SFC compliance and licensing hints – Dec 2016

No more paper licensing submissions for individuals

On 29 November 2016, the SFC announced that all individual applicants or licensees will need to submit their applications, notifications and annual returns via the SFC online portal from 1 February 2017(circular available here). Paper submissions will no longer be accepted.

In connection with this initiative, the SFC introduced new online portal forms for use by individual applicants and licensees on 2 December 2016. During a transitional period from 2 December 2016 to 31 January 2017, individual applicants and licensees can choose to submit their applications, notifications and annual returns either in paper form (using the existing paper forms) or via the SFC Online Portal (using the new online portal forms). If you are working on an application, notification or annual return for an individual, we suggest that you use the new online portal forms, unless you can be sure that the submission can be filed by 31 January 2017.

If you have been preparing any submissions using the “old” online portal forms (i.e. pre 1 December 2016), you will need to start again with the new online portal forms as the system deleted all saved/pending submissions on 1 December 2016.

Even though corporate applicants or licensees can still continue to submit their applications, notifications and annual returns in paper form, the SFC will introduce new paper forms on 1 February 2017. If you are currently preparing any applications or notifications, it would be best to have the forms finalised and submitted to the SFC by the end of January; otherwise, you should start working on the new forms instead.

CPT AML training idea for 2017

As 2017 approaches, perhaps now is a good time to start planning your compliance training schedule for the upcoming year.

One of them could be to train your licensed individuals to use the SFC new online portal forms for submitting their applications, notifications and annual returns. Another one is training on anti-money laundering and counter-terrorist financing (AML).

AML continues to be on the SFC’s radar. Non-compliance with the SFC’s Guideline on Anti-Money Laundering and Counter-Terrorist Financing is a frequent finding during the SFC on-site inspections. The Enforcement department at the SFC has set up eight specialised teams to investigate cases that are considered as key risk areas and AML is one of them. This is not a surprise – the SFC has signalled its concern to the market in its circular of 21 September 2016.

Licensed companies should review and update their AML training materials on a regular basis to ensure their adequacy and relevance. Where appropriate, different training materials should be used for staff carrying out different functions.

When you next review your AML training materials, ask yourself do they cover:

• background to money laundering and terrorist financing activities?
• updates on new techniques, methods and trends in money laundering and terrorist financing activities?
• the firm’s stance on AML, and the measures that it has put in place to address it?
• updates on regulatory developments?
• descriptions of the firm’s AML policies and procedures, e.g. customer due diligence and record-keeping requirements, identifying and reporting of suspicious transactions to the Money Laundering Reporting Officer (MLRO)?
• the company and its staff’s statutory and regulatory obligations and internal requirements on AML, and the possible consequences of breaching them?
• staff’s role and responsibilities in the company’s AML systems and controls?
• responsibilities of management and the MLRO?

The SFC website contains some useful information and resources. It includes trainings presented by the SFC and the Hong Kong Police (the latest sessions were conducted in October 2016).

Licensed companies need to maintain records of all AML training (including materials and staff attendance records) for at least three years, assess the effectiveness of such training (e.g. have “post-training” quizzes and monitor the quantity and quality of reporting of suspicious cases), and give additional training if necessary.