New Legislation on Anti-Money Laundering and Counter-Terrorist Financing Anti-money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) (AMLO) -Effective date 1 April 2012

The AMLO is concerned with making Consumer Due Diligence (CDD) and compulsory record keeping by financial institutions enforceable by law. It should be noted that new offences have been introduced for failure to observe the CDD provisions set out under Schedule 2 of the AMLO. Furthermore, previously unregulated businesses such as money exchange providers and remittance service providers will for the very first time be licensed and regulated under the AMLO.

The reason for the new Ordinance?

In an evaluation carried out jointly by the Financial Action Task Force (FATF) and the Asia Pacific Group (APG) in 2007-08, it was found that the Hong Kong Monetary Authority (HKMA) guidelines had no legal force and hence failed to impose obligations to acquire information in relation to bank accounts. This was one of the major disadvantages identified by the evaluation team. In addition, those who carried out businesses as money remitters and money exchangers were not subject to any form of regulation and thus it was unknown to what extent they would carry out any CDD, if any at all.

At present, money exchangers and money remitters do not have any legal obligation to carry out any CDD and generally only keep very limited records of payments made.

Effect of the new Ordinance

The AMLO addresses the abovementioned problems by imposing CDD (which are listed in Schedule 2 of the AMLO) on all financial institutions, which include money remitters and money exchangers (collectively referred to as money service operators)and making such an obligation legally enforceable.

And in the event that the CDD requirements are not met, this would be classified as an offence under the AMLO. Enforcement action would then be taken by the relevant regulator depending on the financial institution involved in the breach. For example the HKMA and the SFC can be regulators. In addition, in regards to money service operators, the Customs and Excise Department will be the new regulator and will be responsible for taking enforcement action for any breach of the CDD requirements.

Contravention of AMLO

It should be noted that those who knowingly breach the CDD requirements under Schedule 2 of the AMLO may be punishable summarily or on indictment with a penalty of up to 2 years imprisonment and fines of up to HK$1 million.

Disciplinary Powers of Regulators

The various regulators will have disciplinary powers to deal with any breach of the CDD under schedule 2. Examples include an order for compliance or public reprimand.

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