Tuesday, November 4, 2014


China has announced that it has updated its National Security laws, redefining the status of individuals, both domestic and foreign, who acquire sensitive information in China, as spies. In simple terms, this means that your Western due diligence investigators in China, and their local contacts, have a greater risk of being charged as spies, when they gather business intelligence and personal information on new customers who are Chinese nationals. Counterespionage is the new watchword, and it signals a clear and present danger for those who make inquiries.

These new laws will probably operate as a deterrence for Mainland Chinese who are currently engaged in supplying information to Western financial institutions, commercial off-the-shelf databases, and Western investigative agencies tasked with enhanced due diligence inquiries. Given that a small number of Western investigators have run into difficulties with information acquisition within China, you can expect that there will be espionage charges in the future, for making inquiries into what China deems sensitive or proprietary information.

To add to the problem, inquiries into Chinese PEPs who conceal their PEP status, when seeking to open accounts in Western banks, to hide bribe and kickback money, could land investigators, who are unwittingly prying into business relationships of senior government officials, in prison, facing a show trial, and even the death penalty, All of this will, of course, have a definite effect on the willingness of Chinese nationals to obtain, and deliver, non-public information to Western clients.

Expect your Due Diligence on Chinese targets to become more difficult, and even dangerous, to obtain, as the number of available Chinese sources dry up, lest they be charged as spies, for delivering business intelligence.

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