Hong Kong's Securities And Futures Commission Concludes Consultation On Amendments To Anti-Money Laundering And Counter-Financing Of Terrorism Guidelines

The Securities and Futures Commission (SFC) today released consultation conclusions on proposals to amend its Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT Guideline) (Note 1).

The amendments are in line with the latest international anti-money laundering and counter-financing of terrorism (AML/CFT) standards and will make the AML/CFT Guideline more useful and relevant in light of industry developments (Note 2).

Under the revised AML/CFT Guideline, the categories of politically exposed persons (PEPs) will be expanded to include international organisation PEPs who are persons entrusted with a prominent function by an international organisation. The enhanced scrutiny for foreign PEPs will be extended to domestic PEPs and international organisation PEPs where their business relationships with a firm are assessed to be of high risk.

In addition, the changes allow firms the flexibility to adopt reasonable risk-based measures to verify customer identification information. To facilitate non-face-to-face customer onboarding, firms are allowed to take a mix of supplementary measures (Note 3) to guard against impersonation risk.

"The amendments ensure our regulations are in line with the latest international standards," said Mr Ashley Alder, the SFC’s Chief Executive Officer. "Whilst firms will still be required to apply effective measures to detect and prevent money laundering and terrorist financing, the changes provide more flexibility for firms to apply those measures using a risk-based approach."

The revised AML/CFT guidelines (Note 4) will be gazetted on 19 October 2018 and take effect on 1 November 2018.

Notes:

1. On 5 July 2018, the SFC issued a Consultation Paper on Proposed Amendments to the (1) Guideline on Anti-Money Laundering and Counter-Terrorist Financing and (2) Prevention of Money Laundering and Terrorist Financing Guideline issued by the Securities and Futures Commission for Associated Entities. The consultation period ended on 9 August 2018. 19 written submissions were received from various respondents including industry associations, a professional body, brokers and asset management companies. Consultation feedback generally supported the proposals. In response to the comments received, the SFC modified some proposed amendments to better reflect our regulatory intent or give additional guidance.
2. The AML/CFT guidelines will be renamed as the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations) to better align with the terminology used throughout the AML/CFT Guideline and the Financial Action Task Force standards.
3. These supplementary measures include using appropriate technology, checking against reliable databases or registries, or obtaining certified copy identification documents.
4. This refers to the revised AML/CFT Guideline and the revised Prevention of Money Laundering and Terrorist Financing Guideline issued by the Securities and Futures Commission for Associated Entities.