Financial Crime World

Title: FATF’s 2023 Follow-Up Report on Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Measures

Introduction

The Financial Action Task Force (FATF) published its Follow-Up Report for 2023, assessing Hong Kong’s progress in implementing the FATF Recommendations. This article provides an overview of the assessments and recommendations for various sectors.

FATF’s Assessment of Hong Kong

  1. Risk assessment and risk-based approach (R.1): LC - Hong Kong largely complies yet should improve (source)
  2. National cooperation and coordination (R.2): LC - Hong Kong has made progress but requires enhancements (source)
  3. Criminalization of money laundering (R.3) and terrorist financing (R.5): NC - Inadequate and inconsistent criminalization (source)
  4. Confiscation, forfeiture and seizure (R.4) and Targeted financial sanctions related to terrorism & terrorist financing (R.6): C - Adequate laws and regulations (source)
  5. Targeted financial sanctions related to proliferation (R.7): C - Compliance with the recommendation (source)

…

  1. Money or value transfer services (R.14): LC - Mostly implemented measures but needs strengthening (source)
  2. New technologies (R.15): PC - Partial compliance with the recommendation (source)

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  1. DNFBPs: other measures (R.23): LC - Needs to intensify efforts (source)

…

FATF’s Urgent Call to Action

The FATF calls on Hong Kong to:

  1. Address the issues in R.3, R.5, and R.23 recommendations
  2. Make significant progress across all actions

The FATF will conduct another evaluation in 2027 to assess Hong Kong’s progress.

FATF’s Assessment Categories

This summary uses the FATF’s assessment categorization as follows:

  • C = Compliant
  • LC = Largely Compliant
  • PC = Partially Compliant
  • NC = Non-Compliant

R.1: Risk assessment and risk-based approach

source

Hong Kong’s largely compliant rating in risk assessment and risk-based approach reflects its progress in conducting money laundering (ML) and terrorist financing (TF) risk assessments. However, there’s room for improvement in establishing a more consistent and effective risk-based approach.

R.2: National cooperation and coordination

source

Although Hong Kong has made progress in sharing information between agencies and implementing coordination mechanisms, further enhancements are needed to meet the FATF standards for national cooperation and coordination fully.

R.3: Criminalization of money laundering

source

The assessment indicates that Hong Kong is non-compliant with the international standard for criminalizing money laundering due to inadequate and inconsistent criminalization efforts.

R.5: Terrorist financing

source

Similar to money laundering criminalization, Hong Kong also fails to comply with the FATF Recommendation on criminalizing terrorist financing effectively.

R.4, R.6, R.7, R.14, and R.15: Compliance with laws and regulations

source, source, source, source

Hong Kong is compliant with these recommendations, as it has the necessary laws and regulations in place.

R.23: DNFBPs: other measures

source

The FATF assessment states that Hong Kong needs to intensify its efforts to address significant deficiencies, especially when it comes to implementing customer due diligence measures for designated non-financial businesses and professions (DNFBPs).