On 28 June 2017, Hong Kong’s Legislative Council considered the new Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Bill 2017 (the Bill). Subject to the Bill being passed by the Legislative Council, the Government proposes to implement the amendments on 1 March 2018.
The Bill proposes to introduce statutory customer due diligence (CDD) and record keeping requirements for Hong Kong trust or company service providers (TCSPs), solicitors, accountants and real estate agents. Secondly, the Bill introduces a licensing regime for TCSPs to require them to apply for a licence from the Registrar of Companies and satisfy a ‘fit and proper’ test before they can provide trust or company services as a business in Hong Kong.
Thirdly, the Bill proposes to update the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap. 615) (AMLO) to align it with the latest international CDD standards set by the Financial Action Task Force. The changes, which effect existing “financial institutions” who are regulated under the AMLO, include;
- relaxing the threshold which defines beneficial ownership in respect of customers from the existing ‘not less than 10 percent’ to ‘more than 25 percent’ of a customer;
- introducing flexibility to measures permitted to be taken for verifying a customer’s identity, in the light of technological developments in the methods used by financial institutions for obtaining customer information;
- requiring the recording of basic information for wire transfers by requiring basic information about a recipient and, where applicable, an intermediary institution involved in a wire transfer; and
- removing a sunset clause in the AMLO so that financial institutions will continue to have the flexibility to rely on Hong Kong solicitors, accountants, TCSP licensees as well as other financial institutions (including a foreign financial institution in the same parent group) as intermediaries to carry out CDD measures.
The proposed changes to the AMLO outlined above should assist financial institutions in satisfying their CDD requirements under the AMLO. These changes are also helpful in that they align Hong Kong CDD requirements with international practice. The changes should therefore be welcomed by the industry.