Analysis of Internal Control Defects Exposed by China Guangfa Bank's RMB 66.7 Million Fine

Based on search results, I will provide you with a detailed analysis of the internal control defects exposed by China Guangfa Bank’s RMB 66.7 million fine.

---

On September 12, 2025, the State Administration of Financial Regulation imposed a RMB 66.7 million fine on China Guangfa Bank, which is the largest fine the bank has received in the year [1][3]. The reasons for the penalty mainly include:

[1][3]. Notably, this is not an isolated incident — on November 27 shortly after, China Guangfa Bank was further fined and ordered to return illegal gains totaling RMB 15.3783 million by the Guangdong Branch of the State Administration of Foreign Exchange for violations in foreign exchange business [1][3]. The two fines together exceed RMB 82 million, accounting for the majority of the total fines the bank received in the first 11 months of 2025.

---

is one of the core issues in this fine. From the fines on branches, the Wuxi Branch was fined RMB 2.1 million for “inadequate three checks on working capital loans and personal loans” [5]; the Taiyuan Qianfeng South Road Sub-branch was fined RMB 0.6 million for “inadequate post-loan management and negligent pre-loan investigation” [5]. This reflects that China Guangfa Bank has obvious shortcomings in the entire process of pre-loan investigation, in-loan review, and post-loan inspection.

is also a major area of concern. Historical data shows that in 2017, China Guangfa Bank was fined RMB 722 million by banking regulatory authorities for a bill fraud case [2], and in 2020, it was fined and ordered to return illegal gains totaling RMB 120 million for violations in interbank and wealth management businesses [2]. Although the head office stated that “rectification has been completed” after each penalty, similar issues have repeatedly occurred [2], indicating that rectifications were mostly “piecemeal fixes” without “holistic restructuring” of business processes, assessment mechanisms, and data systems [2].

The RMB 66.7 million fine explicitly points out the issue of

[1][3]. Against the backdrop of continuously enhanced regulatory penetration, the accuracy and completeness of regulatory data have been elevated to the same level of importance as capital adequacy ratio [1]. This issue exposes major defects in China Guangfa Bank’s data governance, including ineffective process control in data collection, verification, and submission links.

The RMB 2.0425 million fine on the Shenzhen Branch shows that the branch committed four violations, including

[2]. More seriously, regulatory inspections found that the coverage rate of suspicious transaction models for corporate accounts at the Shenzhen Branch was less than 60%, far below the regulatory requirement of 85% [2], which directly resulted in a large number of abnormal transactions not being warned in a timely manner.

The RMB 15.3783 million fine in November involves 8 illegal acts: evading foreign exchange control, handling capital account fund receipts and payments in violation of regulations, providing external guarantees without authorization, handling settlement and sale of foreign exchange in violation of regulations, failing to conduct reasonable review on the authenticity of transaction documents and their consistency with foreign exchange receipts and payments when handling current account fund receipts and payments, etc. [1][3]. These acts violated relevant regulations including the Regulations of the People’s Republic of China on Foreign Exchange Administration, the Provisions on Foreign Exchange Administration of Cross-Border Guarantees, and the Measures for the Administration of Banks’ Foreign Exchange Settlement and Sale Businesses [3]. Notably, such violations have occurred in multiple branches including Nanchang Branch, Shenyang Branch, Huizhou Branch, and Changchun Branch [3], showing an obvious feature of “multi-point occurrence”.

Industry insiders pointed out that China Guangfa Bank has an

[2]. Taking anti-money laundering as an example, although the head office launched a new-generation large-value and suspicious transaction monitoring system in 2023, the Shenzhen Branch still managed fiscal deposit accounts with manual ledgers, and the system connection was lagging, resulting in the act of withholding funds not being identified by the model [2]. This “paper compliance” is difficult to form a closed loop, causing compliance construction to remain at the system level for a long time.

---

China Guangfa Bank regards the Pearl River Delta and Beijing-Tianjin-Hebei regions as the “dual engines” for corporate and retail businesses, and the Shenzhen Branch is positioned as a flagship outlet for cross-border wealth management and private banking, with asset growth rate exceeding the bank’s average for five consecutive years [2]. However, compliance investment has not increased in tandem — in 2024, its technology investment only increased by 5.7% year-on-year, lower than the average level of joint-stock banks, and projects such as anti-money laundering system transformation and treasury centralized payment and collection interface upgrade were delayed due to insufficient budget [2].

Judging from the rectification effect after historical penalties, the repeated occurrence of similar violations indicates that China Guangfa Bank’s rectifications were mostly

[2], rather than systematic process reengineering and mechanism reconstruction. This palliative approach is difficult to fundamentally plug internal control loopholes.

There is obvious tension between business expansion pressure and compliance management. When business development indicators dominate, compliance requirements are often marginalized, making it difficult to form an effective incentive and restraint mechanism.

---

1. Financial Impact
   : In the first 11 months of 2025, China Guangfa Bank’s entire system has received 52 fines, with a total fine amount of approximately RMB 94 million [2], and the total annual fines and illegal gains to be returned are approaching RMB 100 million, making it one of the joint-stock banks most frequently fined in the year [1][3].

2. Regulatory Rating Risk
   : Frequent penalties and the problem of “old ailments not cured, new symptoms emerging” [2] will lower regulators’ scores for its overall rectification assessment, which may trigger restrictions on business qualifications such as wealth management and interbank liabilities.

3. Impact on Listing Process
   : 2025 is a critical window for China Guangfa Bank to restart its listing tutoring [2], and compliance performance will be an important consideration in regulatory review.

4. Performance Pressure
   : In 2024, China Guangfa Bank saw its operating revenue and net profit both decline for the first time in a decade [5], with net interest margin narrowing to 1.54% [2], forming a vicious cycle between internal control problems and performance decline.

---

Improvement Area	Core Measures
Data Governance	Establish a unified regulatory data submission platform, and strengthen data verification and audit mechanisms
Credit Management	Restructure the “Three Checks” process, introduce digital risk control tools, and achieve full-process control
Anti-Money Laundering System	Increase the coverage rate of suspicious transaction models, and realize a closed loop of system automatic early warning and manual review
Foreign Exchange Compliance	Establish a special inspection mechanism for foreign exchange business, and strengthen training and supervision of branches
Rectification Mechanism	Shift from “piecemeal fixes” to “holistic restructuring”, and establish regular self-inspection and issue tracking mechanisms

---

The internal control defects exposed by China Guangfa Bank’s RMB 66.7 million fine are not problems in a single link, but systemic defects covering multiple fields including

. The root cause of the problem lies in the severe imbalance between rapid business expansion and compliance capacity building, as well as the operating philosophy of “prioritizing business over risk control”. Only by establishing a comprehensive and systematic internal control upgrading mechanism can the bank fundamentally reverse its compliance dilemma and avoid falling into the vicious cycle of ‘penalty - rectification - repeated violations’.

---

[1] Phoenix Finance - “Fined RMB 66.7 Million 2 Months Ago, Another RMB 15.37 Million: China Guangfa Bank’s Compliance Incidents Continue to Pile Up” (https://finance.ifeng.com/c/8pBkkW2XST3)

[2] Guancha.cn - “Shenzhen Branch Receives Another RMB 2.04 Million Fine: China Guangfa Bank’s ‘Compliance Firewall’ Breached Again” (https://www.guancha.cn/GuanJinRong/2025_12_02_799087.shtml)

[3] Sina Finance - “China Guangfa Bank: Total Fines Exceed RMB 98 Million in the Year” (https://finance.sina.com.cn/money/bank/gsdt/2025-12-08/doc-inhaavuy3485300.shtml)

[4] MBCaijing - “China Guangfa Bank: Fined and Ordered to Return Illegal Gains Over RMB 2 Million for Multiple Violations” (https://www.mbcaijing.com/article/LDpIB%2FHu8gM%3D)

[5] CNfol.com - “RMB 80 Million Fines Hit China Guangfa Bank: Internal Control Loopholes Unfixed, Performance Red Light On” (http://mp.cnfol.com/58927/article/1760060215-142046805.html)