Research on The Objectives of Anti-Money Laundering Accounting
Abstract: Money laundering has become a malignant tumor affecting the overall economy. Anti-money laundering (AML), as a systematic project, has drawn attention from various organizations. However, there is still a lack of an effective coordination mechanism between different departments and a unified information collection and screening institution. This paper starts with an analysis of the current status of money laundering and AML efforts, as well as the necessity of AML accounting. It then specifically analyzes the users of AML accounting information, what kind of accounting information they need, and how to provide such information. Finally, it discusses the objectives of AML accounting in China by considering political and legal factors.
Key words: Anti-Money Laundering; AML Accounting; Objectives
It is estimated that every year, at least 200 billion RMB is laundered through underground banks in China, accounting for approximately 2% of GDP. According to data provided by the China Anti-Money Laundering Monitoring and Analysis Center, which was established two years ago, by the end of 2005, the center had transferred a total of 683 suspicious transaction leads involving 137.8 billion RMB, over 10 billion USD, more than 70,000 transactions, and 4,926 accounts. Currently, money laundering crimes are very severe in China, becoming a major issue disrupting the stable operation of the macroeconomy and financial sector.
In April this year, the Standing Committee of the National People's Congress conducted its first review of the much-anticipated draft "Anti-Money Laundering Law." Also, on April 12th, the People's Bank of China issued drafts for public comment, including the "Regulations on Anti-Money Laundering for Banking Financial Institutions," "Regulations on Anti-Money Laundering for Securities and Futures Industry Financial Institutions," and "Regulations on Anti-Money Laundering for Insurance Industry Financial Institutions."
This paper intends to analyze the current mechanisms of anti-money laundering efforts, examine the need for AML accounting information, and offer some insights into the objectives of AML accounting.
### 1. Construction of Anti-Money Laundering Accounting
The 2005 report "China's Anti-Money Laundering Report 2004" published by the central bank pointed out that in 2004, the central bank and the State Administration of Foreign Exchange cooperated with public security agencies to successfully crack down on 50 cases of money laundering and related crimes, involving 5.7 billion RMB and 4.47 billion USD. Five major typical money laundering cases were also disclosed, but only one case was sentenced for the crime of money laundering. The overall results were not very significant.
Anti-money laundering is a systematic project, and one of the key issues is that although the Anti-Money Laundering Monitoring Center has been established, there is still a lack of an effective coordination mechanism among the more than 20 departments involved, led by the central bank, including public security and prosecution. There is also a lack of a unified system for collecting and screening information, which cannot yet provide systematic money laundering crime information.
The process of money laundering is essentially a flow of funds. During this flow, the sources and destinations of these funds leave corresponding traces. Accounting, as an information system, deals with the flow of funds. By constructing an AML accounting system, it is possible to unify and coordinate intelligence information about money laundering crimes scattered across different industries, departments, and regions.
Additionally, financial institutions, as entities required to report large and suspicious transactions, often lack effective internal control systems for AML, increasing the likelihood of money laundering crimes. Accounting itself is also a management activity, possessing both reflective and supervisory (control) functions. Therefore, building an AML accounting system and leveraging the role of accounting in AML efforts is practically feasible.
### 2. Major Users of AML Accounting Information and Their Required Accounting Information
In discussions about the essence of accounting, our country has two representative theories: the "information system theory" and the "management activity theory." However, most scholars agree that these two viewpoints can be unified, meaning they do not have substantial differences but merely focus on different aspects. Professor Tang Yunwei et al. (1998) stated in their article "Review of Chinese Accounting Research": "Accounting is both an information system and a management activity, which is the understanding of most Chinese accounting scholars regarding the essence of accounting."
If we accept this view, it is self-evident that accounting has both reflective and control functions. From the perspective of AML, I believe that AML accounting should be an economic information system primarily aimed at providing financial information. In enterprises, financial institutions, and judicial institutions, it mainly processes data formed by the value movement of money laundering funds, screens them, and generates relevant information. This information serves both reflective and supervisory functions, as well as predictive, planning, and analytical evaluation capabilities.
Under this perspective, AML accounting plays a crucial role in identifying suspicious financial activities and ensuring compliance with AML regulations, making it indispensable for combating money laundering effectively.