Hong Kong has adopted legislation covering anti-money laundering
and counter-terrorist financing measures for financial
institutions. The ordinance (AMLO) comes into effect on 1 April
2012. The Securities and Futures Commission (SFC) has published a
consultation paper on proposals for new guidelines to assist
licensed corporations (LCs) and associated entities (AEs) to comply
with relevant regulations. The SFC's key objective is to help
LCs and AEs implement policies, procedures and controls in the
relevant operational areas. The guidelines will replace the
existing Prevention of Money Laundering and Terrorist Financing
Guidance Note dated September 2009.
The proposals consist of:
Guideline on Anti-Money Laundering and Counter-Terrorist
the Prevention of Money Laundering and Terrorist Financing
Guideline Issued by the SFC for Associated Entities.
The SFC has stated that, in implementing the measures, where
regulated entities make departures from the guidance provided, they
"should document the rationale for doing so and stand prepared
to justify departures".
Key issues in the proposed guidelines include:
Verification of persons purporting to act:
Under the AMLO, financial institutions (FIs) should identify all
persons purporting to act on behalf of customers, take reasonable
measures to verify their identities and verify their authority to
act on behalf of the customers. In a previous soft consultation of
the industry, concerns were expressed over the broad meaning of
"a person purporting to act on behalf of the customer"
and over the practicality of obtaining verification of their
identity and authority. The proposed guideline clarifies that, as a
general rule, FIs should verify the identity of those authorised to
give instructions for the movement of funds or assets. Some
flexibility has been provided as to what measures would be
considered reasonable in verifying identities.
Company searches: The proposed guideline
requires an FI to perform a company registry search in respect of
all locally incorporated non-listed companies and companies
incorporated in jurisdictions which have a public company registry.
Under the SFC's existing guidance note, this is a requirement
only for higher risk customers or where there is any doubt as to
the identity of the company's stakeholders. This increased
compliance burden is unlikely to be welcomed by the industry. The
proposed guideline allows some flexibility in that the FI may, as
an alternative to performing the search, obtain from the customer a
certified true copy of a full company search report.
Nominee companies: Under the AMLO, an FI is
not required to identify and verify beneficial owners in relation
to a customer if the customer is another FI. To accommodate the
industry practice of fund units being held by nominee companies of
fund distributors, the guideline allows for the fund distributor to
be regarded as the customer of the fund house and not the nominee
company. Accordingly, a fund house is not required to identify and
verify the beneficial owners of nominee companies of fund
distributors holding fund units, provided that the distributor is
an FI and has conducted customer due diligence on the underlying
customers and is authorised to operate the account, as evidenced by
contractual document or agreement.
Staff training: The proposals require FIs to
implement staff training and to monitor its effectiveness.
The SFC invites the submission of written comments on the
proposals, to be received no later than 18 November 2011.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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