Depth Interpretation: New Regulations on Bank Forex Business and Their Impact

Recently, the State Administration of Foreign Exchange released the "Regulations on the Duty of Care and Exemption for Bank Forex Operations (Trial)". This document clearly defines the boundaries of responsibility and circumstances for exemption in bank forex operations. This article will analyze in detail the significant meaning and key points of this regulation to help readers understand the rules and responsibilities in forex operations.

The Main Obligations of Banks

1. Due Diligence Obligation: Banks must fulfill the responsibilities of "Know Your Customer, Know Your Business, Due Diligence" throughout the entire forex business process and implement effective risk management measures.

2. Regulatory review obligations: Conduct compliance audits on clients' forex accounts, fund receipts and payments, foreign exchange transactions, etc., strictly in accordance with foreign exchange management regulations.

3. Reporting obligations for monitoring: Conduct trading risk monitoring, timely identify potential violation risks, and report to the forex management department.

4. Compliance with international rules and reporting obligations: When conducting business in accordance with internationally accepted rules or at the request of overseas institutions, if any violation risks are detected, they should be promptly reported to the forex management department.

5. Obligation to cooperate in the review of complaints: When the forex bureau investigates suspected violations, banks should promptly fill out and feedback the "Complaint Form" and relevant evidence, actively cooperate with the investigation.

Consequences of Non-Performance of Obligations

If the bank fails to fulfill the above obligations, it will face legal liabilities, including administrative penalties. These liabilities are mainly based on the Administrative Penalty Law of the People's Republic of China and the Foreign Exchange Management Regulations of the People's Republic of China.

High-Risk Trading Behavior

The high-probability risk transactions reported by banks include:

• Suspected of false trade or investment financing
• Underground money house activities
• Cross-border gambling
• Fraudulently obtaining export tax rebates
• Illegal cross-border financial activities of virtual currency

In virtual currency trading, typical characteristics of high-frequency and high-risk trading include:

• Frequent deposits, withdrawals, and swing trading
• The flow of funds is complex
• Large amount forex remittance or fund splitting credit
• The source and use of funds do not match.
• Frequent inflows and outflows of funds across multiple platforms or accounts in the short term.

Groups Easily Identified as Risk Traders

1. Frequent arbitrage traders: Often engage in arbitrage in the cryptocurrency market, such as USDT brick-moving arbitrage.

2. Anonymous traders: Use complex trading paths to hide the flow of funds or trade in regions with weak regulation.

3. Abnormal fund operations: Frequent and large amounts of funds entering and leaving the account that do not match the individual's financial situation.

Situations Beyond the Bank's Review Capacity

1. Technical and resource limitations: For example, virtual currency transactions involve a large number of anonymous overseas wallet addresses or decentralized trading platforms.

2. Regulations and Information Transparency: There are significant differences in regulatory policies for virtual currencies across different countries, and trading information is not transparent.

3. Transaction is exceptionally complex: The capital flow model is highly intricate, such as multiple mixing operations or transferring funds through several "shell" company accounts.

Handling Conflicts Between International Rules and Domestic Regulations

When international rules conflict with domestic regulations, banks usually prioritize domestic regulations. This may lead to certain transactions that are feasible under international rules being refused domestically. Traders need to fully understand domestic regulatory policies to avoid losses due to rule conflicts.

The Role of Traders in Bank Complaints

1. Assist in the investigation: You may need to provide business-related materials, such as transaction contracts, fund transfer records, etc.

2. Potential Liability Association: Exercise caution when providing evidence and provide information truthfully. If the transaction is legal, cooperation with the investigation generally will not increase risk; however, if there are violations, providing evidence may expose the violation.

In summary, traders should remain cautious during the bank complaint process and provide evidence truthfully to protect their own and the bank's legitimate rights and interests.