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REGULATION

Real-Name Registration Negligence Lands Alipay, Tencent in Hot Water

By Wu Yujian, Zhang Yuzhe and Wang Yuqian

(Beijing) — China’s central bank has publicly censured the country’s top two mobile payment service providers for failing to comply with real-name registration rules as regulators step up efforts to close loopholes that could be exploited for money laundering.

In a rare but apparently co-ordinated move, two branches of the People’s Bank of China (PBOC) simultaneously published details of fines imposed on Alipay and Tenpay. Although the size of the penalties was little more than a slap on the wrist for both companies, the action carried symbolic significance in that it reflected the central bank’s determination to close loopholes that had been known to facilitate money laundering and other crimes, analysts said.

The Shanghai branch of the central bank announced on Wednesday that it had fined Alipay — owned by e-commerce firm Ant Financial Services Group — 30,000 yuan ($4,300) over its breach of payment service rules. It didn’t specify the violation, but said the company was informed on April 21.

On the same day, the Shenzhen branch of the PBOC announced that it had imposed a 30,000-yuan penalty on Tenpay, owned by technology group Tencent Holdings Ltd., which also operates the WeChat social media app. It said the company had failed to strictly follow a regulation that had taken effect in July, but didn’t elaborate.

Alipay has a 54% share of China’s 1.28 trillion yuan mobile payment market, while Tenpay holds 37%, making them the top two companies in the sector, according to data from telecoms and technology consulting group Analysys.

A source close to the central bank told Caixin that Alipay and Tenpay were punished because they didn’t require enough of their customers to prove their identities, a requirement set out in the regulation, which was drawn up to help crack down on financial crime.

Regulators are have become increasingly concerned that transactions between online payment accounts carry higher risks and are more likely to be used for criminal activity because they are more loosely supervised than transactions between ordinary bank accounts. Tracking the flow of money between accounts registered with the same payment provider is often very difficult.

The PBOC regulation that took effect in July 2016 stipulates that all online payment service providers must require account holders to provide their real name and other documents to prove their identity. Accounts are classified into three categories, depending on the number of documents provided as proof of identity, and each category is subject to different degrees of restrictions on services such as payment limits.

Payment companies like Alipay and Tenpay must ensure that at least 90% of their accounts are held by people who meet the most rigorous criteria, according to the regulation.

Only about 51% of all online payment accounts had real-name registration at the end of 2015, according to the Payment and Clearing Association of China, an industry group whose members include banks and payment service providers.

Contact reporter Wang Yuqian (yuqianwang@caixin.com)

 

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