Promote The Facilitation Of Cross-Border Trade, Investment And Financing. The State Administration Of Foreign Exchange Promotes The Reengineering Of Banks’ Foreign Exchange Business Processes.
In order to better promote the facilitation of cross-border trade, investment and financing, and prevent cross-border capital flow risks, the State Administration of Foreign Exchange recently issued the "Measures for the Administration of Banks' Foreign Exchange Exhibition Business (Trial)" (hereinafter referred to as the "Exhibition Business Measures") to promote the foreign exchange business development of commercial banks. Business process reengineering further enhances the bank's foreign exchange business capabilities. The "Business Exhibition Measures" will come into effect on January 1, 2024.
Bank foreign exchange business refers to when banks carry out foreign exchange business for domestic enterprises, institutions, social groups and other institutions (excluding financial institutions, hereinafter referred to as customers), they conduct customer due diligence in accordance with the law, determine the customer's foreign exchange compliance risk level, and implement differentiation Measures should be taken to handle foreign exchange business and promptly monitor activities to deal with foreign exchange compliance risks.
"In recent years, the State Administration of Foreign Exchange has discovered in its supervision that during the implementation of foreign exchange management reform, there have been problems such as banks' failure to conduct due diligence' or 'excessive review'. Banks have engaged in operations in violation of regulations, which may have affected compliance business entities' foreign exchange facilitation. The micro-feeling of the policy." Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said that the "Business Exhibition Measures" further refines and clarifies the bank's business development standards before, during and after the event by building a general framework for banks' foreign exchange business development, and promotes banks' Earnestly fulfill audit obligations.
In terms of promoting the reengineering of commercial banks' foreign exchange business processes, the "Business Development Measures" build a full-process business development framework that includes ex-ante customer identification and classification, in-process differentiated review, and post-event monitoring reports, strengthen risk responsibilities before and after the event, and break the previous "risk prevention" The path dependence on the process will further improve the efficiency of bank foreign exchange business processing and enhance the level of cross-border trade, investment and financing facilitation.
"In advance, banks are required to conduct necessary due diligence on customers and update them dynamically to implement banks' 'know their customers' responsibilities. Banks are supported to classify customers based on their own risk management requirements. During the incident, banks are required to implement differentiated review measures based on customer classification, clarifying Category 1 customers can handle foreign exchange business based on instructions; Category 2 customers are reviewed by banks based on the principles of 'risk-based' and 'substance over form'; Category 3 customers are subject to enhanced review measures by banks based on risk status. Afterwards, banks are required to establish compliance Risk monitoring and analysis mechanism, if foreign exchange risk transactions are found, a foreign exchange risk transaction report should be reported and corresponding control measures should be taken as appropriate. Clarify the scope and reporting path of foreign exchange risk transactions. At the same time, clarify the requirements for the bank's internal management system, covering organizational structure, internal control system, and information system In other aspects, we will promote banks to improve their risk prevention and control mechanisms." Wang Chunying said.
In terms of promoting cross-border trade and investment and financing facilitation, according to the "Business Development Measures", banks should adopt differentiated review measures based on the overall judgment of customers' foreign exchange compliance risk levels and business risks. Premium customers can enjoy existing facilitation measures for both current and capital accounts. Banks can handle foreign exchange business for high-quality customers based on customer instructions, giving banks more room for product innovation. Banks and enterprises can voluntarily choose to apply the "Business Development Measures" or the original relevant foreign exchange management laws and regulations. Foreign exchange risk screening and identification are carried out based on the system, and subsequent monitoring is more accurate, with "no violations and no disturbance" to customers.
"Banks that participated in the pilot in the early stage have reported that after the implementation of the foreign exchange exhibition reform, high-quality enterprises have become more efficient in handling foreign exchange business, and the level of bank foreign exchange services has been effectively improved." Wang Chunying said.
In terms of risk prevention, the "Business Development Measures" consolidate banks' risk prevention responsibilities and achieve "both liberalization and control." Specifically, the "Business Exhibition Measures" further clarifies banks' "know your customers" obligations, and encourages banks to make full use of their own data and technical resources, integrate information to form customer portraits, control customer access, and achieve early identification and discovery of risks. Judging from the pilot situation, the proportion of high-risk customers of each bank is relatively low. Banks can effectively allocate business development resources and provide foreign exchange business facilitation services to the majority of medium- and low-risk customers. At the same time, they will increase the review of high-risk customers and businesses to effectively prevent Control risks. Clarify the scope of foreign exchange risk transaction reporting, guide banks to focus on the characteristics of foreign exchange risk transactions, and rely on timely retrospective screening of the system to achieve precise risk identification and disposal.
It is worth noting that the "Business Development Measures" propose "exemption from liability due to due diligence" for the first time in foreign exchange management regulations. "In practice, banks are on the front line of cross-border capital business processing, and their policy implementation directly determines whether the policy dividends of cross-border trade and investment and financing facilitation can truly benefit business entities." Wang Chunying said that the "Business Development Measures" are clarified in the form of legislation If the foreign exchange business carried out by the customer in the bank is suspected of violating foreign exchange management regulations, but the bank can prove that it has taken measures to promote foreign exchange business diligently and responsibly, the relevant legal liability will not be pursued, the "results only theory" will be eliminated, and the bank's concerns about the implementation of foreign exchange facilitation policies will be eliminated, and better It encourages banks to be "able, willing to do, and dare to do" and enhance the convenience of cross-border business for compliant customers.
"In the next step, the State Administration of Foreign Exchange will respect the objective differences in banks' cross-border business scale, business development model adjustment costs and other aspects, and gradually promote the implementation of the "Business Development Measures" based on the bank's voluntary premise." Wang Chunying said that foreign exchange bureaus at all levels will reform banks Provide corresponding guidance and support for systems, improvement of business processes and other tasks to reduce the bank's trial and error costs.