Comprehensively Strengthen Supervision and Barriers to Cross-Border Financial Security
CHINA FOREX: The year 2024 was the first year for fully implementing the spirit of the Third Plenary Session of the 20th Central Committee of the Communist Party of China (CPC). Could you please introduce the main tasks of the SAFE's Supervision and Inspection Department in 2024?
HU Chunyu: In 2024, the foreign exchange inspection department, guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and firmly under the strong leadership of the CPC Leadership Group of the State Administration of Foreign Exchange (SAFE), comprehensively studied and implemented the spirit of the Third Plenary Session of the 20th CPC Central Committee. The department earnestly conducted studies and education on Party discipline and exercised law-based administration. In 2024, the department addressed over 1,000 cases of foreign exchange violations, imposing fines and confiscating funds totaling over 1.1 billion yuan. These actions significantly deterred various entities engaged in such violations and contributed to the stability and efficiency of the foreign exchange market.
Firstly, propelled by reform and innovation, the department advanced the reform of the banking sector's foreign exchange operations in an orderly manner. It established and refined the "1+6" supporting framework for these operations, formulating and promulgating key regulatory documents, including the Regulations on Due Diligence Exemption for Bank Foreign Exchange Business and the Measures for the Administration of Foreign Exchange Risk Trading Reports. These guidelines provided clear guidance to banks on standardizing business practices and ensuring compliance, facilitating effective policy communication and operational direction. As a result, 16 banks launched reforms, covering 36 provincial branches nationwide.
Secondly, the department significantly strengthened technological empowerment to more effectively enhance its precision in risk identification. It optimized and upgraded the functionality of the off-site inspection system, monitoring and analyzing changes in the risks of abnormal cross-border fund flows. By relying on the national research center and the off-site intelligent analysis platform, the department carried out joint assessments and analyses across departments, ensuring more timely and accurate detection and identification of risks.
Thirdly, the department intensified regulatory cooperation to effectively combat and manage illegal cross-border financial activities. Focusing on key areas of illegal activities, such as underground banking and export tax fraud, it deepened inter-departmental collaboration, and promoted information sharing, data integration, joint assessments and collaborative inspections and supervision. These efforts were aimed at increasing the deterrence effect of regulatory enforcement.
Fourthly, the department strengthened foreign exchange regulation to enhance the effectiveness of "inspection-driven management". It broadened the scope of special inspections, fully covering banks, securities firms, insurance companies, and other institutions. It also delved deeper into the focus of these inspections, implementing mechanisms such as "dual investigations in one case", "dual penalties for one case", and "inspection-driven governance". Emphasizing root cause management, the department aimed to move beyond mere fines and thoroughly address systemic issues to prevent recurrence.
Fifthly, the department consistently adhered to law-based administration. It rigorously implemented the three systems of publicizing administrative law enforcement, recording the entire law enforcement process, and conducting legal reviews of major enforcement decisions. Additionally, it tightened up the institutional framework, strengthened the supervision of law enforcement, and effectively mitigated enforcement risks.
In particular, to strengthen foreign exchange supervision and further improve the supervision capacity and level under the conditions of opening up, the foreign exchange inspection department maintained a strong crackdown on illegal activities in the foreign exchange sector in 2024. Key efforts are as follows. On one hand, enhancing cross-departmental collaboration. The department cooperated closely with the public security authorities and other departments to crack down on over 260 illegal foreign exchange cases, including those involving underground banks and related crimes. On the other hand, implementing a full-spectrum crackdown. The department efficiently addressed cases involving illegal trading counterparties, handling over 500 administrative penalty cases with penalties exceeding 600 million yuan.
CHINA FOREX: What will be the key areas and priorities for Supervision and Inspections Department in 2025?
HU Chunyu: The National Foreign Exchange Administration Work Conference emphasized that in 2025, foreign exchange administration work should be guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. It called for the thorough implementation of the guiding principles of the Third Plenary Session of the 20th CPC Central Committee, the Central Economic Work Conference, and the Central Financial Work Conference. In accordance with the requirements of the national work conferences for the financial system, the SAFE shall persist in seeking progress while maintaining stability and promoting stability through progress, uphold fundamental principles and break new ground, pursue system integration, better coordinate development and security, and anchor on the establishment and improvement of a "more convenient, more open, and secure" foreign exchange administration system and mechanism. The SAFE shall implement more proactive and effective foreign exchange administration policies, promote in-depth reform and high-level opening-up in the foreign exchange field, and prevent and resolve external shock risks, to make greater contributions to the high-quality completion of the goals and tasks set out in the 14th Five-Year Plan and the good start of the 15th Five-Year Plan.
In line with this overall plan, in 2025, the foreign exchange inspection department will focus on strengthening supervision and preventing and mitigating risks. It will continue to maintain a work style of responsibility, practicality, and dedication, enforce the law strictly, and be courageous in confronting challenges. Key tasks will include advancing the quality and scope of the reform of the banking sector's foreign exchange operations, enhancing the precision of off-site foreign exchange violation identification, intensifying efforts to combat illegal cross-border financial activities, improving the effectiveness of supervision and inspection of key entities, and ensuring that administrative enforcement actions are more standardized. The department aims to continuously improve its risk prevention capabilities and contribute to promoting high-quality financial development and accelerating the building of a nation with a strong financial sector.
Firstly, the department will promote the improvement and expansion of the reform of the banking sector's foreign exchange operations, and strengthen the foundation for the compliant development of the foreign exchange market. It will adhere to the principle of seeking progress while maintaining stability and expand the scope in an orderly manner. It will optimize institutional supply to safeguard the quality of reforms. Additionally, the department will guide banks in establishing and improving ex-post monitoring systems, enhancing risk monitoring and manual identification capabilities, and establishing institutional and systematic arrangements that balance openness with security.
Secondly, the department will enhance off-site monitoring and analysis capabilities to provide strong support for the precise crackdown on illegal activities. It will strengthen the monitoring and analysis of abnormal channels, as well as the investigation and analysis of clues, to improve the capability to identify emerging illegal foreign exchange activities. It will persistently reinforce the development of off-site supervision capabilities.
Thirdly, the department will maintain a rigorous crackdown on illegal financial activities in the foreign exchange sector and carry out special inspections. It will strengthen collaboration with public security authorities and other departments, and maintain a strong crackdown on illegal activities such as underground banks, export tax fraud, and cross-border gambling. The department will focus on strengthening the governance of illegal cross-border financial activities at the source and provide timely regulatory proposals. Additionally, it will enhance the inspection and supervision of key entities, ensure institutions fulfill their responsibilities, and elevate the compliance capabilities of foreign exchange operating institutions.
CHINA FOREX: In recent years, the Supervision and Inspection Department has been dedicated to advancing the "off-site first" approach. Could you elaborate on the specific measures planned for 2025?
HU Chunyu: In 2025, the foreign exchange inspection department will continue to empower off-site inspections with technology to promote more precise risk identification. The specific measures are as follows.
Firstly, intensifying the monitoring and analysis of abnormal channels. The department will refine the early warning and monitoring index system for abnormal channels and enterprise risks. It will conduct monitoring and analysis to identify early-stage and trend-related issues and take risk response measures in a timely manner.
Secondly, enhancing clue investigation and analysis. Focusing on key areas such as illegal foreign exchange trading and fraudulent cross-border fund transactions, the department will conduct centralized nationwide and regional analyses. It will collaborate with departments like the Economic Crime Investigation Department of the Ministry of Public Security and the Anti-Money Laundering Bureau of the People's Bank of China to jointly investigate and uncover major c