Hong Kong has in recent times seen an increasing use of remote on-boarding of customers by banks as a result of COVID-19. Banks are generally required to pay more attention to the remote on-boarding assessment of corporate customers as opposed to individual ones due to the higher money laundering and terrorist financing risks associated with corporate vehicles.
In a recent circular, the HKMA explained his regulatory expectations for customer due diligence (“CDD”) in relation to remote on-boarding by banks. In Hong Kong, statutory CDD requirements for banks are principally outlined in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), as supplemented by the related guideline for authorised institutions published by the HKMA. As a general principle, the HKMA stated that the banks should adopt a risk-based approach in their CDD process, and that his regulatory expectation of such process was technology-neutral.
Not only should the CDD process cover vetting of the corporate customer itself, but also verification of the identity of the customer’s representatives and beneficial owners. Where appropriate, the circular confirmed that the CDD steps could (i) be carried out via tele- or videoconference or outsourced to independent and appropriate intermediaries provided use of such methods was commensurate with the assessed money laundering and terrorist financing risks, for customer interaction and (ii) use reliable technology solutions to verify identities of representatives and owners.