The SFC’s recent AML and CTF seminar, held before Christmas, is instructive. Senior management and in particular the Manager-in-Charge (MIC) for AML should take into account the following when considering their 2018 compliance action plan.
1. The SFC’s inspections will continue to focus on AML compliance, including the deficiencies flagged by the SFC in its circular of 26 January 2017. It is a timely reminder to senior management and the MIC for AML to examine whether the firm has sufficient control over its AML systems, especially in areas where the SFC has pointed out deficiencies.
2. The SFC will also focus on:
• cybersecurity risks because these may generate illicit proceeds for laundering; and
• virtual currencies / commodities as they are held on an anonymous basis and by nature pose inherent and significant money laundering / terrorist financing risks.
3. The implementation date for the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Bill 2017 (AML Amendment Bill) is 1 March 2018. Once it has been passed into law, the threshold for defining beneficial ownership will be relaxed from the current “not less than 10%” to “more than 25%”, having regard to the prevailing FATF standard and international practice.
4. The SFC aims to amend its Guideline on Anti-Money Laundering and Counter-Terrorist Financing to:
• reflect the AML Amendment Bill, to take effect on 1 March 2018; and to
• reflect the latest FATF standards; provide more guidance on the risk-based approach; and take into consideration technological developments. The SFC has set a tentative target of the second half of the year for these changes.
5. The following legislation is due to be passed into law this year:
• Companies (Amendment) Bill 2017 – A Hong Kong incorporated company will be required to take reasonable steps to ascertain its significant controllers; keep a register of its significant controllers; and maintain up-to-date identification information of such controllers. This Bill will come into effect on 1 March 2018.
• United Nations (Anti-Terrorism Measures) (Amendment) Bill 2017 – This includes an offence of “dealing” with property, knowing that, or being reckless as to whether the property is, owned or controlled by terrorists.
The SFC’s seminar introduced nothing new in terms of using technology to verify client identity in non-face-to-face account openings since the SFC’s circular of 26 October 2016.
Senior management can start by initiating a self-assessment by reference to the SFC’s AML / CFT Self-Assessment Checklist (issued by means of the SFC’s circular dated 21 December 2012), keeping in mind the deficiencies raised by the SFC.
For more details, the SFC’s seminar slides are available here.