Guideline on Anti-Money Laundering and Counter- Terrorist ...

1 Guideline on Anti-Money Laundering and Counter- Financing of Terrorism (For Authorized Institutions) Revised October 2018 CONTENTS Page Chapter 1 Overview ..1 Chapter 2 Risk-based approach ..8 Chapter 3 AML/CFT Systems ..12 Chapter 4 Customer due diligence ..17 Chapter 5 Ongoing monitoring ..52 Chapter 6 Terrorist financing, financial sanctions and proliferation financing ..55 Chapter 7 Suspicious transaction reports and law enforcement requests ..60 Chapter 8 Chapter 9 Staff training.

2 70 Chapter 10 Wire transfers ..73 Chapter 11 Correspondent banking and other similar relationships ..78 Chapter 12 Private banking ..84 Glossary of key terms and abbreviations ..87 1 Chapter 1 OVERVIEW Introduction This Guideline is published under section 7 of the Anti-Money Laundering and Counter- Terrorist Financing Ordinance (AMLO) and section 7(3) of the Banking Ordinance (BO). Terms and abbreviations used in this Guideline should be interpreted by reference to the definitions set out in the Glossary part of this Guideline .

3 Where applicable, interpretation of other words or phrases should follow those set out in the AMLO or the BO. This Guideline is issued by the Hong Kong Monetary Authority (HKMA) and sets out the relevant Anti-Money Laundering and Counter- financing of terrorism (AML/CFT) statutory and regulatory requirements, and the AML/CFT standards which Authorized Institutions (AIs), including Registered Institutions (RIs)1, should meet in order to comply with the statutory requirements under the AMLO and the BO.

4 Compliance with this Guideline is enforced through the AMLO and the BO. AIs which fail to comply with this Guideline may be subject to disciplinary or other actions under the AMLO and/or the BO for non-compliance with the relevant requirements. This Guideline is intended for use by AIs and their officers and staff. This Guideline also: (a) provides a general background on the subjects of money Laundering and Terrorist financing (ML/TF), including a summary of the main provisions of the applicable AML/CFT legislation in Hong Kong.

5 And (b) provides practical guidance to assist AIs and their senior management in designing and implementing their own policies, procedures and controls in the relevant operational areas, taking into consideration their special circumstances, so as to meet the relevant AML/CFT statutory and regulatory requirements. The relevance and usefulness of this Guideline will be kept under review and it may be necessary to issue amendments from time to time. 1 In addition to comply with this Guideline , RIs and associated entities that are AIs are required to have regard to paragraph of the Guideline on Anti-Money Laundering and Counter- Financing of Terrorism issued by the Securities and Futures Commission (SFC Guideline )

6 For the definition of customer for the securities, futures and leveraged foreign exchange businesses, as well as paragraphs and of the SFC Guideline in identifying suspicious transactions for the securities, futures and leveraged foreign exchange businesses. 2 For the avoidance of doubt, the use of the word must or should in relation to an action, consideration or measure referred to in this Guideline indicates that it is a mandatory requirement. Given the significant differences that exist in the organisational and legal structures of different AIs as well as the nature and scope of the business activities conducted by them, there exists no single set of universally applicable implementation measures.

7 The content of this Guideline is not intended to be an exhaustive list of the means of meeting the statutory and regulatory requirements. AIs should therefore use this Guideline as a basis to develop measures appropriate to their structure and business activities. , AMLO This Guideline also provides guidance in relation to the operation of the provisions of Schedule 2 to the AMLO (Schedule 2). This will assist AIs to meet their legal and regulatory obligations when tailored by AIs to their particular business risk profile.

8 A failure by any person to comply with any provision of this Guideline does not by itself render the person liable to any judicial or other proceedings but, in any proceedings under the AMLO before any court, this Guideline is admissible in evidence; and if any provision set out in this Guideline appears to the court to be relevant to any question arising in the proceedings, the provision must be taken into account in determining that question. In considering whether a person has contravened a provision of Schedule 2, the HKMA must have regard to any relevant provision in this Guideline .

9 A failure to comply with any provision of this Guideline may reflect adversely on whether an AI continues to comply with the authorization criteria set out in the Seventh Schedule to the BO, particularly paragraph 10 of which requires an AI to maintain on and after authorization adequate accounting systems and systems of control. The HKMA is empowered to exercise various provisions under the BO in case of non-compliance with the requirements set out in this Guideline .

10 The nature of money Laundering and Terrorist financing , Sch. 1, AMLO The term money Laundering (ML) is defined in section 1 of Part 1 of Schedule 1 to the AMLO and means an act intended to have the effect of making any property: (a) that is the proceeds obtained from the commission of an indictable offence under the laws of Hong Kong, or of any conduct which if it had occurred in Hong Kong would constitute an indictable offence under the laws of Hong Kong; or (b) that in whole or in part, directly or indirectly, represents such proceeds, 3 not to appear to be or so represent such proceeds.