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UK’s Anti-Money Laundering Regulations Compared to Hong Kong and US

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The fight against financial crime has been intensified in recent years, with governments around the world working together to combat money laundering. In this piece, we examine the similarities and differences between the anti-money laundering (AML) regulations of the United Kingdom, Hong Kong, and the United States.

Customer Due Diligence

One key area where all three jurisdictions agree is the importance of customer due diligence. Each country advises taking a risk-based approach when assessing a customer’s identity and associated risks, with enhanced checks recommended for higher-risk customers. However, there are nuances in each country’s approach to AML checks.

United Kingdom

The EU’s Fourth Anti-Money Laundering Directive (4MLD) introduced a more prescriptive approach to record-keeping and enhanced due diligence requirements. The recent 5MLD changes further clarified beneficial ownership requirements.

Hong Kong

Hong Kong has made significant changes to its regulatory framework in response to FATF standards. Customer due diligence and record-keeping requirements have been strengthened, particularly for designated non-financial businesses and professions (DNFBPs).

United States

In the US, the CDD rule set out by Financial Crimes Enforcement Network (FinCEN) became effective in May 2018. This rule strengthens and clarifies CDD requirements for financial institutions, setting clear guidelines where none existed previously.

Ultimate Beneficial Ownership: A Global Response

The Panama Papers scandal highlighted the need for greater transparency in corporate structures to combat organized crime and terrorism. In response, the UK introduced a requirement for a central UBO register, making it the first country to do so. The US has also implemented measures to identify and verify beneficial ownership.

Hong Kong’s Response

Hong Kong responded by introducing the Significant Controllers Register in March 2018, although this is not publicly available. This move aims to reduce its reputation as a hub for shell companies.

Attitudes to New Technologies

The use of regtech in AML procedures has gained significant attention globally. The UK’s Financial Conduct Authority (FCA) published findings on the potential benefits of emerging technologies in AML, identifying opportunities for firms to manage financial crime risk and reduce operating costs.

Hong Kong and US Approaches

Hong Kong is committed to working with fintech and regtech companies to facilitate innovation in its market. The US authorities have also given the use of regtech the green light, encouraging banks to consider innovative approaches to meet their AML obligations.

Conclusion

As global AML regulations evolve, firms operating internationally must be aware of these nuances and adapt their compliance strategies accordingly. By understanding the similarities and differences between UK, Hong Kong, and US AML regulations, companies can better manage financial crime risk and reduce the burden of regulatory compliance.