Since joining the Financial Action Task Force (FATF) in 1991, Hong Kong has responded to its obligations by introducing legislation to deal with money laundering and terrorist financing. In recent years, these have been enhanced to meet the requirements of the FATF. An overview of the legislation is set out here.
The Financial Action Task Force is an inter-governmental body formed in 1989 which sets international standards on anti-money laundering. In October 2001 it expanded its mandate to include terrorist financing. The FATF consists of 34 member jurisdiction and two regional organisations, representing most major financial centers around the world.
Reference: Financial Action Task Force (FATF)
In 1990 the FATF issued a report with a series of forty recommendations to combat money laundering. In 2001, standards to fight terrorist financing were introduced in eight special recommendations, and in 2004, a ninth special recommendation was added to the list. The recommendations are collectively known as the ‘40+ 9 recommendations’.
Reference: International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation (the FAFT Recommendations)
The progress of members is closely monitored by the FATF, which reviews measures to implement the recommendations, reviews money laundering and terrorist financing techniques as well as the measures taken by members to combat them. The FATF’s decision making body is the FATF Plenary and it meets three times a year.
There is a designated body in Hong Kong to deal with money laundering reports, namely the Joint Financial Intelligence Unit (JFIU), which is staffed by officers from the Hong Kong Police Force and the Hong Kong Customs and Excise Department. Set up in 1989, JFIU receives, analyses and disseminates suspicious transaction reports and engages in financial intelligence exchange with similar bodies overseas. JFIU publishes an annual report setting out the current regulatory regime for combating money laundering and counter-terrorist financing together with reports of case analysis. In preparation for the FATF’s fourth round of Mutual Evaluation of Hong Kong, it has undertaken preliminary strategic work to prepare.
Relevant legislation in Hong Kong
In Hong Kong, legislation dealing with money laundering and terrorist financing include the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) (AMLO); the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap 405) (DTRPO); the Organized and Serious Crimes Ordinance (Cap 455) (OSCO); and the United Nations (Anti-Terrorism Measures) Ordinance (Cap 575) (UNATMO).
The AMLO was adopted on 29 June 2011, and came into force on 1 April 2012. Some of the main objectives were to introduce customer due diligence and record keeping requirements for financial institutions. There are sanctions for failure to comply and enforcement powers for competent authorities. A licensing regime was set up for money service operators, ie currency exchange and remittance services. A new licensing regime for trust or company service providers (TCSPs) was introduced in 2018 under the AMLO to require TCSPs to apply for a licence from the Registrar of Companies.
The DTRPO is used to trace, restrain and confiscate the proceeds of drug trafficking and aims to stop drug traffickers from retaining and laundering illicit profits. It was enacted in 1989.
The OSCO, enacted in 1994 and amended in 2002, contains provisions which largely mirror the DTRPO and apply in respect of organised crimes.
The UNATMO was adopted in August 2002. It came into force in January 2011, with the promulgation of High Court rules and an administrative Code of Practice. It included measures for the forfeiture and freezing of terrorist property. The UNATMO was amended by the United Nations (Anti-Terrorism Measures) (Amendment) Bill 2012, which came into force in July 2012. It expanded the scope of terrorist financing offences.
The United Nations Sanctions (Afghanistan) Regulation 2012 was enacted and implemented in March 2012 to introduce the latest developments in the United Nations’ sanction regime against Afghanistan.
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