The SFC issued a circular on 23 February 2018 to inform the industry that its revised AML guidelines have been gazetted and will take effect on 1 March 2018. The guidelines are the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (the AML Guideline) and the Prevention of Money Laundering and Terrorist Financing Guideline for Associated Entities.
Also with effect from 1 March 2018, the name of Hong Kong’s main AML legislation has been shortened to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). The phrase “(Financial Institutions)” has been removed from the title because the AMLO now applies to a much wider group of entities. The changes are available in the Anti-Money Laundering and Counter-Terrorist Financing (Financial institutions) (Amendment) Ordinance 2018.
Licensed entities may now review and simplify customer due diligence (CDD) policies and procedures, checklists and similar documents to reflect the following changes, as well as implementing them in practice.
- The beneficial ownership threshold is “more than 25%” instead of previously “not less than 10%”.
- Licensed firms can rely on a foreign financial institution within the same financial group as a qualified “specified intermediary” to carry out CDD measures on their behalf. The group company does not necessarily need to be regulated provided that it has met all the prescribed conditions set out in the AMLO (also see guidance in paragraphs 4.17.12 to 4.17.14 of the AML Guideline).
- The record-keeping period is five years instead of six years.
In addition, the AML Guideline reflects the following changes:
- The possibility of introducing flexibility to measures permitted to be taken for verifying a customer’s identity, in light of technological developments in the methods used by licensed firms for obtaining information relating to customers.
While the SFC circular relating to client identity verification in account opening process dated 24 October 2016 remains the latest specific guidance from the SFC in this regard (see our article of 16 November 2016), the SFC has amended the language in the revised AML Guideline (4.12.2(b)) to provide flexibility in non-face-to-face situations to take supplementary measures to verify information relating to the customer that has been obtained by the firm. A firm may now take information from other sources in addition to the customer and may select which information to verify.
- The wire transfer criteria to record basic information about a recipient and, where applicable, about an intermediary institution involved in a transaction.
Also, licensed firms are no longer required to obtain proof of address – please see our article of 13 November 2017.
Licensed firms should take note of these changes to ensure continued compliance with the AMLO and AML Guidelines.