The Cross-boundary Movement of Physical Currency and Bearer Negotiable Instruments Bill (the Bill) will be gazetted on Friday (February 24). It seeks to align Hong Kong's anti-money laundering (AML) and counter-financing of terrorism (CFT) regime with prevailing international standards as prescribed by the Financial Action Task Force (FATF).
 
     The Bill will establish a declaration and disclosure system to detect the movement of large quantities of physical currency and bearer negotiable instruments (CBNIs) into and out of Hong Kong (R32 System), with a view to stopping and restraining CBNIs suspected to be crime proceeds or terrorist property. It will be introduced into the Legislative Council on March 1, 2017.
 
     A spokesman for the Security Bureau (SB) said, "The Bill implements Recommendation 32 of the FATF on the establishment of the R32 System. It will fulfil Hong Kong's international obligations as an FATF member and strengthen the current AML/CFT capability."
 
     The SB conducted a public consultation exercise from July to October 2015 on the salient features of the proposed R32 System in Hong Kong. In the course of the consultation, the SB received 28 written responses and met with over 40 parties including members of the chambers of commerce and trade sectors concerned.
 
     The spokesman said, "Most respondents acknowledged the need for Hong Kong to introduce the R32 System. Many respondents expressed support for the Government's affirmation that the system would not be any form of currency control and should not affect the freedom of movement, the free flow of capital, and the pursuit of the policy of free trade."
 
     The salient features of the proposed R32 System in Hong Kong include:
 

• passengers arriving in Hong Kong via specified control points who are in possession of CBNIs of a total value over $120,000 will be required to make a written declaration to the Customs and Excise Department (C&ED), using the Red Channel under the prevailing Red and Green Channel System. Passengers arriving in Hong Kong not via specified control points and passengers about to leave Hong Kong will be required to disclose, upon the request of the C&ED, whether they are in possession of CBNIs of a total value over $120,000. If so, they should provide other details in a written declaration;  
• for CBNIs with a total value over $120,000 imported or exported in a cargo consignment, an advanced electronic declaration will be required to be made to the C&ED;  
• mail, passengers in transit, and shipments of CBNIs in transit or on air transhipment will not be covered;  
• penalties will be two-tier. For passengers who are first-time offenders not having previously been convicted of any money laundering or terrorist financing offences and whose CBNIs are not reasonably suspected to be crime proceeds or terrorist property, they will be required to make a payment of $2,000. All other cases will be subject to criminal prosecution, and the maximum penalty is a fine of $500,000 and imprisonment for two years; and
• the C&ED will be the key enforcement agency and will be provided with the necessary enforcement powers.

 
     "We look forward to the early enactment of the Bill so that preparations can be made for the practical operation of the R32 System before the FATF's coming mutual evaluation of Hong Kong scheduled in 2018," the spokesman said.
 
     Hong Kong has been a FATF member since 1991. Hong Kong has the obligation to implement the FATF's requirements and is subject to a process of mutual evaluation by the FATF to monitor the progress made by members in implementing the requirements.

Ends/Wednesday, February 22, 2017
Issued at HKT 16:00

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