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PBOC steps up cross-border transaction reporting standards

The People's Bank of China (PBOC) released amended rules on December 30 requiring financial institutions to flag large-volume (defined as Rmb50,000 or above in renminbi and $10,000 or above in foreign currency) or suspicious transactions, in an effort to identify money laundering and crack down on corruption and tax evasion. Transactions subject to scrutiny involve cash deposits and withdrawals, cash settlements or sales of foreign exchange, exchange of notes, cash remittances and payments made through a cash instrument. The new rule will take effect on July 1. The threshold for “large” renminbi transactions has been substantially lowered—it was Rmb200,000 according to a previous 2007 regulation. Daily transfers of at least Rmb2 million or $200,000 in foreign currency between institutional bank accounts, as well as daily domestic transfers of at least Rmb500,000 or $100,000 in foreign currency involving a personal account must also be reported. On December 31, the State Administration of Foreign Exchange (SAFE) released a Q&A for the New Year outlining restrictions for renminbi-to-dollar conversion. Individuals must fill out a detailed form on how they plan to use the money overseas and formally pledge not to spend the money to buy overseas assets such as property or insurance investments. The Q&A also states that violators will be put on a watch list and denied an FX quota for three years. The irony is that the tighter the grip China places on capital outflows, the more people scramble to get their money out in anticipation of further controls.

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