The role of commercial banks in combating money laundering

Abstract

PurposeThe purpose of this paper is to assess the role of commercial banks in combating money laundering in the People's Republic of China (PRC). An effective anti‐money laundering (AML) regime within the banking sector can make a significant contribution to the fight against money laundering both nationally and internationally.Design/methodology/approachAn assessment based on the AML law of China, rules and regulations issued by the People's Bank of China (PBOC) was conducted on commercial banks in Xichang City. A questionnaire and guided oral interviews were employed to collect data for the study.FindingsThe study found that all the five banks that responded to the questionnaire have, for the period 2006‐2010, not been assessed by the PBOC, despite being independently audited by external auditors. All banks have AML policies and procedures in place, have designated a compliance officer for AML activities and trained their employees.Research limitations/implicationsOnly five banks responded to the questionnaire as most of them were not willing to release information on their AML activities, for various reasons. This raises the question of generalizing the findings of the current study.Originality/valueThe paper shows the extent to which AML rules and regulations have been embraced and implemented by commercial banks at a micro level. It is envisaged that the findings of this study will encourage similar studies in other cities of the PRC and help policy makers, especially at the PBOC, to re‐align their strategies in line with what is obtaining on the ground.