China To Establish Anti-money Laundering Incentives

The deteriorating situation of money laundering is made worse by the key role played by the banks' convenient service and numerous readily available financial tools. From the perspective of an individual instance of money laundering, the bank incurs no loss. Instead, it reaps lucrative profit. Consequently, the banks, especially the local commercial banks, lack the motivation to actually enforce the practice of anti-money laundering. Current law establishes the banks' role and responsibility in anti-money laundering, but has no specification in the practices on motivation.This article focuses on how to establish a motivation system, and what the principles, goals, strategies, functionality, standards, and intensity of the motivation should be.Money laundering has its harmful effect on the society. There is a cost to control it. We need strike a balance between the harm caused by money laundering and the cost of controlling the harm. In the process of analyzing this, I have the following three observations.1. The performance of anti-money laundering efforts of the commercial banks is in reverse proportion to the profit the banks obtain from the money laundering, is in proportion to the level of difficulty in how to identify the "black money", is in proportion to level of punishment the banks receive for helping money laundering, is in proportion to the likelihood of detection, and is in proportion to the motivation the banks have.2. To improve the anti-money laundering practice, the central bank should adopt a strategy that emphasizes both punishment and motivation.3. When the complexity level of anti-money laundering increases, the central bank should adopt a strategy that emphasizes more on motivation.Below are my thoughts on the specific practices of the motivation system.1. Establish the legality of the motivation system for anti-money laundering and institutionalize the motivation system.2. The motivation can be either monetary or non-monetary.3. Adopt different motivation systems for different banks and on different times.4. Pay attention to the nurturing of outside environment for the motivation system.