Hong Kong’s proposed AML reforms set for debate in Legislative Council

Hong Kong’s Legislative Council is set to consider new anti-money laundering and counter-terrorist financing (AML/CTF) measures today for solicitors, accountants, real estate agents and trust and company service providers. The territory’s new Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Bill 2017 would introduce customer due diligence and recordkeeping obligations for designated non-financial businesses and professions (DNFBPs) when they engage in specified transactions.

Last week the banking regulator issued a circular regarding the proposed legislation.
The bill has been published in the local Government Gazette and will be presented before the city’s Legislative Council (LegCo) for debate today.

“Subject to the passage of the bill by the Legislative Council, the government proposes to implement the amendments on March 1, 2018,” the Hong Kong Monetary Authority (HKMA)’s circular said. The subject bureau on this amendment bill is the Financial Services and the Treasury Bureau (FSTB), an HKMA spokeswoman told Thomson Reuters Regulatory Intelligence.

Previously ignored professions are now covered

The main objective of the bill is to introduce statutory customer due diligence (CDD) and recordkeeping requirements for a range of DNFBPs, including solicitors, accountants, real estate agents and trust and company service providers (TCSPs). Secondly, the bill seeks to “introduce a licensing regime for TCSPs to require them to apply for a licence from the Registrar of Companies and satisfy a ‘fit and proper’ test before they can provide trust or company services as a business in Hong Kong,” the HKMA said.

The government also views the bill as an opportunity to propose certain improvements to the 2012 Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap. 615), colloquially known as AMLO, to ensure it complies with the latest Financial Action Task Force (FATF) requirements and to facilitate compliance, the HKMA said.

The Paris-based FATF sets the international AML, CTF and know-your-customer (KYC) standards.
Four factors moving forward

The HKMA’s circular said the four enhancements of greatest relevance to the banking sector were:
• relaxing the threshold which defines beneficial ownership from the existing “not less than 10 percent” to “more than 25 percent”, having regard to the prevailing FATF standard and international practice;
• introducing flexibility to measures permitted to be taken for verifying a customer’s identity, in the light of technological development in the methods used by financial institutions for obtaining information relating to customers;
• reflecting the existing criteria relating to wire transfers in the FATF recommendations by requiring the recording of basic information about a recipient and, where applicable, an intermediary institution involved in a transaction; and
• removing a sunset clause in the AMLO so that financial institutions will have the flexibility to rely on solicitors, accountants, TCSP licensees as well as other financial institutions (including a foreign financial institution in the same parent group) as intermediaries to carry out CDD measures.

Published 28-Jun-2017
by
 Ajay Shamdasani, Regulatory Intelligence

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