HKMA ISSUED GUIDANCE PAPER ON TRANSACTION SCREENING,
TRANSACTION MONITORING AND SUSPICIOUS TRANSACTION REPORTING
On 13 December 2013, the Hong Kong Monetary Authority
("HKMA") issued a
guidance paper for authorised institutions
("AIs") on sound industry practices for
transaction screening, transaction monitoring and suspicious
transaction reporting. This paper aims to assist AIs in not only
meeting the legal and regulatory obligations under the Anti-Money
Laundering and Counter-Terrorist Financing (Financial Institutions)
Ordinance, the Drug Trafficking (Recovery of Proceeds) Ordinance,
the Organised and Serious Crime Ordinance and the United Nations
(Anti-Terrorism Measures) Ordinance, but also enhancing the
effectiveness of measures to mitigate their money laundering and
The paper sets out detailed measures that an AI should take to
mitigate its ML/TF risks, including:
establishing an effective transaction monitoring system (by
using a level of automation that is appropriate to the scale of its
operations) which can identify unusual or suspicious activity;
managing transaction monitoring alerts, the decision making
process for suspicious transaction reports and the completion and
timely submission of those reports to the Joint Financial
Intelligence Unit; and
taking appropriate post-reporting actions enabling the AI to
adequately mitigate further ML/TF risks.
Although this paper does not form part of the Guideline on
Anti-Money Laundering and Counter-Terrorist Financing (for
Authorised Institutions), the HKMA expects every AI to give full
consideration to the adoption of the practices this paper
describes, where necessary, to improve their anti-money laundering
and counter-terrorist financing systems.
HKMA ISSUED A REVISED VERSION OF THE SUPERVISORY POLICY MANUAL
ON "FINANCIAL INSTRUMENT FAIR VALUE PRACTICES"
Following the adoption of Hong Kong Accounting Standard 39
Financial Instruments: Recognition and Measurement and the Basel
Committee on Banking Supervision's guidance designed to promote
transparency regarding prudent fair valuation practices, the HKMA
revised module on 10 December 2013 to incorporate amendments
relating to the full recognition, for regulatory purposes, of fair
value arising from fairvalued financial instruments as a component
of "Common Equity Tier 1 Capital" under Basel III.
The key amendments include:
the HKMAfs key supervisory expectations regarding an AIfs
valuation practices, governance structure, senior management
oversight, risk management and controls for the designation and
valuation of financial instruments to be measured at fair value for
financial reporting, risk management and regulatory capital
guidance on elements of a sound valuation process (and
valuation adjustments), including use of relevant and reliable
inputs, marking-to-market or marking-to-model valuation
methodologies, independent and rigorous model validation and
integrated control processes.
All AIs are expected to ensure that all of their fair value
estimates are reliable and determined in accordance with the
applicable accounting standards and supervisory guidance set out in
the module. The HKMA will evaluate the extent to which an AI's
valuation process and practices are consistent with the standards
in the course of its ongoing risk-based supervision and will take
the result of its evaluation into account in its capital assessment
of locally incorporated AIs.
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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