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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
AGENDAAGENDA
33
• 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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
44
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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)
55
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
66
Narcotics Division, Security BureauNarcotics Division, Security Bureau
FATF’S GLOBAL NETWORKFATF’S GLOBAL NETWORK
FATF+
FSRB
FATF+
FSRB
180 countries
77
Narcotics Division, Security BureauNarcotics Division, Security Bureau
THE FATF REQUIREMENTSTHE FATF REQUIREMENTS
40+940+9
RecommendationsRecommendations
88
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
99
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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)
1515
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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)
16
Narcotics Division, Security BureauNarcotics Division, Security Bureau
Situations whereDNFBPs
should applyCDD & record keeping
17
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
1818
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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)
1919
Narcotics Division, Security BureauNarcotics Division, Security Bureau
• 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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
• 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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
REGULATION AND SUPERVISIONREGULATION AND SUPERVISION
DNFBPsDNFBPs
Competent authority or SRO(Rec. 24)
Sanctions(Rec. 17)
Guidelines(Rec. 25)
2222
Narcotics Division, Security BureauNarcotics Division, Security Bureau
HK’s AML/CFT Regime
23
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
25
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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
2626
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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
Legislation on CDD & Record Keeping
• Phase I : Financial Sectors
• Phase II: DNFBPs
Legislation on CDD & Record Keeping
• Phase I : Financial Sectors
• Phase II: DNFBPs
WAY FORWARDWAY FORWARD
2727
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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
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
PHASE I : FINANCIAL SECTORSPHASE I : FINANCIAL SECTORS
2828
Narcotics Division, Security BureauNarcotics Division, Security Bureau
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Bill
• 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
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Bill
• 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
PHASE I : FINANCIAL SECTORSPHASE I : FINANCIAL SECTORS
29
Narcotics Division, Security BureauNarcotics Division, Security Bureau
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Bill
• 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
Anti-money Laundering and Counter Terrorist Financing (Financial Institutions) Bill
• 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
PHASE I : FINANCIAL SECTORSPHASE I : FINANCIAL SECTORS
30
Narcotics Division, Security BureauNarcotics Division, Security Bureau
Legislation on CDD & Record Keeping
• Phase I : Financial Sectors
• Phase II: DNFBPs
Legislation on CDD & Record Keeping
• Phase I : Financial Sectors
• Phase II: DNFBPs
WAY FORWARDWAY FORWARD
3131
Narcotics Division, Security BureauNarcotics Division, Security Bureau
• 2011• 2012• 2013• 2014• 2015
.
.
.
• 2011• 2012• 2013• 2014• 2015
.
.
.
TIMELINETIMELINE
3232
Narcotics Division, Security BureauNarcotics Division, Security Bureau
• 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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
Business Costs / Legal
Obligations
Compliance Cost
Professionalism / Reputation
International Standards
3434Narcotics Division, Security BureauNarcotics Division, Security Bureau
Narcotics 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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
REFERENCESREFERENCES
3636
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
Narcotics Division, Security BureauNarcotics Division, Security Bureau
THANK YOUTHANK YOUTHANK YOU
37
Narcotics Division, Security BureauNarcotics Division, Security Bureau
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.
38