Fines above 10 million yuan were imposed for the first time ever to three Chinese financial institutions demonstrating that regulators may make good on their commitment signaled last year to put an end to immaterial monetary penalties.

The People’s Bank of China (PBoC) imposed fines of 23.6 million yuan ($3.4 million) to China Minsheng Banking Corporation; 18.2 million yuan ($2.6 million) to China Everbright; and 10.1 million yuan to Huatai Securities.

According to the PBoC, the three firms were fined for failing to perform proper customer identification checks, keep customer data and transaction records, and to report large or suspicious transactions. The two banks were also accused of conducting transactions with unidentified clients.

Money Laundering Violations

«Last year, regulators signaled an end to the practice of fining financial institutions a few hundred thousand yuan for money laundering violations, beginning an era of drastically higher penalties,» according to a «Caixin» report citing an unnamed senior bank compliance officer.

Larger fines aside, the PBoC also published information about the people responsible for the violations, including their names, titles, and reason for punishment. A total of 24 managers at the three financial institutions were each fined from 10,000 yuan to 80,000 yuan ($11,437). The move was also the first of its kind, signaling greater willingness towards regulatory transparency. 

Dissuasive nor Proportionate

In 2018, the PBoC imposed fines totaling 190 million yuan ($27 million) which spells a 41 percent year-on-year surge. Despite the significant relative increase, the overall size of each fine remains trivial.

In December last year, an Hangzhou-based branch of China Construction Bank (CCB) was slapped with a 4 million yuan ($570,000) fine, the largest single penalty ever in China which is a very far cry from the multi-billion dollar hits taken by global banks in recent years. 

Not Effective

According to an evaluation published last year by Paris-based Financial Action Task Force, an annual average of 41 million yuan ($5.9 million) in fines imposed was not «effective, dissuasive, nor proportionate» when compared to the size of the banks and other financial institutions in China.