Title: FATF Upgrades Hong Kong’s Anti-Money Laundering and CTF Measures: A New Chapter in Compliance

In a notable development, the Financial Action Task Force (FATF) has upgraded Hong Kong’s technical compliance rating on Recommendation 28. This advancement signifies Hong Kong’s persistent efforts to enhance its measures against money laundering and terrorist financing.

FATF’s Upgraded Rating

In February 2023, the FATF, an international organization that develops and promotes policies to counteract money laundering and terrorist financing, adopted this re-rating following a thorough assessment of Hong Kong’s progress.

Addressing Technical Compliance Deficiencies

The FATF expects countries to address most, if not all, technical compliance deficiencies within three years of their Mutual Evaluation Report (MER) adoption. Hong Kong’s MER, published in June 2019, identified the following technical compliance ratings:

**Table 1: Technical Compliance Ratings, June 2019**

| Recommendation | Rating |
|----------------|--------|
| 2           | LC    |
| 12          | LC    |
| 22          | LC    |
| 24          | LC    |
| 25          | LC    |
| 26          | PC    |
| 27          | PC    |
| 28          | PC    |
| 29          | LC    |

The FATF re-rating analysis was led by Mr. Rizumu Yokose, Deputy Director of the Office for Countering Illicit Financial Flows at Japan’s Ministry of Finance.

Progress on Recommendation 28

Hong Kong was previously rated partially compliant on Recommendation 28 due to inadequate risk-based anti-money laundering/counter-terrorist financing (AML/CFT) supervision in most designated non-financial business and professions (DNFBPs), including trust and company service providers, real estate agents, and accountants. Since then, Hong Kong has established risk-based AML/CFT supervision for most DNFBPs, significantly addressing the primary deficiencies. Consequently, Hong Kong has been upgraded to largely compliant.

Progress on Recommendation 15

Since Hong Kong’s MER, the FATF has introduced new requirements for virtual assets and virtual asset service providers (VASPs). Although Hong Kong has partly met these obligations through AML/CFT requirements for VASPs regulated by the Securities and Futures Commission, the scope of covered entities is limited to centralized virtual asset exchanges trading security tokens. To expand supervision, Hong Kong is proposing the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), which will cover centralized virtual asset exchanges trading non-security tokens from June 2023. With the legislative procedures for the AMLO now completed, Hong Kong is now rated partially compliant.

Future Expectations

In light of Hong Kong’s progress on addressing technical compliance deficiencies and implementing new requirements, the FATF will continue to monitor the Chinese Special Administrative Region’s efforts to further strengthen its AML/CFT framework.

For more information about the FATF, please visit www.fatf-gafi.org.