JOINT FINANCIAL INTELLIGENCE UNIT
Ricky WONG
Joint Financial Intelligence Unit
STR : Legal Obligations/Statistics/STR : Legal Obligations/Statistics/ Case Examples Case Examples
JOINT FINANCIAL INTELLIGENCE UNIT
Overview of current Laws in Hong Kong for (a) What Money Laundering (ML) and Terrorist
Financing (TF) are ; (b) Disclosure,Protection and Restriction Identify ML/TF activities; Statistics Case Examples
Session Outline
JOINT FINANCIAL INTELLIGENCE UNIT
The Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405 (DTROP) – drug proceeds
The Organised & Serious Crimes Ordinance, Cap 455 (OSCO) – extends to serious crime proceeds
United Nations Anti-Terrorism Measures Ordinance, Cap. 575 (UNATMO) – terrorist property
ML and TF Laws in HK
JOINT FINANCIAL INTELLIGENCE UNIT
s.25(1) of OSCO/DTROP*s.25(1) of OSCO/DTROP*
Dealing with property known or having reasonable grounds to believe to represent proceeds of an indictable offence/ drug proceeds
Penalty: 14-year Imprisonment and HK$5 Million Fine
* Organized and Serious Crimes Ordinance, Cap.455 (OSCO)* Drug Trafficking (Recovery of Proceeds) Ordinance, Cap.405 (DTROP)
Money Laundering
JOINT FINANCIAL INTELLIGENCE UNIT
Having “reasonable grounds to believe” is an objective and subjective test (e.g. CACC 555/2001 YAM Ho-keung, FAMC 26/1998 SENG Yuet-fong)
Indictable offence includes reference not only to a HK indictable offence but to conduct abroad which would constitute an indictable offence had it occurred in HK (e.g. CACC 4361997 LI Ching)
Key Features
JOINT FINANCIAL INTELLIGENCE UNIT
Wide definition of “dealing” in propertyCan be committed by the person who committed the underlying indictable offence himself, or by any other person.Not necessary to prove the property is proceeds of an indictable offence. The emphasis is on what the defendant knew or had reasonable grounds to believe.
Key Features
JOINT FINANCIAL INTELLIGENCE UNIT
“A person shall not provide or collect, by any means, directly or indirectly, funds-
(a) with the intention that the funds be used; or(b) knowing that the funds will be used,
in whole or in part, to commit one or more terrorist acts (whether or not the funds are actually so used).
generally refers to the carrying out of transactions involving funds that are owned by terrorists, or that have been, or are intended to be, used to facilitate the commission of terrorist acts
Terrorist Financing – s.7 of UNATMO
JOINT FINANCIAL INTELLIGENCE UNIT
Penalty:- 14 years of imprisonment at maximum, but Unspecified fine
Terrorist Financing – s.14 of UNATMO
JOINT FINANCIAL INTELLIGENCE UNIT
In ML, the focus is on the handling of criminal proceeds, i.e. the source of funds is matters.
In TF, the focus is on the destination or use of funds, which may have been derived from legitimate sources.
Difference between ML & TF
JOINT FINANCIAL INTELLIGENCE UNIT
Any person who knows or suspects any property represents the proceeds of crime or terrorist property shall make a report to an authorized officer.
Penalty: 3-months imprisonment & $50K fine
s.25A OSCO / DTROP / s.12 UNATMO
Disclosures
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DISCLOSURE is SUSPICION based
No Threshold Reporting (CTR)
PROSECUTION is based on REASONABLE KNOWLEDGE
Key Features
JOINT FINANCIAL INTELLIGENCE UNIT
“Suspicion” is a state of conjecture or surmise where proof is lacking.
The test is purely subjective.
Standard of Suspicion
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Benefits of Making an STR?
Immunity from Prosecution for Dealing in the Property
JOINT FINANCIAL INTELLIGENCE UNIT
s.25A(2) DTROP/OSCO, s.12(2) UNATMO
If a person deals with property & STR relates to that act, that person has a defence to ML/TF, provided:-
(i) STR made before act & act done with the consent of an authorized officer; or
(ii) STR made- after the act- on his own initiative- as soon as reasonably practicable
Statutory Defence to ML/TF
JOINT FINANCIAL INTELLIGENCE UNIT
‘CONSENT’ Means you have our consent to carry on your normal business;
‘NO CONSENT’ Means if you deal you loose the Section 25(A)(2)(a) protection from an actual money laundering charge.
CONSENT or NO CONESENTCONSENT or NO CONESENT ??
JOINT FINANCIAL INTELLIGENCE UNIT
s.25A(3) of DTROP/OSCO, s.12(3) of UNATMO
(a) shall NOT be treated as a breach of any restriction upon the disclosure of information imposed by contract or by any enactment, rule of conduct or other provision;
(b) shall NOT render the person who made it liable in damages for any loss arising out of-
(i) the disclosure;(ii) any act done or omitted to be done in
relation to the property concerned in consequence of the disclosure.
Statutory Protection
JOINT FINANCIAL INTELLIGENCE UNIT
s.25A(5) of DTROP/OSCO, s.12(5) of UNATMO
A person commits an offence if, knowing or suspecting that a disclosure has been made, he discloses to any other person any matter which is likely to prejudice any investigation which might be conducted following that first-mentioned disclosure
Penalty: 3-years imprisonment & $500K fine
Tipping Off
JOINT FINANCIAL INTELLIGENCE UNIT
expertise is required in moving criminal proceeds
have associations in many parts of the world give money launders a global reach
FATF Recommendations 13-16 HKICPA’s Guidelines
Accountants as Gatekeepers
JOINT FINANCIAL INTELLIGENCE UNIT
Knowledge of why there is a need to Disclose:- Self/Business Protection. Knowledge of the law/procedure;
How to Disclose :- Level of details; Good KYC and Record Keeping Policy; Good Sources of Information;
Good Awareness of Issues
What makes a good AML systemWhat makes a good AML system ??
JOINT FINANCIAL INTELLIGENCE UNIT
Established in 1989
Jointly operated by Police and Customs
Housed within Police Headquarters
Primary function is to receive, analyze and disseminate STR to law enforcement agencies
JFIU
JOINT FINANCIAL INTELLIGENCE UNIT
Suggested format & content detailed in JFIU website (www.jfiu.gov.hk)
Fax
Post
Verbal (urgency - follow-up by hardcopy)
STR Filing
JOINT FINANCIAL INTELLIGENCE UNIT
Web based Platform – Suspicious Transaction Report and Management System (STREAMS)
e-form e-STRXML format
Internet
JFIU
e-Acknowledge/Resulte-STR
STREAMSSTREAMS
Encrypted
e-Reporting - STREAMS
JOINT FINANCIAL INTELLIGENCE UNIT
Acknowledgement of Receipt File Ref. Contact Person Details
Consent / No Consent Letter
Arrest / Prosecutions / Convictions
STR Quarterly Analysis Report
Feedback
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ABC Company $60M
Case Example 2 – Good Audit
Accountant
Buying IPO shares on ABC’s behalf
Year-end Audit
Amount due from a director
$60M + i