Hong Kong Monetary Authority
The Hong Kong Monetary Authority (HKMA) is Hong Kong’s central banking institution. It was established on 1 April 1993 by merging the Office of the Exchange Fund and the Office of the Commissioner of Banking. The HKMA’s four main functions are:
- Helping to maintain Hong Kong’s status as an international financial centre, including the maintenance and development of Hong Kong’s financial infrastructure
- Maintaining currency stability within the framework of the Linked Exchange Rate System
- Managing the Exchange Fund
- Promoting the stability and integrity of the financial system, including the banking system.
Hong Kong is a member of international standard setting bodies, including the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering (APG), since 1991 and 1997 respectively. Hong Kong’s anti money laundering and counter financing of terrorism regime earns positive assessment from the Financial Action Task Force (FATF), making it the first FATF member jurisdiction in the Asia Pacific region to achieve an overall compliant result.
Money laundering and terrorist financing (ML/TF) represent significant threats to the integrity of economic and financial systems. The Hong Kong Monetary Authority (HKMA), overall AML/CFT regime has developed relevant policies and guidance for the banking sector, which focus on safeguarding the banking system from ML/TF risks.
The main legislation relevant for Authorised Institution’s (AI) AML/CFT Systems is the Anti Money Laundering and Counter Terrorist Financing Ordinance (AMLO), which sets out the customer due diligence and record keeping requirements, and the Banking Ordinance (BO), required for AIs to maintain adequate systems of control.
HKMA’s role in AML/CFT compliance:
- The Government is committed to upholding a robust AML/CFT regime that:
- Fulfils the international AML/CFT standards
- Deters and detects illicit fund flow through financial systems
- Combats ML/TF and restrains and confiscates illicit proceeds effectively
- Reduces ML/TF vulnerabilities of the financial and non-financial sectors in HK
- Adopts a risk-based approach in applying compliance obligations to businesses and individuals
- Fosters strong external and international collaboration to disrupt global ML/TF threats
- Promotes awareness and builds the capacity of private sector stakeholders in combating ML/TF risks through engagement in AML/CFT efforts.
- HKMA supervises and monitors Authorised Institutions (AI) in their effective assessment and management of ML/TF risks and compliance with AML/CFT requirements
- Provide guidance and assistance to Authorised Institutions to focus their resources and efforts efficiently on ML/TF risk
- HKMA seeks to:
- Meet international standards, in particular those set by FATF
- Support government and law enforcement efforts to combat ML/TF activities, and restrain and confiscate the proceeds of illicit activities
- Cooperate with other financial regulators and law enforcement agencies
- Actively participate in FATF, APG (Asia Pacific Group), Expert Group of the Basel Committee on Banking Supervision
- raise awareness and build AML/CFT capacity in the financial sector by providing guidance and promoting training
The risk-based approach (RBA) is central to the effective implementation of an AML/CFT regime. A RBA to AML/CFT means that jurisdictions, competent authorities, and Ais, are expected to identify, assess and understand the ML/TF risks to which they are exposed and take AML/CFT measures commensurate with those risks in order to manage and mitigate them effectively. An Authorised Institution should have AML/CFT systems, which are approved by senior management, to enable the institutions to effectively manage and mitigate the risks; monitor the implementation AML/CFT systems; and take enhanced measures to manage and mitigate the risk, where higher risks are identified.
An Authorised Institution should implement AML/CFT systems in regard to nature, size and complexity of its business and ML/TF risks arising from those business and should include:
- Compliance management arrangements; appointment of a Compliance Officer (CO) and a Money Laundering Reporting Officer (MLRO)
- Employee screening procedures
- An independent audit function
- Ongoing employee training programme.