U.S. Defense Bill Orders Study of Illicit Finance Risks Posed by China
06 Jan 2021

The U.S. Treasury Department is expected to study the money-laundering risks posed by China—and develop a strategy to defend against them—following the approval last week of the annual defense policy legislation.

The directive highlights the continued scrutiny on China from the executive and legislative branches of the U.S. government, policy observers said.

The provision in the National Defense Authorization Act asks the Treasury secretary to conduct a report on China’s illicit finance risks, using information largely obtained from trade-based money-laundering analyses done by the U.S. Comptroller General. The Treasury has up to a year to submit the report.

On Friday, the Senate voted 81-13 to override President Trump’s veto of the bill, following the House’s 322-87 override earlier in the week. The bill contained other provisions aimed at curbing illicit finance, paving the way for an overhaul of U.S. anti-money-laundering rules.

The study would look into the extent and effect of illicit finance risk related to the Chinese government and Chinese companies, including financial institutions; illicit finance risks emanating from China; whether such risks have been enabled directly or indirectly by the Chinese government through weak regulatory oversight or administrative controls; and the ways increased global trade and investment from the Chinese government and Chinese companies expose the international financial system to illicit finance risks.

Responsibility for the study could fall to Janet Yellen, who was nominated by President-elect Joe Biden to become Treasury secretary. Ms. Yellen must be confirmed by the Senate. A Treasury spokesman declined to comment.

By Mengqi Sun, The Wall Street Journal, 5 January 2021

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