Measuring up in fight against dirty cash

PUBLISHED : Sunday, 11 November, 2007, 12:00am
UPDATED : Sunday, 11 November, 2007, 12:00am

Experts to assess HK's 'war on terror' role

A team of international experts will begin an investigation tomorrow into how Hong Kong measures up to global standards in the fight against money laundering and terrorist financing.

The probe comes amid fears in some quarters that Hong Kong could be viewed as a target of money launderers fleeing draconian measures taken by countries in the front line of the 'war on terror', like the United States and Britain, according to a law enforcement source.

It has also increased the pressure on non-financial businesses and professions to be more proactive in reporting what they suspect could be shady deals.

The investigation will be carried out by evaluators from the Financial Action Task Force (FATF) and the Asia-Pacific Group on Money Laundering.

In the run-up to the evaluation team's visit, the city's legal and accountancy professions have felt heat from Narcotics Commissioner Sally Wong Pik-yee, who has described the level of reporting of suspicious transactions in some quarters as 'frankly miserable'.

The United Nations Office on Drugs and Crime estimates criminal syndicates and terrorist organisations 'wash' between US$500 billion and US$1 trillion of illicit funds through the global financial system each year.

Leading the battle against this is the Paris-based, intergovernmental Financial Action Task Force.

Set up in 1989, it laid down guiding principles for tackling money laundering, comprising 40 recommendations.

Nine special recommendations were added following the September 11, 2001, terrorist attacks on the United States.

A country's standing in the fight against money laundering and terrorist financing can be judged by the extent to which it implements the 49 recommendations.

Hong Kong is widely accepted to have fairly stringent anti-money laundering laws and enforcement measures. A good 'report card' helps maintain Hong Kong's reputation for having a clean and transparent financial system.

A law enforcement source said: 'The pressure has been on in the run-up to the FATF evaluation team's visit to make sure we get a clean bill of health. We want to make sure the gates are closed as firmly as possible along with other places which have stiffened their regulations.'

Among those feeling the heat in the run-up to the team's arrival are the non-financial businesses that are legally obliged under Hong Kong's anti-drug and organised crime laws to report suspicious transactions as they go about their work.

They are expected to file reports to the joint financial intelligence unit (JFIU) run by the police and Customs and Excise Department, but the level of reporting is low.

Lawyers and accountants blame a lack of clarity about what information law enforcers require, what denotes a 'suspicious transaction' and the need for them to balance compliance with client confidentiality.

As narcotics commissioner, Ms Wong heads the lead government body in the fight against money laundering - an activity historically linked to the drug trade.

She says non-financial businesses need to be more aware of their legal obligations and rights.

Nelson Cheng Yiu-mo, a superintendent of financial investigations at the JFIU, said the number of financial professionals knowingly involved in facilitating money laundering was small.

Still, he urged them to be vigilant about being taken advantage of by criminal organisations.

Michael Lintern-Smith, executive director of the Hong Kong Law Society, for which client confidentiality is a key concern, said: 'The Law Society has been very proactive in setting out minimum requirements for their members on what is required before opening up a client file. However, the risk-based approach [to countering money laundering] creates a host of difficulties for the gatekeepers.'