anti-money laundering (aml)/ counter-financing of ... · 3/3/2011 · eag east asian group apg...

Narcotics Division, Security BureauNarcotics Division, Security Bureau

ANTI-MONEY LAUNDERING (AML)/ COUNTER-FINANCING OF TERRORISM (CFT)– Aligning with the International Standards

ANTIANTI--MONEY LAUNDERING (AML)/ MONEY LAUNDERING (AML)/ COUNTERCOUNTER--FINANCING OF TERRORISM (CFT)FINANCING OF TERRORISM (CFT)–– Aligning with the International StandardsAligning with the International Standards

Mr. Gordon YamAssistant Secretary for SecurityNarcotics Division, Security Bureau 3 March 2011

Mr. Gordon YamAssistant Secretary for SecurityNarcotics Division, Security Bureau 3 March 2011


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

ABBREVIATIONSABBREVIATIONS

2


AGENDAAGENDA

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• AML/CFT International Standard – FATF

• The FATF Requirements

• HK’s AML/CFT Regime

• Latest Development and Way Forward

• AML/CFT International Standard – FATF

• The FATF Requirements

• HK’s AML/CFT Regime

• Latest Development and Way Forward


ABOUT FATFABOUT FATF

• An inter-governmental body

• Established in 1989 by G7

• Sets international standards, develops and promotes policies to combat money laundering and terrorist financing

• An inter-governmental body

• Established in 1989 by G7

• Sets international standards, develops and promotes policies to combat money laundering and terrorist financing

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Argentina Finland Italy Russian Federation

Australia France Japan Singapore

Austria Germany Kingdom of the Netherlands South Africa

Belgium Greece Luxembourg Spain

BrazilGulf Co-operation

Council Mexico Sweden

CanadaHong Kong, China

(since 1991) New Zealand Switzerland

China (since 2007) Iceland Norway Turkey

Denmark India Portugal United Kingdom

European Commission Ireland Republic of Korea United States

FATF MEMBERSFATF MEMBERS

(As of February 2011)(As of February 2011)

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FATF-STYLE REGIONAL BODIESFATF-STYLE REGIONAL BODIES

EAGEAGEast Asian GroupEast Asian Group

APGAPGAsia Pacific GroupAsia Pacific Group

MONEYVALMONEYVALEuropean Union countriesEuropean Union countries

MENAFATFMENAFATFMiddle East Middle East

& North Africa & North Africa FATFFATFGIABAGIABA

Intergovernmental ActionIntergovernmental ActionGroup against ML in Africa Group against ML in Africa

ESAAMLGESAAMLGEastern & Southern Eastern & Southern Africa AML GroupAfrica AML Group

GAFISUDGAFISUDSouth American South American

FATFFATF

CFATFCFATFCaribbean Caribbean

FATFFATF

APGAPG

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FATF’S GLOBAL NETWORKFATF’S GLOBAL NETWORK

FATF+

FSRB

FATF+

FSRB

180 countries

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THE FATF REQUIREMENTSTHE FATF REQUIREMENTS

40+940+9

RecommendationsRecommendations

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THE 40+9 RECOMMENDATIONSTHE 40+9 RECOMMENDATIONSLegal systems

• Criminalise ML/TF; means to detect, freeze, seize, confiscate proceeds and funding

Preventive measures - financial institutions and DNFBPs• CDD, record keeping, STR, internal control, regulatory and supervisory

measures

Institutional framework• Financial Intelligence Unit, law enforcement authorities, supervisors; their

powers & resources

International cooperation• Mutual legal assistance, extradition, information exchange

Legal systems• Criminalise ML/TF; means to detect, freeze, seize, confiscate proceeds and

funding

Preventive measures - financial institutions and DNFBPs• CDD, record keeping, STR, internal control, regulatory and supervisory

measures

Institutional framework• Financial Intelligence Unit, law enforcement authorities, supervisors; their

powers & resources

International cooperation• Mutual legal assistance, extradition, information exchange

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DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS (DNFBPs)DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS (DNFBPs)

• Lawyers

• Accountants

• Trust and Company Service Providers

• Real Estate Agents

• Dealers in Precious Metals/ Stones

• Casinos

• Lawyers

• Accountants

• Trust and Company Service Providers

• Real Estate Agents

• Dealers in Precious Metals/ Stones

• Casinos

1010

Narcotics Division, Security BureauNarcotics Division, Security Bureau 1111

FATF+

FSRB

FATFFATF++

FSRBFSRB

Financial Institutions

Trust & Trust & Company Company Services Services ProvidersProviders

LawyersLawyers

AccountantsAccountantsEstate Estate AgentsAgents

Dealers in Dealers in Precious Precious Stones Stones and and MetalsMetals

CasinoCasino

Narcotics Division, Security BureauNarcotics Division, Security Bureau 1212


Politically Exposed Persons

(Rec. 6)

Complex/ Unusual large or pattern

transactions(Rec. 11)

Countries insufficiently apply FATF Rec.

(Rec. 21)

Technology favor anonymity /Non-

face-to-face Business(Rec. 8)

FATF REQUIREMENTS RELEVANT TO ACCOUNTANTSFATF REQUIREMENTS RELEVANT TO ACCOUNTANTS

Internal Control

(Rec. 15)1313

To be set out in law

CDD(Rec. 5)STRs

(Rec. 13)Record Keeping

(Rec. 10)

DNFBPsDNFBPs


CDD MEASURESCDD MEASURES

• Identify and verify identities of customers and beneficial owners

• Obtain information on purpose and nature of business relationship

• Enhanced measures for higher risk categories

• An on-going process

(Recommendation 5)

• Identify and verify identities of customers and beneficial owners

• Obtain information on purpose and nature of business relationship

• Enhanced measures for higher risk categories

• An on-going process

(Recommendation 5)

1414


CDD - FINANCIAL INSTITUTIONS RELIANCE ON 3RD PARTIES CDD - FINANCIAL INSTITUTIONS RELIANCE ON 3RD PARTIES

• Financial Institutions can rely on 3rd parties to perform CDD or introduce business

• Provided that 3rd parties are regulated and supervised for, and comply with CDD & records keeping

(Recommendation 9)

• Financial Institutions can rely on 3rd parties to perform CDD or introduce business

• Provided that 3rd parties are regulated and supervised for, and comply with CDD & records keeping

(Recommendation 9)

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RECORD KEEPINGRECORD KEEPING

• Transaction records

• Records on identification data, account files, business correspondence

(Recommendation 10)

• Transaction records

• Records on identification data, account files, business correspondence

(Recommendation 10)

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Situations whereDNFBPs

should applyCDD & record keeping

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ACCOUNTANTSACCOUNTANTS

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 or arrangements; buying / selling business entities

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 or arrangements; buying / selling business entities

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TRUST & COMPANY SERVICES PROVIDERSTRUST & 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)

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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• Report of funds suspected / has reasonable grounds to suspect to be proceeds of criminal activity or related to terrorist financing

(Recommendation 13)

• Report of funds suspected / has reasonable grounds to suspect to be proceeds of criminal activity or related to terrorist financing

(Recommendation 13)

SUSPICIOUS TRANSACTIONS REPORTINGSUSPICIOUS TRANSACTIONS REPORTING

2020


• Internal AML/CFT policies, procedures and control

• Compliance management

• On-going staff training

• Independent audit function to test compliance

(Recommendation 15)

• Internal AML/CFT policies, procedures and control

• Compliance management

• On-going staff training

• Independent audit function to test compliance

(Recommendation 15)

INTERNAL CONTROLS INTERNAL CONTROLS

2121


REGULATION AND SUPERVISIONREGULATION AND SUPERVISION

DNFBPsDNFBPs

Competent authority or SRO(Rec. 24)

Sanctions(Rec. 17)

Guidelines(Rec. 25)

2222


HK’s AML/CFT Regime

23


Legal Framework

• DTROP (Cap. 405)

• OSCO (Cap. 455)

• UNATMO (Cap. 575)

Legal Framework

• DTROP (Cap. 405)

• OSCO (Cap. 455)

• UNATMO (Cap. 575)

HK’S AML/CFT REGIMEHK’S AML/CFT REGIME

2424

Law Enforcement

• Financial Investigations - Police, Customs

• Joint Financial Intelligence Unit

Law Enforcement

• Financial Investigations - Police, Customs

• Joint Financial Intelligence Unit


International Cooperation

• Member of FATF, APG, Egmont Group

• Law enforcement cooperation, mutual legal assistance

International Cooperation

• Member of FATF, APG, Egmont Group

• Law enforcement cooperation, mutual legal assistance

HK’S AML/CFT REGIMEHK’S AML/CFT REGIME

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Policy Steer

• Central Coordinating Committee on AML and CFT -established in April 2008

Policy Steer

• Central Coordinating Committee on AML and CFT -established in April 2008


CENTRAL COORDINATING COMMITTEECENTRAL COORDINATING COMMITTEE

Secretary for JusticeSecretary for Justice Secretary for the Financial Services and the TreasurySecretary for the Financial Services and the Treasury Secretary for SecuritySecretary for Security

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Financial SecretaryFinancial SecretaryFinancial Secretary

Security BureauNarcotics Division

DNFBPs + Non-profit Organizations

Security BureauNarcotics Division

DNFBPs + Non-profit Organizations

Financial Services and the Treasury Bureau

Overall Coordinator +Financial Services

Financial Services and the Treasury Bureau

Overall Coordinator +Financial Services

Department of JusticeDepartment of Justice

Securities and Futures

Commissions

Securities and Futures

Commissions

Office for the Commissioner of Insurance

Office for the Commissioner of Insurance

Hong Kong Monetary Authority

Hong Kong Monetary Authority

Hong Kong Police ForceHong Kong Police Force

Customs and Excise

Department

Customs and Excise

Department

Secretary for JusticeSecretary for Justice Secretary for the Financial Services and the TreasurySecretary for the Financial Services and the Treasury Secretary for SecuritySecretary for Security

Financial SecretaryFinancial Secretary


Legislation on CDD & Record Keeping

• Phase I : Financial Sectors

• Phase II: DNFBPs




WAY FORWARDWAY FORWARD

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Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Bill

• Codify CDD & record-keeping requirements

• Empower relevant authorities to supervise

• Provide supervisory and criminal sanctions


• Codify CDD & record-keeping requirements

• Empower relevant authorities to supervise

• Provide supervisory and criminal sanctions

PHASE I : FINANCIAL SECTORSPHASE I : FINANCIAL SECTORS

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• Applies to banking, depositing taking, securities and insurance, remittance agents & money changers sectors

• Introduced to LegCo in Nov 2010

• To commence on 1 April 2012


• Applies to banking, depositing taking, securities and insurance, remittance agents & money changers sectors

• Introduced to LegCo in Nov 2010

• To commence on 1 April 2012


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• Financial institutions may rely on certain unregulated intermediaries 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 have adequate AML/CFT procedures

• Provision to expire in 3 years


• Financial institutions may rely on certain unregulated intermediaries 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 have adequate AML/CFT procedures

• Provision to expire in 3 years


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WAY FORWARDWAY FORWARD

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• 2011• 2012• 2013• 2014• 2015

.

.

.

• 2011• 2012• 2013• 2014• 2015

.

.

.

TIMELINETIMELINE

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• Internal control systems• Policies, procedures• Compliance management• Staff Training• Audit function• SRO

.

.

.

• Internal control systems• Policies, procedures• Compliance management• Staff Training• Audit function• SRO

.

.

.

ISSUESISSUES

3333


Business Costs / Legal

Obligations

Compliance Cost

Professionalism / Reputation

International Standards

3434Narcotics Division, Security BureauNarcotics Division, Security Bureau


GUIDING PRINCIPLESGUIDING PRINCIPLES

• 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

3535Narcotics Division, Security BureauNarcotics Division, Security Bureau


REFERENCESREFERENCES

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FATF

www.fatf-gafi.org

Narcotic Division, Security Bureau

www.nd.gov.hk

Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Bill

www.fstb.gov.hk/fsb/aml/eng/latest/amlbill.pdf

FATF

www.fatf-gafi.org

Narcotic Division, Security Bureau

www.nd.gov.hk

Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Bill

www.fstb.gov.hk/fsb/aml/eng/latest/amlbill.pdf


THANK YOUTHANK YOUTHANK YOU

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Disclaimer

Information contains in these slides is for reference only. Whilst the Narcotics Division endeavours to ensure the accuracy of the information at the time of preparation, no warranty is given as to

the accuracy of the information.

DisclaimerDisclaimer

Information contains in these slides is for reference only. WhilInformation contains in these slides is for reference only. Whilst st the Narcotics Division endeavours to ensure the accuracy of the the Narcotics Division endeavours to ensure the accuracy of the information at the time of preparation, no warranty is given as information at the time of preparation, no warranty is given as to to

the accuracy of the information.the accuracy of the information.

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anti-money laundering (aml)/ counter-financing of ... · 3/3/2011 · eag east asian group apg...

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