Comprehensive AML Laws and Regulations: Hong Kong

Hong Kong has developed a robust framework to combat money laundering (ML) and terrorist financing (TF), aligning with international standards. These regulations cover various sectors, including banking, insurance, asset management, wealth management, payment processors, fintech, lending, and crypto, ensuring the integrity of its financial system.

Key Laws and Guidelines

• Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO): The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) requires financial institutions to implement comprehensive AML and CTF measures. The ordinance covers customer due diligence, record-keeping, and the reporting of suspicious transactions, ensuring that financial institutions adhere to strict AML/CFT standards. The AMLO also extends to designated non-financial businesses and professions, including lawyers, accountants, and real estate agents.
• Drug Trafficking (Recovery of Proceeds) Ordinance (DTROP): The Drug Trafficking (Recovery of Proceeds) Ordinance focuses on confiscating proceeds from drug trafficking. It mandates financial institutions to report transactions suspected to be linked to drug trafficking and provides authorities with the power to seize assets derived from drug-related activities.
• Organized and Serious Crimes Ordinance (OSCO): The Organized and Serious Crimes Ordinance addresses the confiscation of proceeds from serious crimes. It empowers law enforcement agencies to investigate and seize assets associated with organized crime, money laundering, and other serious offenses. The OSCO also mandates financial institutions to report suspicious transactions related to organized crime.
• Securities and Futures Ordinance (SFO): The Securities and Futures Ordinance regulates the securities and futures markets for AML compliance. It mandates that financial intermediaries conduct customer due diligence, monitor transactions, and report suspicious activities. The SFO ensures that the securities sector adheres to high AML/CFT standards.
• Cryptocurrency Guidelines: Issued by the Securities and Futures Commission (SFC), these guidelines regulate virtual asset trading platforms. They require platforms to implement robust AML measures, including customer verification, transaction monitoring, and the reporting of suspicious activities. The guidelines aim to mitigate the risks associated with virtual assets and ensure compliance with AML/CFT regulations.
• Real Estate Agents Authority (EAA) Guidelines: The Real Estate Agents Authority provides AML/CFT guidance for real estate professionals. The guidelines require real estate agents to conduct customer due diligence, keep transaction records, and report suspicious transactions. These measures help prevent money laundering in the real estate sector.

Regulatory Bodies

• Hong Kong Monetary Authority (HKMA): The HKMA regulates banks and other financial institutions to ensure compliance with AML regulations. It oversees the implementation of AML/CFT measures, conducts inspections, and enforces penalties for non-compliance. The HKMA also provides guidance and support to financial institutions to enhance their AML programs.
• Securities and Futures Commission (SFC): The SFC oversees the securities and futures markets, enforcing AML compliance. It regulates financial intermediaries, ensuring they adhere to AML/CFT standards. The SFC also issues guidelines and conducts inspections to promote best practices in the securities sector.
• Insurance Authority (IA): The IA regulates the insurance industry to ensure adherence to AML laws. It mandates that insurance companies implement effective AML measures, including customer due diligence and transaction monitoring. The IA conducts regular inspections and enforces penalties for non-compliance.
• Customs and Excise Department (C&ED): The C&ED monitors cross-border movement of cash and negotiable instruments. It enforces regulations to prevent money laundering and terrorist financing through the physical movement of money. The C&ED also collaborates with other Regulatory Bodies to enhance AML/CFT efforts.
• Real Estate Agents Authority (EAA): The EAA regulates the real estate sector for AML compliance. It provides guidelines and training to real estate agents, ensuring they implement effective AML measures. The EAA also conducts inspections and enforces penalties for non-compliance.

History of Regulations

• 1995: Enactment of the Drug Trafficking (Recovery of Proceeds) Ordinance.
• 2000: Introduction of the Organized and Serious Crimes Ordinance.
• 2012: Implementation of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
• 2018: Amendments to the AMLO to align with FATF recommendations.
• 2020: Issuance of guidelines by the SFC for virtual asset trading platforms.

Sector-specific Regulations

• Banking and Financial Institutions: Regulated by the Hong Kong Monetary Authority (HKMA), the banking and financial institutions sector is required to implement comprehensive AML/CFT programs. This includes strict KYC protocols, continuous monitoring of transactions, and the reporting of suspicious activities. Banks and financial institutions must also maintain records for a minimum of five years.
• Insurance: The insurance sector, overseen by the Insurance Authority (IA), mandates companies to implement effective AML measures. This includes customer due diligence, transaction monitoring, and the reporting of suspicious activities to the Joint Financial Intelligence Unit (JFIU).
• Asset Management and Wealth Management: Regulated by the Securities and Futures Commission (SFC), asset management and wealth management firms must adhere to stringent AML regulations. These firms are required to implement robust AML programs, conduct thorough customer due diligence, and monitor transactions for suspicious activities. They must also report any suspicious transactions and maintain detailed records.
• Payment Processors and Fintech: Payment processors and fintech companies are subject to HKMA regulations. These entities must implement comprehensive AML measures, including customer verification, real-time transaction monitoring, and the reporting of suspicious transactions. They must also comply with guidelines issued by the SFC for virtual asset service providers.
• Lending: Lending institutions, both traditional and fintech-based, must adhere to AML regulations set by the HKMA. These institutions are required to conduct customer due diligence, monitor transactions for suspicious activities, and report any suspicious transactions to the JFIU. They must also maintain records of all transactions and customer information.
• Crypto: The crypto sector is regulated under guidelines issued by the SFC. Virtual asset service providers (VASPs) are required to implement robust AML measures, including customer verification, transaction monitoring, and the reporting of suspicious activities. VASPs must also maintain detailed records of all transactions.