Chinese Commercial Codes are a screening issue that has been around for a long time now, some firms have embraced them and provided extensive support for them, and others have done little or nothing. However, the risk of them varies hugely depending upon where you do your business.
But first, what are they?
Back in days when telegraphs were the be all and end all of real-time communication, we used Morse code to transmit data. This was rather limiting as it only allowed the user to convey basic Latin characters and digits. In China Morse code was useless, so a system was devised whereby the 10,000 most common Chinese symbols were each given a four-digit code, these four-digit codes were transmitted and using an encoding book at the other end re-formed in Chinese symbols. This Chinese Telegraphic Code or Chinese Commercial Code, has had an extended longevity due to some systems still only allowing basic Latin characters, in particular – SWIFT MT Messages. A Chinese bank may use this Chinese Commercial Code to transmit the name of its client over the SWIFT network.
It is important to remember that using Chinese Commercial Code isn’t necessarily an attempt to conceal the name of a person or company. This is normal business practice. If you only hold the name of your client in Chinese symbols and wish properly retain this name, then Chinese Commercial Code is your best option. However, this does create a problem for screening as matching this string of digits against listed names (which could be Romanised versions of original Chinese names) isn’t going to work without some intervention.
The use of Chinese Commercial Codes has been widely recognised:
SWIFT provide a conversion table for converting Chinese Commercial Code back into Chinese Symbols.
HKMA, the Hong Kong Monetary Authority, in their Guidance Paper on Transaction Screening give the following advise: “Effective screening procedures should be in place for names that use non-Latin script (including Chinese characters) or commercial codes. Such procedures should be reviewed periodically.”
OFAC now provide Chinese Commercial Codes as part of the SDN list. Currently, 12 individuals have a Chinese Commercial Code provided as an ID Number. The way OFAC provide the CCC is a problem, however. A CCC is an alias, not an ID Number, and as such these CCCs have not been generally used directly in screening, and not listed as aliases by screening list vendors.
How much Chinese Commercial Codes affects you will be heavily dependent on the payments channels you support, consider this report from an American bank with strong interests in the far East:
“We did an in-depth research project on CTC in early 2012. At the time we were seeing around 31,000 payments a year, primarily in USD, that included CTC (90% of which was used in the bene name field, the rest in the origin name field, both name fields, or very rarely in the address fields). A very small number of the payments were accompanied by a pinyin translation. Banks in Hong Kong and Taiwan used CTC more frequently than the Chinese banks, and most of the payments (80%) were to Chinese banks. A small handful of payments also came from Macau.”
If you are have recognised yourself to be in such a position, then you will have probably reacted by creating extensive lists of Chinese Commercial Codes covering people, companies, and countries/cities and implemented as private lists for screening.
However, for most of the banks for whom we have monitored SWIFT traffic, we have seen virtually no use of Chinese Commercial Code.
Like most sanctions-related issues – react if your risk demands it.
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