The Hong Kong Monetary Authority (HKMA) has published guidance to assist authorized institutions (AIs) and stored value facility (SVF) licensees with their anti-money laundering (AML) and counter-terrorist financing (CTF) risk management practices during the COVID-19 pandemic. The HKMA has reiterated in the circulars that it does not expect a “zero failure” outcome from AIs and SVF licensees in respect of money laundering (ML) and terrorist-financing (TF) detection. Importantly, the HKMA has indicated that it will exercise supervisory flexibility in this period to support AIs and SVF licensees.
The circulars follow the recent statement issued by the Financial Action Task Force (FATF) on AML/CTF which (amongst other things) encourages regulators to work with financial institutions during the pandemic to utilise the flexibility built into the FATF’s risk-based approach.
A brief summary of the key points from the circulars is set out below.
Remote on-boarding and simplified due diligence
- AIs are encouraged to work closely with the HKMA during this period to provide greater convenience (e.g. through use of financial technology) for account opening (e.g. remote account opening) and continued access to essential banking services to the public.
- To help AIs adapt to COVID-19 containment measures e.g. social distancing, simplified due diligence measures can be applied to customer on-boarding and account opening for customers that pose lower ML and TF risks. For customers opening accounts solely for the purpose of the Government’s (recently announced) cash payout scheme, AIs should apply the minimum level of customer due diligence appropriate in the circumstances.
- SVF licensees may conduct customer due diligence measures which are commensurate with the lower risks posed by SVF products based on their stored values, transaction limits and functions.
- SVF licensees are, similarly, encouraged to work closely with the HKMA to provide greater convenience for account opening and continued payment services to the public.
COVID-19 financial crime risks
- AIs and SVF licensees should remain vigilant to emerging ML and TF risks (e.g. face mask scams). Such risks should be mitigated through information sharing and by reporting suspicious transactions to the Joint Financial Intelligence Unit (JFIU). If an AI or SVF licensee encounters issues in reporting to the JFIU, the matter should be discussed with the HKMA (and the JFIU) without delay.
Ongoing support from the HKMA
- Given the current challenges AIs and SVF licensees are facing, maintaining normal operations of AML/CFT systems may not be achievable in all cases. Where the AI or SVF licensee is unable to meet a particular obligation in the short-term, it should maintain a record of the circumstances, the risk assessment performed as well as any mitigation measures being taken.
 This is permitted under the Anti-Money Laundering and Counter Terrorist Finance Ordinance (Cap. 615), and the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (for AIs)