13 November, 2017
Licensed corporations no longer need to obtain verification of their customers’ addresses for anti-money laundering purposes after a circular from the SFC on 11 October 2017, available here. The HKMA issued its own circular separately but the content of both circulars is effectively the same.
This means financial institutions (FIs) are now only required to obtain address information of customers and/or beneficial owners and do not also need to collect documentary evidence (i.e. address proof). For individual customers, FIs only need to collect the residential address and do not need to obtain the permanent address if it is different. With corporate customers however, FIs need to collect both the address of the registered office and the principal place of business (if different).
The appendix to the SFC circular, available here, lists all the resulting amendments to the SFC AML/CFT Guideline. The changes will not come into formal effect until gazettal, expected in the first half of 2018 but very interestingly, the SFC made it clear in the circular that the changes are effectively effective immediately.
Usually in HK, there is a consultation and gazettal process before new changes take effect. The SFC said the changes were driven by feedback from various stakeholders about AML/CFT processes (i.e. difficulties in obtaining address proofs) and industry developments but we note that an address proof is often not required in the PRC, is not specifically required by the FATF Recommendations (updated June 2017 and available here) and may not actually mitigate money laundering or terrorist financing risk.
It is also worth noting however that clients need to be on the lookout for red flags and other suspicious transaction indicators when verifying customer identity and reviewing customer background.
For further information, please contact:
Lavita Pong, Deacons
lavita.pong@deacons.com.hk
