Implementing AML Risk Assessments for Payment Institutions in China

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Payment Institutions in China have experienced unprecedented development over the past decade. Led by the two payment giants, Alipay and WeChat Pay, payment institutions launched a payment revolution that robbed banks of a large portion of their retail payment business. They integrated technology into digital payments, created new payment methods, such as the QR code and Facial Recognition payments, and dominated the digital payment business in China. The new digital payment methods changed how people pay for their daily necessities, express gratitude, and even how beggars collect their donations. By 2019, 237 Payment Institutions in China processed 720 billion transactions valued at around USD38.44 trillion for over 700 million customers. On the newly published Forbes Global 2000 list 2022, Alibaba and Tencent, the holding companies of the two payment giants, have outranked Morgan Stanley and HSBC Holdings.

Unfortunately, most payment institutions, starting their business as e-commerce or technological companies, have not understood AML risks sufficiently. Their measures to mitigate risks are generally not commensurate with their risk profiles. In 2021, the People’s Bank of China issued new guidelines for the self-assessment of money laundering and terrorist financing. Payment institutions urgently need to develop a comprehensive risk assessment mechanism, including planning risk assessments, assessing the inherent and residual risks, and adopting mitigation methods.

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