Hong Kong’s Securities and Futures Commission (SFC) has published the conclusion of a consultation to amend its anti-money laundering and counter terrorism financing guidelines.
According to Regulation Asia, under the new approach, licensed corporations would be able to apply additional due diligence and other risk mitigating measures for cross-border correspondent relationships with affiliated companies through their group AML/CFT programs.
The amendments – originally proposed in September last year – are aimed at aligning the guidelines with the Financial Action Task Force standards.
The commission received 26 written submissions that were largely supportive of the proposals, however, a ‘considerable number’ of comments were made in regard to the proposed requirements for cross-border correspondent relationships.
Based on the overall feedback, the SFC revised its guidelines to offer more clarity and flexibility in meeting the requirements for cross-border correspondent relationships, including a more simplified approach for such relationships with affiliated firms.
The new guidelines will also set out the sources of information and risk factors that should be considered when licensed businesses conduct their risk assessments, which should be conducted at least once every two years.
Licensed corporations with overseas subsidiaries and branches will be required to conduct a group-wide risk assessment, and those licensed corporations that are part of a financial group may make reference to or rely on a group-wide or regional institutional risk assessment.
Furthermore, the SFC has also limited the kind or extent of customer due diligence measures that must be used for identity verification of low risk customers. Enhanced customer due diligence measures should be introduced for customers who are PEPs are in other high-risk situations.
Additional updates to the guidelines include the bolstering of the list of red flag indicators for suspicious transactions and activities, requirements to perform third-party deposit due diligence before settling transactions with client-deposited funds and additional guidance on fund sources and wealth check sources.
The revised guidelines will come into action on 30 September 2021, with the exception of the cross-border correspondent relationships requirements, which will become effective on 30 March next year due to a six-month transition period.
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