Hong Kong to tighten anti-money-laundering rules

City hopes to achieve a good rating in the compliance evaluation in 2016 and bolster its reputation as an international financial centre

PUBLISHED : Thursday, 20 February, 2014, 1:30pm
UPDATED : Friday, 21 February, 2014, 1:03am

The government aims to toughen Hong Kong's rules against money laundering so as to obtain a good rating in a review by the Financial Action Task Force in two years' time and bolster the city's reputation as an international financial centre.

In light of new international standards on combating money laundering published by the task force in 2012, the government was reviewing local legal and regulatory requirements to strengthen its anti-money-laundering regime before the next evaluation, a Hong Kong Monetary Authority spokesman said.

"The HKMA attaches great importance to maintaining effective anti-money-laundering controls and is strongly committed to Hong Kong's efforts in implementing international standards and obligations," the spokesman said.

There is a clear trend of Hong Kong increasing its supervision of laundering

He said the HKMA was "significantly strengthening resources dedicated to anti-money-laundering supervision".

The task force is a 36-member intergovernmental body that sets standards and promotes measures for combating money laundering. Its officials would visit Hong Kong in March and April 2016 to review the city's anti-money-laundering controls, its website said.

The HKMA spokesman said the task force was expected to announce its findings on Hong Kong in late 2016.

Kyran McCarthy, Asia-Pacific head of anti-money-laundering and sanctions services at KPMG, said the task force's reviews always had a significant impact and a negative report on a country or financial centre would damage its reputation.

"Financial transactions going through a country or centre considered to have high money-laundering risk would require much more due diligence, which could slow things and [affect] competitiveness," he said.

In the last evaluation in 2008, Hong Kong was rated partly compliant with the task force's standards, leaving room for improvement.

The task force said the city's anti-money-laundering supervision was effective for banking, insurance and securities, but weak or non-existent for many non-financial sectors.

Joseph Bognanno, anti-money-laundering director at Nice Actimize, a Nasdaq-listed provider of software to counter such crimes, said money could be laundered through non-financial sectors such as property. For example, a building could be bought with proceeds of a crime and then sold, even at a loss, he said, with the loss being the cost of legitimising the laundered money.

In October 2012, the task force said Hong Kong "had made significant progress in addressing the deficiencies identified" in the 2008 report.

The city passed the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance in April 2012, and the HKMA gave guidance to banks on combating money laundering three months later. In December last year, the HKMA issued another guidance paper on money laundering.

"There is a clear trend of Hong Kong increasing its regulatory supervision of money laundering," McCarthy said. "Going forward, you will see the financial institutions in Hong Kong discussing anti-money-laundering more regularly at meetings and devoting more resources to anti-money-laundering measures."