Management Money Laundering and Terrorist Financing Risks associated with Virtual Assets
4. MANAGEMENT MONEY LAUNDERING AND TERRORIST FINANCING RISKS ASSOCIATED WITH VIRTUAL ASSETS
As for AML/CFT legislation in Hong Kong, the AMLO currently only applies to financial institutions (including HKMA-authorised institutions (i.e. banks), SFC licensed corporations, licensed insurance companies, stored value facility issuers and money service operators) and “designated non-financial businesses and professions”) (“DNFBP”) (professions such as lawyers, public accountants, estate agents, and trust and company services agents). All entities that are licensed or registered by the SFC to conduct regulated activities are thus subject to the AML and CTF obligations of the AMLO.
The FSTB’s proposals to create a new licensing regime for virtual asset exchanges under the AMLO, if adopted, will also require virtual asset exchanges licensed under the new regime to comply with AML and CTF obligations of the AMLO.
The Hong Kong Monetary Authority and the SFC have also reminded regulated bodies of the need to comply with the FATF’s latest recommendation.
In response to the FATF’s revised Recommendations, the HKMA published a notice on 16 December 2019 [21] (the “HKMA FATF Notice”). The purpose of the HKMA FATF Notice was to provide guidance to authorised financial institutions in relation to the revised FATF Recommendations.
The HKMA FATF Notice reminded authorised institutions that when they establish and maintain business relations with VASPs , appropriate risk assessments should be carried out to differentiate the risks of each VASP, recognising that there is no ‘one size fits all’ approach. The approach adopted by authorised institutions will depend on the nature of the relationship between the authorised institution and the VASP. As such, authorised institutions must undertake additional customer due-diligence measures, which includes the collection of sufficient information to adequately understand the nature of the VASPs business, determining from publicly available information whether or not the VASP is licensed or registered and subject to AML/CTF supervision, and assessing the AML/CTF controls of the VASP as appropriate. The HKMA FATF Notice explains that the extent of the customer due-diligence measures employed by the authorised institution should be commensurate with the assessed money laundering/terrorist financing risks of the VASP.
Before introducing new banking or investment products, authorised institutions should also undertake money laundering / terrorist financing risks assessments, take appropriate measures to manage and mitigate the identified risks in accordance with the applicable legal and regulatory requirements which includes the requirements set out in the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism.
- HKMA notice on Managing ML/TF risks associated with virtual assets (VAs) and virtual asset service providers. Available at: https://www.hkma.gov.hk/media/eng/doc/key-information/guidelines-and-circular/2019/20191216e2.pdf
This note is provided for information purposes only and does not constitute legal advice. Specific advice should be sought in relation to any particular situation. This note has been prepared based on the laws and regulations in force at the date of this note which may be subsequently amended, modified, re-enacted, restated or replaced.