Financial Crime World

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AML Compliance Requirements in Hong Kong

By Carl Fernandes, Denise Fung, Kishore Bhindi, Shirley Au Yeung and Clara Hackney

In an effort to combat money laundering and terrorist financing, the Anti-Money Laundering and Counter-Terrorist Financing (AMLO) legislation in Hong Kong sets out specific requirements for covered institutions. In this series of articles, we will delve into the AML compliance requirements for financial institutions and designated non-financial businesses and professions (DNFBPs).

Specific AML Compliance Requirements

Covered institutions must establish and maintain effective systems and controls to manage and mitigate money laundering and terrorist financing risks. This includes:

  • Customer due diligence (CDD)
    • Identify and verify a client’s identity
    • Obtain information on the purpose and intended nature of a business relationship with a client
  • Record-keeping
    • Keep records of transactions, CDD, and any other necessary records to ensure a clear audit trail
  • Business monitoring
    • Periodically review information and documents obtained for CDD purposes
    • Monitor transactions
    • Identify unusual or complex transactions

Record-Keeping and Reporting

Covered institutions must keep records of transactions, CDD, and any other necessary records to ensure a clear audit trail. The record-keeping procedures should be commensurate with the nature, size, and complexity of the business.

Senior management is responsible for implementing effective AML procedures, systems, and controls, including:

  • Appointing a compliance officer
  • Appointing a Money Laundering Reporting Officer (MLRO)

Government Authorities

Multiple agencies are involved in the examination and enforcement of AML rules, including:

  • Hong Kong Monetary Authority (HKMA)
  • Securities and Futures Commission (SFC)
  • Insurance Authority
  • Money Service Supervision Bureau for financial institutions
  • Estate Agents Authority
  • Hong Kong Institute of Certified Public Accountants
  • Law Society of Hong Kong
  • Companies Registry

Suspicious Activity Reporting

It is a statutory obligation to make an STR where a person knows or suspects that any property is connected to an indictable offence, drug trafficking, terrorist property, or related to offences endangering national security. Firms are expected to have AML/CTF systems and controls in place that allow for continuous monitoring of business relationships with customers.

The factors that trigger the requirement to make an STR will depend on the sector and type of institution involved. The statutory requirement is triggered by knowledge or suspicion of money laundering or terrorist financing activity.

Conclusion

In conclusion, AML compliance requirements in Hong Kong are designed to prevent money laundering and terrorist financing activities. Covered institutions must establish effective systems and controls, including CDD, record-keeping, business monitoring, and suspicious activity reporting. Firms should also have a clear understanding of the factors that trigger the requirement to report suspicious activity.

For more information on AML compliance requirements in Hong Kong, please contact Carl Fernandes, Denise Fung, Kishore Bhindi, Shirley Au Yeung, or Clara Hackney at Linklaters LLP.