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Anti-Money Laundering Seminars by tQsm5d32

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									International Standards on
  Regulating DNFBPs &
     The way forward

 Narcotics Division, Security Bureau


          Mr Ping-Yiu MA
  Assistant Secretary for Security
            3 March 2010
               Agenda


 Financial Action Task Force (FATF)
  requirements on lawyers
 Highlight of the FATF recommendations
  relevant to lawyers
 Way Forward in regulating lawyers




                                          2
     FATF
The Financial Action Task Force (FATF) :
 an inter-governmental body
 created in 1989 by ‘G7’
 sets standards, develops and promotes
  policies to combat money laundering and
  terrorist financing
 has published 40+9 Recommendations to
  achieve its purpose
                                            3
   Designated Non-Financial Businesses
   and Professions (DNFBPs)
DNFBPs as defined by Financial Action Task
Force (FATF) are:
  Lawyers
  Accountants
  Trust and Company Service Providers
  (TCSPs)
  Real Estate Agents
  Dealers in Precious Metals/ Stones
  Casinos                                   4
      You Play an Important Role


                                  Trust and
                               Company Services
                   Casino         Providers

                                   Banks

             Dealers in
                          Securities
              Precious                          Lawyers
                          House
             Stones and             Insurance
               Metals               Firms


                      Estate
                      Agents          Accountants




Designated Non-Financial Businesses and Professions (DNFBP)
                                                              5
6
Be a Gatekeeper
 for Hong Kong




                  7
      FATF Requirements on Lawyers


                         CDD
   Complex                                   Record
                      (Rec. 5 & 9)
 Transactions                               Keeping
   (Rec. 11)                                (Rec. 10)

    New           Lawyers – operating
Technology      individually or in a firm        STRs
  (Rec. 8)                                   (Rec. 13 & 14)



    Special                                  Internal
   Attention             PEPs                Control
   (Rec. 21)            (Rec. 6)            (Rec. 15)




                                                              8
  FATF Requirements on the
     Lawyers Profession


Sanctions                  SRO
(Rec. 17)                (Rec. 24)

               The
             Lawyers
            Profession



            Guidelines
             (Rec. 25)


                                     9
    FATF Requirements for Lawyers

Requirements to be specified in law:

 Customer Due Diligence (Rec. 5)
 Record Keeping (Rec. 10)
 Suspicious Transaction Reporting (STR)
  (Rec. 13)


 Risk-based Approach Guidance for Legal
  Professionals
                                           10
     When to Conduct CDD?

When lawyers prepare for or carry out transactions
in relation to:
 Buying and selling of real estates;
 Managing of client money, securities or other
  assets;
 Management of bank, savings or securities
  accounts;
 Organisation of contributions for the creation,
  operation or management of companies;
 Creation, operation or management of legal
  persons or arrangements, and buying and selling
  of business entities.                          11
      When to Conduct CDD?

When lawyers act as Trust and Company Service
Providers and
 Acting as a formation agent of legal person;
 Acting as a director or secretary of a company;
 Providing a registered office, etc for a company;
 Acting as a trustee of an express trust;
 Acting as a nominee shareholder for another person.
 They have to comply with Rec. 5, 6, 8-11, 21.

                                                      12
  FATF Requirements for Lawyers


Other selected requirements:

 Internal Controls (Rec. 15)
 Self Regulatory Organisation (SRO)
  (Rec. 24)




                                       13
    Internal Controls

 To establish / maintain internal
  policies / procedures to prevent ML / TF.

 Policies / procedures to cover CDD,
  record keeping and STR obligations.

 To communicate these to employees.

 To develop appropriate compliance
  management (e.g. AML/CFT Compliance
  Officer at management level).
                                              14
      Internal Controls

 On-going staff training.
 Independent audit function to test
 compliance with the policies and procedures.
 To put in place screening procedures to
  ensure high standards in hiring employees.
 The type and extent of measures to be taken
  should commensurate with:
    the level of ML / TF risk; and
    the size of the business.
                                               15
    SRO – Responsibilities & Sanctions


 Government authority or SRO to monitor
  and ensure compliance with AML / CFT
  requirements.

 Power to sanction in case of non-
  compliance.

 Effective, proportionate and dissuasive
  criminal, civil or administrative sanctions
  be available.

                                                16
    SRO - Sanctions


 Range of sanctions available should be
  broad and proportionate to severity of
  non-compliance.

 Sanctions should be available to legal
  persons, their directors and senior
  management.



                                           17
      SRO - Resources

 Adequate structuring, funding, staff with
  sufficient technical and other resources to
  fully and effectively perform their functions.

 Sufficient operational independence and
  autonomy to ensure freedom from
  interference.

 Staff be of high professional standard &
  integrity and adequately trained for AML/CFT.

                                                   18
     SRO - Guidelines

 Government authority or SRO to establish
  guidelines to include the following:

  ML / FT techniques and methods; and
  any additional measures that DNFBPs
   could take to ensure their AML/CFT
   measures are effective.



                                             19
FATF Recommendations relevant to
DNFBPs

1    2    3    4    5 * 6     7
8    9    10 * 11   12   13 * 14
15   16   17   18   19   20   21
22   23   24   25   26   27   28
29   30   31   32   33   34   35
36   37   38   39   40   41   42
43   44   45   46   47   48   49
                                   20
    Results of HK Mutual Evaluation


 Rec. 12 (applying Rec. 5, 6 & 8-11) : NC

 Rec. 16 (applying Rec. 13-15 & 21) : NC

 Rec. 24                            : NC




                                             21
    Post ME Development (1)


 Establishment of Central Co-ordinating
  Committee (CCC), chaired by Financial
  Secretary.

 To steer & co-ordinate the strategic
  development of HK’s AML/CFT regime
  in line with internationally recognised
  standards.


                                            22
     Post ME Development (2)


 Financial Services & the Treasury Bureau
  (FSTB) is the overall co-ordinator for
  AML/CFT matters and with specific
  responsibilities on financial sectors.

 Security Bureau (Narcotics Division)
  looks after DNFBPs and Non-profit
  Organisations.


                                             23
   Way Forward (1)


Legislation on CDD & Record Keeping

 Phase I : Financial Sectors

 Phase II: DNFBPs




                                      24
     Way Forward (2)

 FSTB Consultation on Legislative
  Proposals Against Money Laundering
  ended on 6 February 2010.

Proposes to allow continued reliance on
 unregulated Third Parties by Financial
 Institutions.

 To be introduced into to LegCo – Q2 2010.

                                              25
    Way Forward (3)

 To prepare for Phase II, SB will step up
  outreaching activities to raise awareness
  on AML/CFT and work closely with
  professional bodies.

 CPD Seminars.

 Sector Specific Guidelines.

 Revised Interactive Training Kit.
                                              26
Consultation with Non-Financial Sectors


Issues

 Timeline

 Compliance costs

 Regulatory Authority


                                     27
Timeline (1)
                                     2010
                         2011
                      2013
               2015             2012
                              2014
                             2016




                                            28
Timeline (2)




            FATF
             35
           members




                     29
Compliance Costs (1)


        Internal
                    Staff
        Control
                   Training
        Systems
                     Policies
       Audit
                       and
      Function
                   Procedures
            Complianc
             e Officer




                                30
Compliance Costs (2)




   Compliance   International
     Cost        Standards




                                31
Compliance Costs? (1)




    Business
   Costs and     Professional
     Legal        Status and
   Obligations    Reputation




                                32
Compliance Costs? (2)




                        33
Open-minded




              34
Partnership




              35
Thank you!



             36

								
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