Jolene Chen and Teresa Huang
On May 11, 2022, the State Administration of Foreign Exchange promulgated the Measures of the State Administration of Foreign Exchange for Administrative Penalties (hereinafter, the “Measures”), which came into effect on June 1, 2022, when the previous Measures of the State Administration of Foreign Exchange for Administrative Penalties of 2020 became invalid. These amendments provide a more comprehensive procedural guarantee for effectively implementing the Regulations on the Foreign Exchange Administration, combating illegal financial activities, and maintaining the order of the foreign exchange market.
Firstly, the newly amended Measures have increased the circumstances of reducing or exempting administrative penalties. Under Articles 18-21 of the Measures, no administrative penalty will be imposed for minor foreign exchange violations that are timely corrected without any harmful consequences. In case of the first legal violation with minor harmful consequences, the administrative penalty may be exempted. If a party has sufficient evidence to prove that there is no subjective fault, no administrative penalty will be imposed. If the laws and administrative regulations provide otherwise, such provisions shall apply. If mental patients or mentally disabled people who have not completely lost the ability to identify or control their own behavior have committed foreign exchange violations, or have taken the initiative to voluntarily testify to their illegal acts administrative agencies have not yet grasped can or should be eligible for reduced or mitigated administrative penalty.
Secondly, the newly amended Measures clarify the provisions of the State Administration of Foreign Exchange (hereinafter, the “SAFE”) on the case acceptance criteria. Pursuant to the provisions of Article 23 of the Measures, a case is accepted after it is being reviewed and concurrently meets the following case acceptance criteria:
(1) there are specific entities that engage in foreign exchange violations;
(2) there is prima facie evidence that proves the existence of foreign exchange violations of the relevant entity, or there is prima facie evidence that proves the existence of specific clues concerning foreign exchange violations;
(3) the relevant foreign exchange violations fall under the jurisdiction of the SAFE; and
(4) the relevant foreign exchange violations have not exceeded the limitation of prosecution.
Thirdly, the newly amended Measures stipulate the SAFE’s period of administrative penalty. Pursuant to Article 69 of the Measures, the SAFE’s period of the administrative penalty will be governed by the Provisions of the People’s Bank of China on Administrative Penalty Procedure. The SAFE is required to make the administrative decision within 90 days from the date of acceptance of the administrative penalty case, and the time required for the following procedures is not included in the period of administrative penalty:
(1) the party’s administrative penalty case is investigated pursuant to the Measures after it is accepted;
(2) a hearing is organized according to the party’s application, or the relevant evidence needs to be verified or examined;
(3) the administrative penalty notice is served by publication; and
(4) the SAFE decides to suspend the penalty procedure. If an administrative penalty decision cannot be made within 90 days, a 90-day extension may be granted with the approval of the chairman of the case review committee of this instance or the principal responsible person of its authorized foreign exchange inspection department. If laws, regulations, and rules provide otherwise, such provisions shall govern.
Fourthly, the newly amended Measures also modify the case amount standard on the application of a summary procedure. Pursuant to Article 78 of the Measures, the threshold for the cases to which the summary procedure can be applied is raised from a penalty of less than RMB 50 imposed on an individual or a penalty of less than RMB 1,000 or a warning imposed on an organization in the original 2020 version to a penalty of less than RMB 200 imposed on a citizen or a penalty of less than RMB 3,000 or a warning imposed on a legal person or other organization.