The Securities and Futures Commission (SFC) today released consultation conclusions on proposed amendments to its anti-money laundering and counter-financing of terrorism (AML/CFT) guidelines (Note 1).
The amendments aim to align the guidelines with the Financial Action Task Force’s (FATF) (Note 2) AML/CFT standards, which include additional guidance to facilitate the implementation of risk-based AML/CFT measures by securities industry participants.
While the proposals received broad support, a considerable number of comments were made on the requirements for cross-border correspondent relationships (Note 3). In response, the revised guidelines provide greater clarity and additional flexibility in meeting the requirements (Note 4).
“As a global equities trading centre, our regulated firms in Hong Kong execute trades for overseas brokers in major financial hubs around the world,” said Ms Julia Leung, the SFC’s Deputy Chief Executive Officer and Executive Director of Intermediaries. “The amendments provide guidance to firms in assessing and managing the risks of cross-border correspondent relationships more effectively.”
The revised AML/CFT guidelines will become effective upon gazettal on 30 September 2021, with the exception of the new cross-border correspondent relationships requirements, which will take effect on 30 March 2022 (Note 5).
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Notes:
- On 18 September 2020, the SFC launched a three-month Consultation on Proposed Amendments to the AML/CFT guidelines. The SFC received 26 written submissions from respondents including industry associations, professional and consultancy firms, brokers and asset management companies.
- The FATF is an inter-governmental policy-making body which sets international standards to prevent money laundering and terrorist financing. It reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks.
- The requirements for cross-border correspondent relationships were introduced in the consultative draft, having regard to the FATF’s Guidance for a Risk-Based Approach for the Securities Sector (October 2018) which requires financial institutions to apply additional due diligence and risk mitigating measures for business relationships in the securities sector which are similar to cross-border correspondent banking relationships, eg, in instances where a Hong Kong securities broker executes trades for an overseas broker which acts for its own local customers.
- For example, the SFC has provided a streamlined approach for cross-border correspondent relationships with affiliated companies. Firms may apply additional due diligence and risk mitigating measures by assessing whether the group policy and AML/CFT programme which apply to an affiliated company are in line with the FATF standards.
- Considering that firms would need time to implement appropriate policies, procedures and controls, the SFC has provided a six-month transition period from the date of gazettal for firms to comply with the new cross-border correspondent relationships requirements. As the other amendments do not require substantial adjustments to firms’ existing AML/CFT systems, they will become effective upon gazettal on 30 September 2021.
