15 April 2021
On 18 September 2020, the Securities and Futures Commission published a consultation paper on proposed amendments to (1) the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations) (the “AML/CFT Guideline”) and (2) the Prevention of Money Laundering and Terrorist Financing Guideline issued by the SFC for Associated Entities (“AE”).
The SFC’s proposed amendments to the AML/CFT Guideline aim to align with the Financial Action Task Force’s (the “FATF”) standards amplified by its Guidance for a Risk-based Approach for the Securities Sector (the “RBA Guidance for Securities Sector”) published on 26 October 2018 while providing useful practical guidance to facilitate the implementation of anti-money laundering and counter-financing of terrorism (“AML/CFT”) measures in a risk-sensitive manner.
Key changes incorporated into the proposed amendments addressing the following aspects of the RBA Guidance for the Securities Sector are:
1. the process and methodology of Money Laundering and Terrorist Financing (“ML/TF”) risk assessments and indicators of a high or lower risk level associated with specific risk factors which should be considered in the assessment;
2. the risk mitigating policies, procedures and controls for customer due diligence and ongoing monitoring in various risk situations including:
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additional measures to mitigate the risks associated with business relationships in the securities sector similar to cross-border correspondent banking relationships;
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possible simplified and enhanced measures for customers assessed to be either of lower or higher ML/TF risk; and
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red-flag indicators of suspicious transactions and activities.
The SFC proposes to incorporate into the AML/CFT Guideline the relevant guidance currently set out in its circulars to Licensed Corporation (“LC”) and AE in several areas such as institutional risk assessments and third-party deposits and payments. The SFC also proposes to provide additional guidance where appropriate to facilitate LCs in complying with some existing AML/CFT obligations; for example, a provision was introduced to facilitate compliance with the requirement to assess third-party deposits.
The consultation concluded on 18 December 2020. Taking into account the comments received by the SFC, a consultation conclusions paper is expected soon be issued together with the finalized guidelines.
For further information, please contact:
Louise Yam, Hauzen LLP
info@hauzen.hk
