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Regulation targets illegal fundraising

Updated: Feb 10,2021 08:40 PM

China will implement a regulation to prevent and handle illegal fundraising, according to a State Council decree signed by Premier Li Keqiang on Jan 26 and issued on Feb 10.

The regulation, passed at a State Council executive meeting on Dec 21, 2020, will take effect on May 1.

Targeting illegal fundraising, it is aimed at safeguarding the legitimate rights and interests of the public, and guarding against and resolving financial risks, as well as maintaining economic order and social stability.

According to the regulation, illegal fundraising involves collecting funds from non-specific targets with promised principal and interest or other investment returns, without lawful permission from the State Council’s financial management departments or in violation of China’s financial management rules.

Provincial-level governments should have overall responsibility for anti-illegal fundraising efforts within their respective administrative regions, and local governments should build necessary work mechanisms.

Supervision and guidance over implementation by local areas and departments will be conducted by an inter-ministerial joint conference system established by the State Council and led by the banking and insurance regulator under the State Council.

The joint conference system should introduce a national monitoring and early warning system for illegal fundraising, enhance local and departmental information sharing, and strengthen research into possible risks.

For business registration management, the regulation forbids the inclusion of words meaning “financial”, “exchange”, and “wealth management”, to name a few, in the name and business scope of enterprises and self-employed individuals, unless otherwise stipulated by laws, administrative regulations and the State.

To support the crackdown on illegal fundraising, financial and non-banking payment institutions should report large-value and suspicious transactions as required, and analyze and identify related accounts having suspected association with illegal fundraising.

According to the regulation, departments, when handling illegal fundraising cases, may close down business premises and seize assets involved, order individuals leading or assisting illegal fundraising to recover and sell related assets to repay illegally raised funds, and bar those accountable from leaving the country.