Rules clear for banks on money laundering and due diligence

PUBLISHED : Monday, 22 June, 2015, 12:01am
UPDATED : Monday, 22 June, 2015, 12:01am

We refer to your reports, "HK loophole 'helped Fifa suspect funnel cash'" (June 5) and "Fifa 'bribe' came via bank with drug link" (June 6). Unfortunately, some important information was missing in the reports.

First, the reports said the Hong Kong Monetary Authority did not regard officials in charge of world soccer as politically exposed persons (PEPs) and the headline described it as a "loophole in Hong Kong". We do not believe this to be the case.

PEPs are defined in the international standards set by the Financial Action Task Force, on which most jurisdictions base their anti-money laundering combating the financing of terrorism frameworks.

The definition includes individuals who are or have been entrusted with prominent public functions, for example, heads of state or of the government, senior politicians, senior government judicial or military officials, etc. International sports organisations are not included in the definition of PEPs in the task force's framework.

However, an individual who does not fall into the definition of a PEP, as adopted by the task force, does not mean that he or she would not be classified as high risk and subject to enhanced due diligence by banks.

In Hong Kong, it is required that, where a customer poses higher money laundering risks, banks should conduct enhanced due diligence.

Such work includes obtaining additional information on the customer and the intended nature of the business relationship, obtaining senior management approval and conducting enhanced monitoring of the relationship. These measures are broadly the same as the measures that must be taken for PEPs.

Second, while we are unable to comment on a specific case, it is the HKMA's understanding that banks would flag senior officials in international sporting bodies as sensitive and therefore of higher risk.

Some service providers providing background checks, which banks use as part of the due diligence process, also flag these positions as high risk.

We hope the above presents a more comprehensive picture to your readers on how the control mechanism of the banking system works on the anti-money laundering front.

Rhonda Lam, communications chief, the Hong Kong Monetary Authority