Recently, the State Administration of Foreign Exchange (SAFE) conducted a policy Q&A on the Administrative Measures for Banks' Foreign Exchange Business (for Trial Implementation). The details are as follows:
1. What is the definition of "financial institution" in Article 2 of the Administrative Measures for Foreign Exchange Business of Banks (for Trial Implementation) (hereinafter referred to as the "Business Development Measures")?
Answer: The term "financial institutions" mentioned in Article 2 of the Measures for Business Development includes: legal entities of domestic banks, securities, insurance and trust financial institutions, as well as their domestic and foreign branches and subsidiaries with business licenses; Transaction settlement financial institutions and their branches; Financial holding companies established in China and their branches with business licenses; Unincorporated branches established by overseas financial institutions within the territory of China with business licenses; Non-bank payment institutions, microfinance companies, financing guarantee companies, regional equity institutions, pawnshops, financial leasing companies, commercial factoring companies, local asset management companies; Other financial institutions established with the approval of China's financial regulatory authorities.2. How to understand the provision of "establishing a comprehensive, systematic and standardized internal control system supplemented by information system control" in Article 3, Paragraph 2 of the Business Development Measures?
Answer: Based on its own control system in the foreign exchange industry, banks should establish corresponding systems to achieve information management of key links, such as customer due diligence information collection, customer risk rating assessment, customer classification and in-process review linkage, post-event monitoring, screening and disposal, and other key links. The goal of system control is to realize the effective linkage of business development links before, during and after the event through the implementation of standardized, information-based and intelligent systems, so as to improve the efficiency of business development and reduce moral hazard. The business development system can be a newly built stand-alone system, or it can be a new functional module based on the bank's existing system.3. What is the meaning of the retention period in Article 9 of the Business Development Measures, which states that "relevant materials and records shall be retained for future reference in accordance with the requirements and time limits stipulated in the current laws and regulations"?
Answer: If there are provisions in the current foreign exchange management regulations, the time limit stipulated in the current foreign exchange management regulations shall be implemented; Where there are no provisions in the current foreign exchange management regulations, but laws, administrative regulations and departmental rules do have provisions, those provisions shall prevail. If there are no clear provisions in the above-mentioned laws and regulations, the bank shall retain the relevant materials and records for five years for future reference.4. What are the main elements of customer due diligence?
A: Customer due diligence consists of "basic due diligence" and "special due diligence for foreign exchange business". Among them, "basic due diligence" mainly involves reusing the bank's existing due diligence information, such as customer identity information, beneficial owner information, etc. "Special due diligence" refers to the due diligence on the characteristics of the customer's foreign exchange business, such as the age, scale and structure of the customer's foreign exchange business, as well as the internal and external evaluations of the customer that the bank has mastered.5. How to understand Article 14 of the Business Development Measures, which stipulates that "banks shall continue to pay attention to and review the identity, transactions and risk status of customers during the existence of the relationship with customers"?
Answer: Article 14 of the Business Development Measures stipulates a continuous due diligence clause, which is a re-examination of due diligence elements, which can be divided into two types: "triggered" and "cyclical". "Triggered" due diligence element re-examination refers to the process in which a bank discovers the circumstances listed in Article 12 of the Business Development Measures and re-identifies the customer in order to confirm the authenticity of the customer's identity and transaction background. "Periodic" due diligence element re-examination refers to the process in which a bank reasonably determines the continuous due diligence cycle based on its own risk management strategy and the customer's identity, transaction and risk profile, and conducts regular re-examination of due diligence elements.6. What are the specific regulatory authorities referred to as "relevant regulatory authorities" in Paragraph 2 of Article 16 and Paragraph 2 of Article 17 of the Business Development Measures?
Answer: According to the characteristics of foreign exchange administration, the "relevant regulatory authorities" in Paragraph 2 of Article 16 and Paragraph 2 of Article 17 of the Business Development Measures currently refer to the General Administration of Customs and its branches, the State Administration of Taxation and its branches, and banks are also encouraged to appropriately collect information on the penalties imposed by other regulatory authorities.
7. If the customer is a high-risk customer for money laundering, what other measures should the bank take during the review of foreign exchange business?8. How to interpret Article 23 of the Business Development Measures, which stipulates that "for a class of customers, banks may handle the receipt, payment, settlement and sale of foreign exchange funds for them on the basis of the instructions submitted by the customers in paper or electronic form"?
Answer: Banks and customers should pay attention to the fact that the receipt and payment of foreign exchange funds, as well as the settlement and sale of foreign exchange by the first type of customer, are "available" rather than "due" in the process of handling business. Based on its own risk management policies and the specific characteristics of its customers, banks can independently determine the scope of customers who can handle cross-border receipts and payments and foreign exchange settlement and sales business on the basis of instructions. or based on its own risk management policies and the characteristics of specific foreign exchange business, it can independently determine the specific types of cross-border payment and payment and foreign exchange settlement and sales business that can be handled by a class of customers on the basis of instructions. For foreign exchange business that is required to perform formalities such as approval, registration and filing in accordance with the law, banks and customers shall handle it in accordance with other current foreign exchange management regulations.
"Receipt and payment of foreign exchange funds" in Article 23 of the Measures for Business Development includes domestic foreign exchange transfers; "Foreign exchange settlement and sales business" includes the settlement and sale of foreign exchange and the payment of foreign exchange settlement and sale funds.
9. How to understand the second paragraph of Article 32 of the Business Development Measures, which stipulates that "if a bank is suspected of violating foreign exchange management laws and regulations in the foreign exchange business handled by a bank, but there is evidence to prove that it has diligently and conscientiously carried out foreign exchange business, the relevant legal liability shall not be pursued"?
Answer: Paragraph 2 of Article 32 of the Business Development Measures stipulates a due diligence exemption clause to actively respond to the demands of banks, avoid "consequentialism", and further enhance the facilitation of cross-border trade, investment and financing. If the customer is suspected of violating the foreign exchange management regulations in the foreign exchange business handled by the bank, if the bank has evidence to prove that the customer has implemented the duty of diligence and due diligence in the whole process of business development, the relevant legal liability will not be pursued.
