior notice to the affected parties before implementing these measures. No entity or individual may lift them without authorization.

Failure to fulfill these obligations will subject financial institutions and responsible personnel to penalties in accordance with the Anti-Money Laundering Law, said the document.

Bai Wenxi, vice-chairman of the China Enterprise Capital Union, said the new set of rules marks a major milestone in the development of China's anti-money laundering framework.

"It not only fills the operational gap in the Anti-Money Laundering Law with regard to targeted financial sanctions, but reflects China's proactive alignment with the international standards set by the Financial Action Task Force (FATF) and the country's commitment to fulfilling the responsibilities as a major country."

The FATF is an independent intergovernmental body that develops and promotes policies to protect the global financial system against money laundering.

According to Bai, the new rules further align domestic measures with advanced international standards in the fields of targeted financial sanctions against terrorist financing and the financing of the proliferation of weapons of mass destruction.

By establishing a domestic enforcement mechanism aligned with international sanctions lists, Bai said the rules also provide institutional support for China's participation in multilateral cooperation frameworks such as the FATF while laying a foundation for financial security cooperation under the Belt and Road Initiative.

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Such alignments will help China become better prepared for the fifth round of international anti money laundering evaluations by the FATF, scheduled to run from November 2025 to February 2027, Bai added.

The PBOC has listed fully preparing for the fifth round of anti money laundering evaluations and steadily advancing the implementation of the newly revised Anti-Money Laundering Law as key tasks for 2026 as it laid out priorities at an annual anti-money laundering work meeting last week.

With the new set of rules among the most important supporting regulations for implementing the Anti-Money Laundering Law, Lou Feipeng, a researcher at the Postal Savings Bank of China, said China has established a comprehensive framework for the special preventive actions and provided clearer tools for cross-border capital supervision.

Lou said that the special measures, compared with routine anti money laundering supervision, are characterized by immediate enforcement, the absence of prior notification and full coverage of related entities and transactions.

Contact the writers at zhoulanxv@chinadaily.com.cn