HK SFC concludes AML/CFT consultation

 
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SFC concludes consultation on amendments to anti-money laundering and counter-financing of terrorism guidelines
12 Oct 2018
 

The Securities and Futures Commission (SFC) today released consultation conclusions on proposals to amend its Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT Guideline) (Note 1).

The amendments are in line with the latest international anti-money laundering and counter-financing of terrorism (AML/CFT) standards and will make the AML/CFT Guideline more useful and relevant in light of industry developments (Note 2).

Under the revised AML/CFT Guideline, the categories of politically exposed persons (PEPs) will be expanded to include international organisation PEPs who are persons entrusted with a prominent function by an international organisation. The enhanced scrutiny for foreign PEPs will be extended to domestic PEPs and international organisation PEPs where their business relationships with a firm are assessed to be of high risk.

In addition, the changes allow firms the flexibility to adopt reasonable risk-based measures to verify customer identification information. To facilitate non-face-to-face customer onboarding, firms are allowed to take a mix of supplementary measures (Note 3) to guard against impersonation risk.

“The amendments ensure our regulations are in line with the latest international standards,” said Mr Ashley Alder, the SFC’s Chief Executive Officer. “Whilst firms will still be required to apply effective measures to detect and prevent money laundering and terrorist financing, the changes provide more flexibility for firms to apply those measures using a risk-based approach.”

The revised AML/CFT guidelines (Note 4) will be gazetted on 19 October 2018 and take effect on 1 November 2018.

 

Here’s the Executive Summary of the conclusions (a 374 page PDF, which is about 20 pages of discussion, followed by the full text of the proposed revised laws and regulations):

Executive summary

1. On 5 July 2018, the Securities and Futures Commission (SFC) issued a consultation paper1 which proposed a range of amendments to the Guideline on Anti-Money Laundering and Counter-Terrorist Financing2 (AML/CFT Guideline) with a view to:

(a) ensuring that it keeps in line with the latest international anti-money laundering and counter-financing of terrorism (AML/CFT) standards; and

(b) improving the usefulness and relevance of the AML/CFT Guideline in light of industry developments and feedback from stakeholders about the AML/CFT process.

Comments were invited from the public by 9 August 2018.

2. During the consultation period, the SFC received 19 written submissions from various types of respondents including but not limited to industry associations, a professional body, brokers and asset management companies. A list of respondents (other than those who requested anonymity) is set out in Appendix 1.

3. The majority of the respondents supported the proposed amendments which aim to keep in line with the latest Financial Action Task Force (FATF) standards, provide increased flexibility under the risk-based approach and give additional guidance on existing requirements. Some respondents also commented or sought clarification of some matters related to our draft amendment texts.

4. The SFC has carefully considered all the comments received. Major comments received and the SFC’s responses are set out in this conclusions paper under the following categories:

A. Keeping in line with the latest FATF standards;

B. Clientonboardingusinganon-face-to-faceapproach;

C. Persons purporting to act on behalf of the customer;

D. Politicallyexposedpersons;

E. Identity verification of natural persons, legal persons, trusts and other similar legal

arrangements;

F. Beneficial owners;

G. Connected parties and trusts; and

H. Other comments3

5. Some comments were outside the scope of this consultation or went beyond the AML/CFT requirements. The SFC will keep these comments in view and separately consider their application in other policy areas.

6. In light of the majority support for the proposed amendments and having regard to the comments received, the SFC will adopt the amendments with a number of modifications to provide greater clarity and better reflect our regulatory intent. With a view to maintaining a consistent standard of guidance for the different financial sectors covered by the AMLO4, the SFC has discussed these modifications with fellow AMLO regulators5. The marked-up texts of the amendments to the AML/CFT Guideline are set out in Appendix 2 which will become effective on 1 November 2018.

7. This paper should be read in conjunction with the Consultation Paper and the Final Form of the Revised AML/CFT Guideline and Final Form of the Revised Guideline for AEs attached as Appendices 2 and 3 to this paper.

8. We would like to thank all respondents for their time and effort in reviewing our proposals and providing us with their detailed and thoughtful comments.

9. The Consultation Paper and the responses (other than those who requested anonymity) are available on the SFC website at http://www.sfc.hk.6. In light of the majority support for the proposed amendments and having regard to the comments received, the SFC will adopt the amendments with a number of modifications to provide greater clarity and better reflect our regulatory intent. With a view to maintaining a consistent standard of guidance for the different financial sectors covered by the AMLO4, the SFC has discussed these modifications with fellow AMLO regulators5. The marked-up texts of the amendments to the AML/CFT Guideline are set out in Appendix 2 which will become effective on 1 November 2018.

7. This paper should be read in conjunction with the Consultation Paper and the Final Form of the Revised AML/CFT Guideline and Final Form of the Revised Guideline for AEs attached as Appendices 2 and 3 to this paper.

8. We would like to thank all respondents for their time and effort in reviewing our proposals and providing us with their detailed and thoughtful comments.

9. The Consultation Paper and the responses (other than those who requested anonymity) are available on the SFC website at http://www.sfc.hk.

Links:

HK SFC Notice

Consultation Conclusions

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