Transcript Anti-Money Laundering Seminars

International Standards on
Regulating DNFBPs &
The way forward
Narcotics Division, Security Bureau
Mr Ping-Yiu MA
Assistant Secretary for Security
3 March 2010
Agenda
 Financial Action Task Force (FATF)
requirements on lawyers
 Highlight of the FATF recommendations
relevant to lawyers
 Way Forward in regulating lawyers
2
FATF
The Financial Action Task Force (FATF) :
 an inter-governmental body
 created in 1989 by ‘G7’
 sets standards, develops and promotes
policies to combat money laundering and
terrorist financing
 has published 40+9 Recommendations to
achieve its purpose
3
Designated Non-Financial Businesses
and Professions (DNFBPs)
DNFBPs as defined by Financial Action Task
Force (FATF) are:
 Lawyers
 Accountants
 Trust and Company Service Providers
(TCSPs)
 Real Estate Agents
 Dealers in Precious Metals/ Stones
 Casinos
4
You Play an Important Role
Casino
Trust and
Company Services
Providers
Banks
Dealers in
Precious
Stones and
Metals
Securities
House
Insurance
Firms
Estate
Agents
Lawyers
Accountants
Designated Non-Financial Businesses and Professions (DNFBP)
5
6
Be a Gatekeeper
for Hong Kong
7
FATF Requirements on Lawyers
Complex
Transactions
(Rec. 11)
New
Technology
(Rec. 8)
Special
Attention
(Rec. 21)
CDD
(Rec. 5 & 9)
Lawyers – operating
individually or in a firm
PEPs
(Rec. 6)
Record
Keeping
(Rec. 10)
STRs
(Rec. 13 & 14)
Internal
Control
(Rec. 15)
8
FATF Requirements on the
Lawyers Profession
Sanctions
(Rec. 17)
SRO
(Rec. 24)
The
Lawyers
Profession
Guidelines
(Rec. 25)
9
FATF Requirements for Lawyers
Requirements to be specified in law:
 Customer Due Diligence (Rec. 5)
 Record Keeping (Rec. 10)
 Suspicious Transaction Reporting (STR)
(Rec. 13)
 Risk-based Approach Guidance for Legal
Professionals
10
When to Conduct CDD?
When lawyers prepare for or carry out transactions
in relation to:
 Buying and selling of real estates;
 Managing of client money, securities or other
assets;
 Management of bank, savings or securities
accounts;
 Organisation of contributions for the creation,
operation or management of companies;
 Creation, operation or management of legal
persons or arrangements, and buying and selling
of business entities.
11
When to Conduct CDD?
When lawyers act as Trust and Company Service
Providers and
 Acting as a formation agent of legal person;
 Acting as a director or secretary of a company;
 Providing a registered office, etc for a company;
 Acting as a trustee of an express trust;
 Acting as a nominee shareholder for another person.
 They have to comply with Rec. 5, 6, 8-11, 21.
12
FATF Requirements for Lawyers
Other selected requirements:
 Internal Controls (Rec. 15)
 Self Regulatory Organisation (SRO)
(Rec. 24)
13
Internal Controls
 To establish / maintain internal
policies / procedures to prevent ML / TF.
 Policies / procedures to cover CDD,
record keeping and STR obligations.
 To communicate these to employees.
 To develop appropriate compliance
management (e.g. AML/CFT Compliance
Officer at management level).
14
Internal Controls
 On-going staff training.
 Independent audit function to test
compliance with the policies and procedures.
 To put in place screening procedures to
ensure high standards in hiring employees.
 The type and extent of measures to be taken
should commensurate with:
 the level of ML / TF risk; and
 the size of the business.
15
SRO – Responsibilities & Sanctions
 Government authority or SRO to monitor
and ensure compliance with AML / CFT
requirements.
 Power to sanction in case of noncompliance.
 Effective, proportionate and dissuasive
criminal, civil or administrative sanctions
be available.
16
SRO - Sanctions
 Range of sanctions available should be
broad and proportionate to severity of
non-compliance.
 Sanctions should be available to legal
persons, their directors and senior
management.
17
SRO - Resources
 Adequate structuring, funding, staff with
sufficient technical and other resources to
fully and effectively perform their functions.
 Sufficient operational independence and
autonomy to ensure freedom from
interference.
 Staff be of high professional standard &
integrity and adequately trained for AML/CFT.
18
SRO - Guidelines
 Government authority or SRO to establish
guidelines to include the following:
ML / FT techniques and methods; and
any additional measures that DNFBPs
could take to ensure their AML/CFT
measures are effective.
19
FATF Recommendations relevant to
DNFBPs
4
5 * 6
1
2
3
7
8
9
10 * 11
12
13 * 14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
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Results of HK Mutual Evaluation
 Rec. 12 (applying Rec. 5, 6 & 8-11) : NC
 Rec. 16 (applying Rec. 13-15 & 21) : NC
 Rec. 24
: NC
21
Post ME Development (1)
 Establishment of Central Co-ordinating
Committee (CCC), chaired by Financial
Secretary.
 To steer & co-ordinate the strategic
development of HK’s AML/CFT regime
in line with internationally recognised
standards.
22
Post ME Development (2)
 Financial Services & the Treasury Bureau
(FSTB) is the overall co-ordinator for
AML/CFT matters and with specific
responsibilities on financial sectors.
 Security Bureau (Narcotics Division)
looks after DNFBPs and Non-profit
Organisations.
23
Way Forward (1)
Legislation on CDD & Record Keeping
 Phase I : Financial Sectors
 Phase II: DNFBPs
24
Way Forward (2)
 FSTB Consultation on Legislative
Proposals Against Money Laundering
ended on 6 February 2010.
Proposes to allow continued reliance on
unregulated Third Parties by Financial
Institutions.
 To be introduced into to LegCo – Q2 2010.
25
Way Forward (3)
 To prepare for Phase II, SB will step up
outreaching activities to raise awareness
on AML/CFT and work closely with
professional bodies.
 CPD Seminars.
 Sector Specific Guidelines.
 Revised Interactive Training Kit.
26
Consultation with Non-Financial Sectors
Issues
 Timeline
 Compliance costs
 Regulatory Authority
27
Timeline (1)
2010
2011
2015
2013
2012
2014
2016
28
Timeline (2)
FATF
35
members
29
Compliance Costs (1)
Internal
Control
Systems
Staff
Training
Policies
and
Procedures
Complianc
e Officer
Audit
Function
30
Compliance Costs (2)
Compliance
Cost
International
Standards
31
Compliance Costs? (1)
Business
Costs and
Legal
Obligations
Professional
Status and
Reputation
32
Compliance Costs? (2)
33
Open-minded
34
Partnership
35
Thank you!
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