July 11, 2016: HK SFC AML/CTF Circular

Circular to Licensed Corporations and Associated Entities 

Anti-Money Laundering / Counter-Terrorist Financing 

(1)  FATF Statement on Democratic People’s Republic of Korea and Iran

(2)  FATF Statement on Improving Global AML/CFT Compliance: On-Going Process

(3)  Outcomes from the Meeting of the FATF Plenary, 22-24 June 2016

(4)  United Nations (Anti-Terrorism Measures) Ordinance

(1)  FATF Statement on Democratic People’s Republic of Korea and Iran

Further to our circular issued on 4 March 2016, this is to inform you that the Financial Action Task Force (“FATF”) issued an updated statement on 24 June 2016 identifying a number of jurisdictions that have strategic deficiencies in their anti-money laundering and combating the financing of terrorism (“AML/CFT”) regimes.

The statement Note 1 has been separated into two sections.

(i)    Jurisdiction subject to a call on its members and other jurisdictions to apply counter-measures  

Democratic People’s Republic of Korea (“DPRK”)

The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its AML/CFT regime and the serious threat this poses to the integrity of the international financial system.  Further, the FATF is concerned about the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction (“WMDs”) and its financing.  The FATF calls on its members and other jurisdictions to apply counter-measures and targeted financial sanctions in accordance with applicable United Nations Security Council Resolutions to protect the international financial system from the on-going and substantial money laundering, terrorist financing and WMD proliferation financing risks emanating from the jurisdiction.

(ii)   Jurisdiction subject to a call on its members and other jurisdictions to apply enhanced due diligence measures  

Iran

The FATF welcomes Iran’s adoption of an Action Plan to address its strategic AML/CFT deficiencies, and therefore has suspended counter-measures for twelve months.  Until Iran implements the measures required to address the deficiencies identified in the Action Plan, the FATF remains concerned with the risk of terrorist financing emanating from Iran and the threat this poses to the integrity of the international financial system.  The counter-measures will be re-imposed after the twelve-month period if Iran has not demonstrated sufficient progress in implementing the Action Plan.  The FATF calls on its members and other jurisdictions to apply enhanced due diligence measures proportionate to the risks arising from the jurisdiction.

Licensed corporations (“LCs”) and associated entities (“AEs”) should continue to apply the applicable measures specified in our circulars of 15 April 2011 and 31 March 2009 (http://www.sfc.hk/edistributionWeb/gateway/EN/circular/openFile?refNo=H628 & http://www.sfc.hk/edistributionWeb/gateway/EN/circular/openFile?refNo=H545) in relation to transactions associated with DPRK and Iran respectively.  LCs and AEs are also reminded to apply relevant guidance as specified in the FATF statement Note 1 and implement appropriate measures and safeguards accordingly. In addition, LCs and AEs are reminded that it is an offence under section 4 of the Weapons of Mass Destruction (Control of Provision of Services) Ordinance (Cap. 526) for a person to provide any services where he believes or suspects, on reasonable grounds, that those services may be connected to WMD proliferation.

(2)  FATF Statement on Improving Global AML/CFT Compliance: On-Going Process

In addition, please be informed that in a separate statement as part of the on-going process to improve global AML/CFT compliance, the FATF has set out an updated list of jurisdictions that have strategic AML/CFT deficiencies for which they have developed an action plan with the FATF.  The FATF will closely monitor the implementation of those action plans and encourage its members to consider the information presented in the statement which can be found on the website of the FATF (http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/fatf-compliance-june-2016.html).

As the FATF will continue to assess the progress made by these jurisdictions in addressing the deficiencies in their AML/CFT systems and issue updated statements from time to time, LCs and AEs are reminded to browse the website of the FATF for the latest information.

(3)  Outcomes from the Meeting of the FATF Plenary, 22-24 June 2016 

In addition to the statements in (1) and (2) above, the FATF has also published various other outcomes of its recent Plenary Meeting which may be of interest to LCs and AEs. They include, for example, the Consolidated FATF Standards on Information Sharing.  Further information can be found on the website of FATF (http://www.fatf-gafi.org/publications/fatfgeneral/documents/plenary-outcomes-june-2016.html).  

(4)  United Nations (Anti-Terrorism Measures) Ordinance 

Further to our circular issued on 29 April 2016, an updated list specifying terrorists and terrorist associates designated by the United Nations Security Council (“UNSC”) was published under section 4 of the United Nations (Anti-Terrorism Measures) Ordinance (“the UNATMO”) (Cap. 575) in the Gazette on 8 July 2016 (G.N. 3765 of 2016).  Three relevant press releases issued by the UNSC, reflecting the updates since the previous list was published in the Gazette (G.N. 2358 of 2016), are attached in Attachment 1.

The aforesaid list can be found on the Government’s website (http://www.gld.gov.hk/egazette/pdf/20162027/egn201620273765.pdf).

LCs and AEs should check the names in the above list against their records, and report any transactions or relationships they have or have had with the named persons or entities to the Joint Financial Intelligence Unit.

Furthermore, LCs and AEs are reminded to refer to Chapter 6 of the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (“AML Guideline”) which contains guidance on the appropriate measures that LCs and AEs should take to ensure compliance with the UNATMO Note 2.

Should you have any queries regarding the contents of this circular, please contact Ms Kiki Wong on 2231 1569.

Intermediaries Supervision Department
Intermediaries Division
Securities and Futures Commission

Enclosure

End

SFO/IS/019/2016

 

Note 1 The statement can be found on the website of the FATF (http://www.fatf-gafi.org/publications/high-riskandnon-cooperativejurisdictions/documents/public-statement-june-2016.html).
Note 2
 Under paragraph 6 of the Prevention of Money Laundering and Terrorist Financing Guideline issued by the Securities and Futures Commission for Associated Entities, AEs that are not authorized financial institutions are expected to have regard to the provisions of the AML Guideline as if they were themselves LCs.

Links:

Hong Kong SFC Notice

HK SFC Circular

UN Web Notices

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