China is targeting virtual money laundering in an expanded anti-money laundering push

China has unveiled plans to strengthen anti-money laundering laws, increase scrutiny of money laundering-related crimes, and deepen international cooperation as authorities prepare a national financial security framework for the next five-year policy cycle.

The People’s Bank of China said in a policy document reviewing anti-money laundering work during the Five-Year Plan period that authorities will maintain pressure on money-laundering cases, with a particular focus on money laundering, cross-border fund transfers, wire fraud, online gambling, drug crimes, illegal fundraising, and underground banking networks.

The central bank said China has entered a new stage in the fight against money laundering after completing a series of legislative, regulatory, enforcement, and international cooperation initiatives over the past five years. Officials said future efforts will focus on implementing the revised Anti-Money Laundering Act, strengthening risk-based surveillance, improving beneficial ownership reporting, and improving cross-border law enforcement cooperation.

Virtual money laundering remains an important enforcement activity

The People’s Bank of China said authorities have strengthened measures against money laundering crimes in recent years through a joint campaign launched in 2022 by the central bank, the Ministry of Public Security, and nine other government agencies.

Under that program, investigators have expanded the use of a “dual investigation” approach that examines both the underlying criminal activity and the networks associated with drug trafficking. The central bank said the agencies have coordinated efforts to address evidence collection, case management, and enforcement issues while increasing enforcement of professional money laundering, virtual money laundering operations, and cross-border programs.

The report said courts across China issued more than 2,000 191 convictions under Article 191 of the Criminal Law, a provision that prosecutes money laundering, by 2025.

Authorities also warned that criminal organizations have used new methods to hide illegal funds. The central bank said that emerging technology and new business methods have provided more channels that can be misused for money transfers, making detection and tracing of transactions more difficult.

Chinese officials have identified cross-border smuggling networks as a growing challenge. The report said that organized crime groups are increasingly taking advantage of the disparity in law and regulatory systems in all jurisdictions and are using underground banking, designated accounts, reverse transactions, and virtual currencies to hide the movement of funds.

China is expanding its legal and regulatory framework

The central bank said China completed a major overhaul of its Anti-Money Laundering Law, which took effect in 2025. This revised law formally adopts a risk-based approach and introduces requirements to monitor money laundering threats linked to new technologies and emerging sectors.

Authorities have also established a national beneficial ownership reporting system by 2024 through measures jointly issued by the People’s Bank of China and the State Administration of Market Regulation. Officials described the program as an important tool to prevent shell companies from being used to hide illegal activities.

The report said regulators later introduced new rules requiring financial institutions to identify and verify the beneficial owners of customers while improving the quality of information through the use of a separate reporting system.

China has also expanded its anti-money laundering controls over banks and financial institutions. The central bank said it is working with the Ministry of Justice, the Ministry of Finance, the Ministry of Housing and Rural Development, and other agencies to establish oversight bodies that include lawyers, notaries, accountants, local businesses, precious metal dealers, jewelers, and company registration agents.

The document comes as Chinese authorities continue to tighten oversight of cryptocurrency-related activities.

In February, the People’s Bank of China, the China Securities Regulatory Commission, and other agencies issued a notice expanding regulatory restrictions on onshore renminbi stablecoins and real-world assets. The draft stated that cryptocurrencies such as Bitcoin, Ether, and Tether do not have the same legal status as a sovereign currency and cannot circulate as money within China.

The notification classified crypto trading, token issuance, market making services, and crypto-linked financial products as illegal financial activities. The authorities also said that civil legal actions involving cryptocurrency investments will not be allowed, where investors are responsible for any resulting losses.

The central bank said that future efforts to combat money laundering will include stronger international cooperation in intelligence sharing, investigations, asset recovery, and law enforcement coordination, especially in cases involving cross-border criminal activities and illegal money transfers.

In May, Liu Guixiang, a member of the judiciary committee of China’s Supreme People’s Court, said that the courts will conduct further research on judicial standards in disputes involving virtual currencies and cross-border financial transactions.

Despite recent concerns, Wang Xin, director-general of the Research Bureau at the People’s Bank of China, said policymakers were paying more attention to the central bank’s coins and digital currencies. Speaking at the Lujiazui Forum on June 17, Wang said stablecoins could play a major role in international payments in the future and called for continued attention to regulatory coordination and international cooperation surrounding their use.