Financial Crime World

Hong Kong’s Anti-Money Laundering (AML) Regime

The Hong Kong government has established a robust anti-money laundering (AML) regime to combat money laundering and terrorist financing activities. This regime requires financial institutions and designated non-financial businesses and professions (DNFBPs) to establish and maintain effective AML systems and controls.

Key Components of the AML Regime

  • Compliance Officer: Each financial institution and DNFBP must appoint a compliance officer responsible for establishing and maintaining AML systems and controls.
  • Money Laundering Reporting Officer (MLRO): The MLRO serves as the central reference point for suspicious transaction reporting (STR).
  • Regulatory Bodies: Regulatory bodies, such as the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), the Insurance Authority, and the Money Service Supervision Bureau, supervise compliance with AML rules.

AML Requirements

Financial institutions and DNFBPs are required to:

  • Establish AML/CFT systems and controls: These systems must allow for continuous monitoring of business relationships with customers.
  • Manage and mitigate risks: Firms must properly manage and mitigate the risks associated with any customer or transaction involved in a suspicious transaction report (STR).
  • Make Suspicious Transaction Reports (STRs): Knowledge or suspicion of money laundering or terrorist financing activity triggers the requirement to make an STR.

Factors Triggering an STR

The following factors trigger the requirement to make an STR:

  • Actual knowledge: Firms have actual knowledge of money laundering or terrorist financing activity.
  • Circumstances indicating facts: Firms have knowledge of circumstances that would indicate facts to a reasonable person, suggesting money laundering or terrorist financing activity.
  • Knowledge of circumstances putting on inquiry: Firms have knowledge of circumstances that would put a reasonable person on inquiry, suggesting money laundering or terrorist financing activity.

Post-Reporting Procedures

After making an STR, firms must:

  • Keep records of internal reports and STRs: Firms must maintain records of internal reports and STRs.
  • Have policies and procedures in place: Firms must have policies and procedures for internal reporting, reporting to the Joint Financial Intelligence Unit, post-reporting risk mitigation, and prevention of tipping off.

Examination and Enforcement

The Hong Kong government has established a framework for examining and enforcing compliance with AML rules. Relevant authorities and regulatory bodies are empowered to supervise compliance with requirements under AMLO, and multiple agencies are involved in the examination and enforcement of AML rules.