New Hong Kong AML Guidelines - how to prepare for the changes

The government of Hong Kong announced new changes to its Anti-Money Laundering regime, effective 1 April 2012 (the start of fiscal 2012/2013).   Formally know as Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance, the new legislation covers anti-money laundering and counter-terrorist financing measures for financial institutions.

The new guidelines therefore describe a uniform set of requirements that apply to all financial services companies in the banking, securities, insurance and remittance and money changing sectors.  These are broad rules which cover all aspects of the financial system.  The main objective of the new rules is to help financial services companies in designing and implementing appropriate and effective policies, procedures and controls to reduce the risks of money laundering or terrorist financing. 

Here are some of the main changes to the Hong Kong AML statute:

• Customer Due Diligence (CDD): verifying the identity of individuals who move money on behalf of customers
• Company record searches: for suspicious or high-risk customers, financial institutions should perform a company registry search on the customer companies.
• Identificaiton and reporting of suspicious transactions: Hong Kong's SFC considers this the "most forgotten element of the CDD process" and requires financial firms to have processes and controls to identify suspicious transctions, account files, documents.  In 2010, 662 suspicious transactions were reported in Hong Kong, which the SFC considers "inadequate."
• Staff screening and training requirements: all financial services firms most complete staff training to ensure that employees know all the rules.

Compliance officers at Hong Kong's banks will be busy rolling out processes and training programs to meet these guidelines as they come into force.  While there are a number of internal controls that will need to be put in place, it's also worth remembering that a company's culture and staff training can play important roles in minizing risk.  This includes having a written AML policy in place.

When it comes to risk management, nothing beats strong, ethical leadership.

Good news: our online AML training course contains the information banks and financial companies in Hong Kong need to comply with the new regulations.  Our course covers KYC (know your customer) due diligence, the 3 stages of money laundering (placement, layering and integration) and has a specific module on Hong Kong's regulations.

If you're interested in reading more about the changes to the Hong Kong AML/CTF law, see this excellent article in GFS News, written by Charlotte Robins.