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The Government today (December 7) launched the second-round consultation on the detailed legislative proposals on customer due diligence and record-keeping requirements for financial institutions, as well as the regulation of remittance agents and money changers. The two-month consultation will last until February 6, 2010.
The Government completed the first-round consultation on the conceptual framework of a legislative proposal to enhance the anti-money laundering (AML) regulatory regime in respect of the financial sectors on October 8, 2009. During the first-round consultation, the Financial Services and the Treasury Bureau (FSTB) organised a series of consultative sessions to listen to views from industry practitioners and received a total of 39 written responses to the consultation paper.
A spokesman for the bureau said: "The majority of respondents acknowledge the importance for Hong Kong to comply with the international AML standards in order to maintain our status as an international financial centre, and there is broad support for the Government's proposal to introduce new legislation to enhance the AML regulation of financial institutions and to introduce a licensing system to regulate remittance agents and money changers.
"Respondents have also provided useful comments on the details of different aspects of the proposed legislation. Having taken into account the public views collected, we have drawn up a set of detailed proposals on the new legislation in consultation with the relevant authorities."
The spokesman noted that the proposal was intended to address the major deficiencies in respect of the lack of statutory backing and appropriate sanctions for customer due diligence and record-keeping requirements and the absence of an AML regulatory regime for remittance agents and money changers in Hong Kong identified by the Financial Action Task Force in its evaluation of Hong Kong completed in 2008. The proposed legislation will codify in statute in respect of the international standards on customer due diligence and record-keeping.
The consultation paper sets out the detailed legislative proposals for the following areas:
- The categories of financial institutions (authorised institutions, licensed corporations, insurers, insurance agents and brokers and remittance agents and money changers) to be subject to the requirements under the proposed legislation and the respective relevant authority (Hong Kong Monetary Authority, Securities and Futures Commission, Office of the Commissioner of Insurance and the Customs and Excise Department) designated for each of these sectors for supervision of compliance;
- the customer due diligence and record-keeping obligations for financial institutions. These include the circumstances under which customer due diligence should be conducted, the extent of customer due diligence measures applicable to customers of different risk profiles, specific requirements on wire transfers and remittance transactions, requirements for ongoing due diligence, actions required when unable to complete customer due diligence and the types of records required to be maintained and the period for record retention;
- the powers available to the relevant authorities under the proposed legislation to supervise financial institutions' compliance with the obligations, including powers to conduct inspections and require information from financial institutions and other persons, initiate investigation into suspected breaches, enter into premises under warrants, initiate summary prosecutions and share information with overseas regulators. Procedural safeguards to ensure proper exercise of powers by the relevant authorities are also provided in the legislative proposals;
- the range of supervisory sanctions that the relevant authorities may impose for breaches of financial institutions' obligations or breaches of officers' duty to take reasonable measures to prevent breaches of obligations by the financial institution, and the criminal liability for non-compliance committed with knowledge and intent;
- the establishment of an independent appeals tribunal to review decisions on supervisory sanctions and remittance agent and money changer licensing matters made by the relevant authorities as checks and balances in the regulatory regime; and
- the detailed licensing regime for remittance agents and money changers, including the functions and powers of the Customs and Excise Department as the licensing authority, coverage of the licensing regime, "fit and proper" criteria for remittance agent and money changer licensees, and the offence for operations by unlicensed remittance agents and money changers.
"In view of the relatively low money laundering risks involved in money changing transactions and to alleviate the concerns of the remittance agent and money changer sectors over the AML regulation, we have revised the proposed customer due diligence threshold for money changing transactions from the current HK$8,000 to HK$120,000. In addition, taking into account comments received in the first-round consultation concerning the mental element involved in the proposed criminal liabilities for breaches of the statutory obligations, we propose to set a high threshold for the mental element such that only those persons who knowingly contravene the statutory obligations or those who contravene the statutory obligations with intent to defraud will attract criminal liability. To facilitate normal business operations under a risk-based approach, financial institutions will be permitted to conduct simplified due diligence in specified circumstances where money laundering risks are low and, subject to specified conditions, rely on specified local professional sectors in conducting customer due diligence in introduction of business," the spokesman stressed.
"As in the first-round consultation, we will solicit views of the relevant trade bodies and professional organisations, trade associations and remittance agents and money changers on the detailed legislative proposals. We will, in conjunction with the relevant financial regulators, arrange consultative sessions for the concerned financial services groups during the consultation period.
"We will take into account the views and comments received during the consultation period in drawing up the bill. We aim to introduce the bill into the Legislative Council in the second quarter of 2010," the spokesman said.
"We look forward to receiving views from the general public, in particular practitioners in the concerned financial sectors, during the consultation period," the spokesman added.
The consultation document is available from the website (www.fstb.gov.hk/fsb/aml/eng/consultation/consultation.htm). Views and comments can be sent to the FSTB by direct mail (Division 7, Financial Services Branch, Financial Services and the Treasury Bureau, 18/F, Tower 1, Admiralty Centre, 18 Harcourt Road, Hong Kong), or by e-mail to aml_consultation@fstb.gov.hk, or by fax to 2865 6736 on or before February 6, 2010.
Ends/Monday, December 7, 2009
Issued at HKT 16:30
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