Financial Crime World

Financially Tainted: Understanding Money Laundering and Terrorist Financing Risks in Hong Kong’s Legal Profession

Hong Kong, as a prominent international financial hub, plays a critical role in combating financial crimes, including money laundering and terrorist financing. This article aims to help legal practitioners understand the risks and implications of these illicit activities.

Money Laundering Risks in Hong Kong

Money laundering, as defined by Section 25(1) of the Organized and Serious Crimes Ordinance (Cap. 455) (OSCO), is dealing with property known or suspected to represent criminal proceeds. Legal practitioners must avoid involvement in such transactions and conduct due diligence to prevent harsh consequences.

Aside from local offenses, various criminal activities serve as breeding grounds for illicit proceeds in Hong Kong:

  • Drug trafficking
  • Smuggling
  • Illegal gambling
  • Bookmaking
  • Extortion
  • Loan sharking
  • Tax evasion
  • Controlling prostitution
  • Corruption
  • Robbery
  • Theft
  • Fraud
  • Copyright infringement
  • Insider dealing
  • Market manipulation

During property transactions, legal practitioners need to be vigilant in recognizing money laundering risks.

Terrorist Financing Risks

While money laundering is a primary concern, terrorist financing poses equal risks and requires equal vigilance. Section 7 of the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575) (UNATMO) prohibits providing or collecting funds with the intention or knowledge that such funds will be used for terrorist activities.

Terrorist financing can stem from seemingly legal sources, such as business operations or charitable organizations. Legal practitioners must perform thorough background checks on clients, their representatives, beneficial owners, or any entities they control or represent against the respective designated individuals and entities’ lists published by the Security Bureau and the Commerce and Economic Development Bureau (CEDB).

The Law Society of Hong Kong offers professional support and resources on their website (https://www.hklawsoc.org.hk/en/Support-Members/Professional-Support/AML) regarding anti-money laundering (AML) and anti-terrorist financing (ATF) regulations. The Commerce and Economic Development Bureau also published guidelines on United Nations Security Council sanctions (https://www.cedb.gov.hk/en/policies/united-nations-security-council-sanctions.html). Utilizing these resources will not only help safeguard legal practices but also contribute to maintaining Hong Kong’s reputation as a responsible and trustworthy financial center.

In summary, Hong Kong’s legal practitioners play an essential role in combating money laundering and terrorist financing activities. By staying informed and proactive, they can effectively contribute to preserving financial integrity and promoting Hong Kong’s position as a leading financial hub in the world.