China Banking Industry Anti-money Laundering

Money laundering, which is the "Black Industry", has rapidly become into the third business activity after the Foreign Exchange and Petroleum. Because money laundering has been beyond the people's imagination, exists everywhere, influences viciously and threatens the civilized society, it has turned into the "vibrato" of the modern civilization. With unique features of storage and transfer of funds, the banking industry is vulnerably used by money launderers and it is the main point of prevention and identification of money-laundering.Anti-money laundering is not only theory, but also practice; anti-money laundering is not a legal issue, but a financial issue. With Externality Theory, Information Economics, Game Theory and the Decision-making Approach of Capital Investment in Corporate Finance, the paper tries to resolve :how to analyze the necessity and feasibility of anti-money laundering of banking industry in China with the theories, in order to design the prevention and identification system of anti-money laundering in the Macro and Micro level.The possibility of innovation:1. The paper attempts to establish an analysis framework of "understanding money laundering—the necessity and feasibility of anti-money laundering of banking industry—the prevention and identification of anti-money laundering", to afford the valuable information .2. With Externality Theory, the paper analyzes anti-money laundering of banking industry, which has a public product characteristic. Under the premise of complete information, the paper has achieved that the anti-money laundering can increase the welfare of the entire community through the Game.3. With Information Economics, the paper assays the mechanism of anti-money laundering of banking industry. Although the outside world does not understand that cost of anti-money laundering is high or low, under repeated games, money launderers know that the cost of anti-money-laundering is high, money laundering will be so wantonly, so we should make money launderers aware of low-cost of the anti-money laundering ,money-laundering will be subject to heavy blow.4. The paper construes the compensatory mechanism of anti-money laundering of banking industry. Because of positive externality and higher cost of anti-money laundering of banking industry, the supply of anti-money laundering of banking industry is insufficient. With the compensatory mechanism, the supply of anti-money laundering of banking industry will increase.5. With the Decision-making Approach of Capital Investment, the anti-money laundering is seen as a capital project which has long-term investment value. Since the implementation of anti-money laundering business of the banking industry, the bank's cash inflows increase, while the banks would inevitably pay the cost of money-laundering. Ultimately through the net present value (NPV) method to determine that the net present value is greater than or equal to zero, anti-money laundering business of the banking industry can invest.6. To design the prevention and identification system of anti-money laundering of the banking industry in the Macro and Micro level. The paper systemically devises the essential and main three parts: the construction of system, setting of institution, preparation of staff in the macro framework. And then the paper dominatingly expounds the function of the prevention and identification system in due diligence investigation of customers.The shortcomings of the paper:1. Be lack of data for the corresponding empirical analysis. Because the stage of anti-money laundering of the banking industry is just getting started, data collection need some time, and much of information is in secrecy , it is difficult to get performance data of the anti-money-laundering system.2. Qualitative research is more, quantitative analysis is less. Although the net present value model was constructed on Empirical Analysis of the feasibility of anti-money laundering, with the lack of corresponding data, the analysis can only be a preliminary quantitative analysis.