Key Points
- New AML Rules: Starting August 10, 2025, China will implement new Anti-Money Laundering (AML) regulations requiring comprehensive due diligence for any single deposit or withdrawal transaction exceeding ¥50,000 RMB ($7,000 USD) or its foreign currency equivalent.
- Regulatory Collaboration: These measures, outlined in the “Administrative Measures for Customer Due Diligence and the Preservation of Customer Identification Data and Transaction Records (Draft for Comment),” were drafted by the People’s Bank of China (中国人民银行), National Financial Regulatory Administration (国家金融监督管理总局), and China Securities Regulatory Commission (中国证监会).
- Enhanced KYC: Financial institutions must now perform “Know Your Customer” (KYC) procedures, including identifying and verifying customers and retaining ID copies for transactions like cash remittances, currency exchange, and financial product sales.
- Data Retention: Financial institutions are required to keep customer identity information and transaction records for at least 10 years after a business relationship ends, moving towards electronic storage to prevent data loss and ensure traceability for AML investigations.
- Challenges: Banks face significant challenges in balancing compliance with customer experience and privacy, requiring investments in system upgrades, refined operational processes for “high-risk customers,” and complex cross-border compliance.
China’s new financial regulations are set to shake things up starting August 10, 2025.
A major shift is coming to how money is handled, with new rules requiring comprehensive due diligence on any deposit or withdrawal over ¥50,000 RMB ($7,000 USD).
This isn’t just a minor tweak; it’s a significant step-up in China’s anti-money laundering (AML)
game.
The Lowdown: What’s Actually Changing?
Three of China’s top financial regulators have teamed up to draft these new rules.
We’re talking about:
- The People’s Bank of China (Zhongguo Renmin Yinhang 中国人民银行)
- The National Financial Regulatory Administration (Guojia Jinrong Jiandu Guanli Zongju 国家金融监督管理总局)
- The China Securities Regulatory Commission (Zhongguo Zhengquan Jiandu Guanli Weiyuanhui 中国证监会)
Their new playbook is called the “Administrative Measures for Customer Due Diligence and the Preservation of Customer Identification Data and Transaction Records (Draft for Comment).”
Now, you might remember an earlier proposal that just required people to register the source of their funds for these transactions.
That idea got some pushback over privacy and hassle.
So, they scrapped it.
Instead, the new measures focus on full-on due diligence.
This means financial institutions have to identify customers, verify who they are, and keep copies of their IDs on file.
“The new ‘Administrative Measures’ adopt a more systemic and comprehensive approach,” says Zeng Shengjun (Zeng Shengjun 曾圣钧), a senior researcher at the Bank of China (Zhongguo Yinhang 深圳分行 中国银行).
“They focus on the entire service lifecycle, emphasizing continuous tracking… and are more closely aligned with the ‘Anti-Money Laundering Law’ set to be implemented in 2025.”
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Get Ready for “Know Your Customer” (KYC) on Steroids
- Due Diligence Trigger: Transactions over ¥50,000 RMB ($7,000 USD) or $10,000 USD foreign currency equivalent
- Applicable Services: Cash remittances, Currency exchange, Bill payments, Precious metals trading, Sales of various financial products
- Mandatory Actions for Institutions: Identify customers, Verify identity, Keep copies/scans of valid IDs
The core principle here is “Know Your Customer” (KYC).
Banks and financial firms can’t just process transactions blindly anymore.
They need to understand their customers, the nature of their business, and their risk profile.
This due diligence kicks in for one-off transactions over ¥50,000 RMB ($7,000 USD) or the equivalent of $10,000 USD in foreign currency.
This applies to a wide range of services, including:
- Cash remittances
- Currency exchange
- Bill payments
- Precious metals trading
- Sales of various financial products
For these, institutions must perform customer due diligence, register basic identity info, and keep a copy or scan of valid IDs.
The Big Challenge: Balancing Compliance, Customer Experience, and Privacy
This is where it gets tricky for financial institutions.
How do you follow these strict rules without making every customer feel like a criminal and bogging down the system?
Jin Peng (Jin Peng 金鹏), a director at Rongfu Law Firm, says banks need to find a “dynamic equilibrium.”
He suggests they should be “using technology to boost efficiency, categorizing customers more accurately to reduce unnecessary inconvenience, and transparent communication to ease privacy anxieties.”
Zeng Shengjun breaks down how banks can nail this balancing act:
- Tiered Management: Create different procedures for different risk levels. Low-risk customers get a simplified process, while high-risk clients get a deeper dive. No more “one-size-fits-all” headaches.
- Go Digital: Use tech to speed things up. Think mobile banking apps where customers can upload documents and get verified in real-time, cutting down on trips to a physical branch.
- Protect Privacy: Stick to the “least privilege” principle. Only collect the information that is absolutely necessary for the transaction and nothing more.
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Data, Costs, and Cross-Border Complexity
The new measures also get serious about data.
Financial institutions now have to keep customer identity info and transaction records for at least 10 years after a business relationship ends.
And they have to move towards storing all this data electronically.
The system must be robust enough to prevent data loss and leaks, while also ensuring that every single transaction can be reconstructed and traced.
Critically, this data must be accessible to regulators and law enforcement to help with AML investigations.
What About the Cost?
No surprise here—compliance costs are going up in the short term.
Banks will have to shell out for system upgrades, more staff, and third-party data services.
But the long-term view is more optimistic.
Experts believe that standardization and smart tech will eventually cut down on human error, reduce compliance risks, and stabilize costs.
As Jin Peng puts it, this will drive banks from “passive compliance” to “proactive risk management.”
The goal is to turn compliance costs into risk benefits—a pretty solid ROI.
- System Upgrades: Requires significant investment in technology and data governance to overhaul tech backbone.
- Operational Complexity: Need to create detailed internal processes, especially for defining and handling “high-risk customers.”
- Cross-Border Compliance: Juggling new domestic regulations with international AML standards for foreign clients without conflicts.
Future Hurdles for Financial Institutions
Looking ahead, Zeng Shengjun points out three key challenges banks will face:
- System Upgrades: The tech backbone of these banks needs a serious overhaul to support the new rules, requiring big investments in tech and data governance.
- Operational Complexity: The rules are detailed, meaning banks need to create very specific internal processes, especially for defining and handling “high-risk customers.”
- Cross-Border Compliance: Things get even more complex with international clients. Institutions will have to juggle both these new domestic regulations and international AML standards without creating conflicts.
Ultimately, these new regulations signal a major maturation of China’s financial system, bringing it more in line with global standards and cracking down hard on illicit financial activity. For investors and businesses operating in China, understanding these changes to China’s new financial regulations is absolutely critical.
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