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ANTI-MONEY LAUNDERING (AML) / COUNTER-FINANCING OF TERRORISM (CFT)– Aligning with the International Standards
ANTIANTI-MONEY LAUNDERING (AML) / COUNTER-FINANCING OF TERRORISM (CFT) – Aligning with the International Standards
-MONEY LAUNDERING (AML) / COUNTER-FINANCING OF TERRORISM (CFT)– Aligning with the International StandardsMr Mr Thomas YuThomas YuAssistant Secretary for SecurityAssistant Secretary for SecurityNarcotics Division, Security Bureau Narcotics Division, Security Bureau 20 Feb 2013 (Wed)20 Feb 2013 (Wed)
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau
ABBREVIATIONS
AML Anti-money Laundering
CDD Customers due diligence
CFT Counter financing of terrorism
DNFBPs Designated non-financial businesses and Professions
FATF Financial Action Task Force
SRO Self-regulatory organization
STR Suspicious transactions reporting
ABBREVIATIONS
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 2
AGENDAAGENDA
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The FATF Requirements
HK’s AML/CFT Regime
Latest Development and Way Forward
The FATF Requirements
HK’s AML/CFT Regime
Latest Development and Way Forward
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 3
THE FATF REQUIREMENTSTHE FATF REQUIREMENTS
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40 Recommendations
( Feb 2012)
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau
THE 40 RECOMMENDATIONSTHE 40 RECOMMENDATIONS•
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Money laundering and confiscationMoney laundering and confiscationCriminalise Criminalise MML/TF; means to detect, freezL/TF; means to detect, freeze, seize, confiscate proceeds and e, seize, confiscate proceeds and fundingfunding
Preventive measures - Preventive measures - ffinancial institutions and DNFBPsinancial institutions and DNFBPsCDD, record keeping, STR, internal CDD, record keeping, STR, internal control, regulatory and supervisory control, regulatory and supervisory measumeasurreses
Power & responsibilities of competent authoritiesPower & responsibilities of competent authoritiesFinancial Intelligence Unit, law enforcFinancial Intelligence Unit, law enforcement authorities, supervisors; their ement authorities, supervisors; their powers & resources powers & resources
International cooperationInternational cooperationMutual legal assistance, extradition, information exchangeMutual legal assistance, extradition, information exchange
5NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 5
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FATF+
FSRB
FATFFATF++
FSRBFSRB
Financial Institutions
Trust & Co mpany Services Providers
Lawyers
AccountantsEstate Agents
Dealers in in Precious Stones and Metals
Casino
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 6
FATF REQUIREMENTS RELEVANT TO DNFBPs FATF REQUIREMENTS RELEVANT TO DNFBPs
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DNFBPsDNFBPs
STRs (Rec. 20)
To be set out in law CDD
(Rec. 10) Record Keeping (Rec. 11)
Internal Control
(Rec. 18)NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 7
CDD MEASURESCDD MEASURES
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Identify and verify identities of customers and beneficial owners
Obtain information on purpose and nature of business relationship
Enhanced measures for higher riskcategories
An on-going process
(Recommendation 10)
Identify and verify identities of customers and beneficial owners
Obtain information on purpose and nature of business relationship
Enhanced measures for higher riskcategories
An on-going process
(Recommendation 10)
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 8
RECORD KEEPINGRECORD KEEPING
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Transaction records
Records on identification data, account files, business correspondence
(Recommendation 11)
Transaction records
Records on identification data, account files, business correspondence
(Recommendation 11)
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 9
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Report of funds suspected / hasreasonable grounds to suspect to beproceeds of criminal activity or related toterrorist financingAlready included in Hong Kong Law
(Recommendation 20)
SUSPICIOUS TRANSACTIONS REPORTING
Report of funds suspected / hasreasonable grounds to suspect to beproceeds of criminal activity or related toterrorist financingAlready included in Hong Kong Law
(Recommendation 20)
SUSPICIOUS TRANSACTIONS REPORTING
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 10
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Internal AML/CFT policies, procedures andcontrol
Compliance management
On-going staff training
Independent audit function to testcompliance
(Recommendation 15)
INTERNAL CONTROLS
Internal AML/CFT policies, procedures andcontrol
Compliance management
On-going staff training
Independent audit function to testcompliance
(Recommendation 15)
INTERNAL CONTROLS
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 11
Situations where DNFBPs
should applyCDD & record keeping
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 12
ACCOUNTANTS & LAWYERSACCOUNTANTS & LAWYERS
When preparing for/carrying out transactions for client concerning
buying / selling of real estates
managing of client money, securities or other assets
managing of bank, savings or securities accounts
organisation of contributions for the creation, operation or management of companies
creation, operation or management of legal persons orarrangements; buying / selling business entities
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When preparing for/carrying out transactions for client concerning
buying / selling of real estates
managing of client money, securities or other assets
managing of bank, savings or securities accounts
organisation of contributions for the creation, operation or management of companies
creation, operation or management of legal persons orarrangements; buying / selling business entities
13NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 13
TRUST & COMPANY SERVICES PROVIDERS TRUST & COMPANY SERVICES PROVIDERS
When providing the following services to third parties:
acting as a formation agent of legal person
acting as a director or secretary of a company, partner or legal person
providing a registered office/address for a company, partner or legal person
acting as a trustee of an express trust
acting as a nominee shareholder for another person
(acting include arranging for person to act)
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When providing the following services to third parties:
acting as a formation agent of legal person
acting as a director or secretary of a company, partner or legal person
providing a registered office/address for a company, partner or legal person
acting as a trustee of an express trust
acting as a nominee shareholder for another person
(acting include arranging for person to act)
14NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 14
REGULATION AND SUPERVISIONREGULATION AND SUPERVISION
DNFBPsDNFBPs
Competent authority or SRO (Rec. 28)
Sanctions (Rec. 35)
Guidelines (Rec. 34)
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 15
Risk Based Approach
A new over-arching Recommendation
Applies across all relevant FATFrecommendations
(Recommendation 1)
A new over-arching Recommendation
Applies across all relevant FATFrecommendations
(Recommendation 1)
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau
Risk Based Approach
‣ Objective:
1. Focus on higher risk for more effectiveimplementation
2. More efficient allocation of resources
‣ Objective:
1. Focus on higher risk for more effectiveimplementation
2. More efficient allocation of resources
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau
Risk Based Approach
Countries should:(a) “Identify, assess and understand” theirmoney laundering / terrorists financing risksthey face(b) Designated “an authority or mechanismto coordinate actions to assess risks”
DNFBPs are required to identify, assess andunderstand their money laundering /terrorists financing risks
Countries should:(a) “Identify, assess and understand” theirmoney laundering / terrorists financing risksthey face(b) Designated “an authority or mechanismto coordinate actions to assess risks”
DNFBPs are required to identify, assess andunderstand their money laundering /terrorists financing risks
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau
Risk Based Approach
Basic Principles
Higher-risk-> Require enhanced measures
Lower-risk-> Possible simplified measures
Basic Principles
Higher-risk-> Require enhanced measures
Lower-risk-> Possible simplified measures
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau
Legislation on CDD & Record Keeping
• Financial Sectors
Current Legislation
Legislation on CDD & Record Keeping
• Financial Sectors
Current Legislation
20NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 20
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
Codify CDD & record-keeping requirements
Empower relevant authorities to supervise
Provide supervisory and criminal sanctions
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FINANCIAL SECTORS
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
Codify CDD & record-keeping requirements
Empower relevant authorities to supervise
Provide supervisory and criminal sanctions
FINANCIAL SECTORS
21NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 21
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
Applies to banking, depositing taking, securitiesand insurance, remittance agents & moneychangers sectors
Commenced on 1 April 2012
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FINANCIAL SECTORS
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
Applies to banking, depositing taking, securitiesand insurance, remittance agents & moneychangers sectors
Commenced on 1 April 2012
FINANCIAL SECTORS
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 22
FINANCIAL SECTORSAnti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
Schedule 2 Part 2 Division 1
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What are customer due diligence measures
When customer due diligence measures must becarried out
Simplified customer due diligence
Duty to continuously monitor business relationships
Schedule 2 Part 2 Division 2
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Special requirements when customer is not physicallypresent for identification purposes
Special requirements when customer is politicallyexposed person
Special requirements in other high risk situations
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
Schedule 2 Part 2 Division 1
What are customer due diligence measures
When customer due diligence measures must becarried out
Simplified customer due diligence
Duty to continuously monitor business relationships
Schedule 2 Part 2 Division 2
Special requirements when customer is not physicallypresent for identification purposes
Special requirements when customer is politicallyexposed person
Special requirements in other high risk situations
FINANCIAL SECTORS
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 23
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
Schedule 2 Part 2 Division 4
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Financial institutions to establish procedures
Schedule 2 Part 3
Duty to keep record
Manner in which records are to be kept
FINANCIAL SECTORSAnti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
Schedule 2 Part 2 Division 4
Financial institutions to establish procedures
Schedule 2 Part 3
Duty to keep record
Manner in which records are to be kept
FINANCIAL SECTORS
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 24
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance
Financial institutions may rely on certainintermediaries to carry out CDD:a solicitor practising in HKa Certified Public Accountant (Practising) practising in HKa current member of the HKICS practising as a Chartered Secretary in HKA registered trust company carrying on trust business in HK
when satisfy that that the intermediaries haveadequate AML/CFT procedures
Provision to expire in 3 years
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FINANCIAL SECTORS
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Ordinance
Financial institutions may rely on certainintermediaries to carry out CDD:a solicitor practising in HKa Certified Public Accountant (Practising) practising in HKa current member of the HKICS practising as a Chartered Secretary in HKA registered trust company carrying on trust business in HK
when satisfy that that the intermediaries haveadequate AML/CFT procedures
Provision to expire in 3 years
FINANCIAL SECTORS
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 25
Legislation on CDD & Record Keeping
• DNFBPs
WAY FORWARD
Legislation on CDD & Record Keeping
• DNFBPs
WAY FORWARD
26NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 26
GUIDING PRINCIPLESGUIDING PRINCIPLES
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Acknowledge the threat
Conform with international standards
Address HK’s own circumstances
Build up partnership
Acknowledge the threat
Conform with international standards
Address HK’s own circumstances
Build up partnership
Narcotics Division, Security Bureau 27
REFERENCESREFERENCES
FATF
www.fatf-gafi.org
Narcotic Division, Security Bureau
www.nd.gov.hk
Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance www.legislation.gov.hk
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 28
THANK YOUTHANK YOUTHANK YOU
NarcotiNarcotics Dics Divisivision, Son, Seecurcurity Burity Bureaueau 29
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