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Following is a question by the Hon Sin Chung-kai and a written reply by the Secretary for Financial Services, Mr Stephen Ip, in the Legislative Council today (March 6):

Question:

It is learnt that a United States company offers an online payment agency service, in which a client registered with it first transfers money from his/her bank account or in the form of credit card debits to his/her account held with the company which then transfers the payment through e-mail according to the clients' instruction to a designated payee; the payee can then receive the payment in his/her account via e-mail links provided that he/she also holds an account with the company. In this connection, will the Government inform this Council whether:

(a) transactions made between individuals and businesses in the above mode are recognized by the laws of Hong Kong;

(b) it knows if such transactions are recognised by the United States government; and

(c) the Government will conduct a study regarding the problems (such as money laundering) involved in such mode of payment?

Reply:

(a) The choice of the mode of payment in Hong Kong for any transaction is a matter of contract between the parties concerned. The use of online payment agency services is known in Hong Kong. There are no laws in Hong Kong which specifically prohibit such mode of payment.

(b) It is not appropriate for us to give an opinion on US laws concerning the standing of such online payment agencies and their transactions. Nevertheless, it appears that the control and regulation of those agencies under US State, US Federal, and international financial services regulations are not uniform. Some States in the United States require the registration of the agencies as money transmitters, and the requirements differ from State to State, and the extent of compliance also varies with the States and the agencies concerned.

(c) Our existing regime primarily covers the legislative enforcement and preventive aspects of computer-related crimes. The Interdepartmental Working Group on Computer-related Crime, convened under the direction of the Security Bureau, has made a number of recommendations to deal with these aspects. The recommendations are designed to increase our effectiveness in detecting, preventing and prosecuting computer-related crimes. The recommendations are in the process of implementation.

As far as money laundering is concerned, if a fund transfer involves or is arranged through the banking system, the bank concerned should process such transaction in accordance with established suspicious transaction reporting requirements or anti-money laundering guidelines (including guidelines on customer identification and keeping of transaction records) as stipulated by the Hong Kong Monetary Authority.

As to electronic financial transactions, the Financial Action Task Force on Money Laundering (FATF) is reviewing its 40 Recommendations that cover ways to strengthen customer identification and to handle suspicious electronic financial transactions. As a member of FATF, Hong Kong is participating in the review.

End/Wednesday, March 6, 2002

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