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Hong Kong amends anti-money laundering guidelines

Hong Kong amends anti-money laundering guidelines

Hong Kong’s Securities and Futures Commission has amended its anti-money laundering (AML) and counter-terrorist financing guidelines for financial institutions in accordance with international standards.

The categories of politically exposed persons (PEPs) have been expanded beyond domestic and foreign PEPs to include officials who hold prominent posts in international organisations.

As a result, if private banking clients hold a prominent public post in a foreign government and also have a high-profile role in an international organisation, they will have to be treated as both foreign PEPs as well as international organisation PEPs.

Banks will now have to obtain approval from their senior management for establishing or continuing business relationships with international organisation PEPs.

They will also have to establish the customer’s source of wealth and funds, as well as conduct ongoing monitoring on the business relationships of the client on at least an annual basis.

Additionally, the enhanced scrutiny that is typically undertaken for foreign PEPs has now been extended to domestic PEPs and international organisation PEPs for high-risk cases.

Hong Kong defines a domestic PEP as a person holding a prominent public function within the People’s Republic of China.

This includes the head of state, head of government, senior politician, senior government, judicial or military official, senior executive of a state-owned corporation and an important political party official.

In addition to introducing the new category of PEPs, Hong Kong has amended its AML guidelines to allow banks to be flexible when adopting measures to verify customer identification information.

For example, for non-face-to-face customer onboarding, firms can now use a variety of measures, including technology and independent databases and registries, to prevent impersonation.

‘Whilst firms will still be required to apply effective measures to detect and prevent money laundering and terrorist financing, the changes provide more flexibility for firms to apply those measures using a risk-based approach,’ said SFC CEO Ashley Alder.

The changes reflect recommendations by the Financial Action Task Force after it conducted a risk assessment review of Hong Kong earlier this year.

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