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Anti-money by sdfwerte


									Anti-money                                     FEATURE ROUNDTABLE

 and the role of the
       New recommendations from the Financial
    Action Task Force (FATF) extend the obligations
     on professional groups such as accountants,
     lawyers and company secretaries to disclose
      and document suspicious activities by their
         clients. On 12 September 2005 A Plus
        invited a group of experts to share their
          views and experiences on the latest
                  anti-money laundering
                       (AML) legislation.

                                                       October 2005   +   A Plus [ 27 ]
                                        Albert Au (chair)
                                        Senior partner, BDO McCabe Lo & Co. and
                                        Council member of the Hong Kong Institute of CPAs

                                        “I chair the Institute’s expert panel
                                         on legal matters, which led to
                                         my participation in discussions
                                                                                                           Phillip Baldwin
                                         with the government over the                                      CEO, Hong Kong Institute of
                                         implementation of the                                             Chartered Secretaries
                                         FATF recommendations.”
                                                                                                           “Chartered secretaries must have
                                                                                                            a higher calling to their profession

    Samantha Suen                                                                                           than to their role in a company.
                                                                                                            As a professional body we
    Managing director, KCS and former                                                                       provide a support mechanism, to
    president of Hong Kong Institute                                                                        give our members the courage
    of Chartered Secretaries                                                                                to speak out when they suspect
                                                                                                            money laundering or other
    “I am chairing the Hong Kong                                                                            unethical activities.”
     Institute of Chartered Secretaries’
     Anti-Money Laundering Working
     Group. At KCS we are working
     hard to enhance our clients’
                                                                                Jill Wong
     awareness of this issue.”                                                  Consultant, Clifford Chance

                                                                                “Clifford Chance’s regulatory and
                                                                                 compliance team works across

                                    Annie Chan                                   the litigation, dispute resolution,
                                                                                 corporate and financial markets
                                    Managing director, Investigative and         practices. We regularly advise
                                    Dispute Services, Ernst & Young              on AML procedures and client
                                                                                 identification issues. I previously
                                    “We are involved in two aspects of           worked as deputy legal counsel
                                     AML. First, in assessing whether            to the Hong Kong Monetary
                                     clients have established adequate           Authority, where I also advised
                                     AML policies and procedures and             on AML initiatives.”
                                     making recommendations on how
                                     to enhance those reporting systems;
                                     and second by helping the regulators
                                     to conduct investigations and where                                               Rosanna Ure
                                     necessary acting as expert witness.”
                                                                                                                       Commissioner for Narcotics,
                                                                                                                       Security Bureau of the
                                                                                                                       Hong Kong government
          Keith Stoddart
                                                                                                                       “I am the administrative
          Regional head of compliance, UBS
                                                                                                                        head of the narcotics
          “UBS has recognised the full importance                                                                       bureau in the Hong Kong
           of AML guidelines, by allocating staff and                                                                   government, the main
           IT resources and maintaining a constant                                                                      agency dealing with AML
           dialogue with regulators and other                                                                           legislation. I previously
           affected parties. We are also a member                                                                       worked in the community
           of the Wolfsberg Group, formed in 2000                                                                       relations department of the
           to develop industry standards to tackle                                                                      Independent Commission
           money laundering.”                                                                                           Against Corruption (ICAC).”

[ 28 ] A Plus   +   October 2005
Albert Au Let’s start by reviewing the
existing legislation governing money
laundering and terrorist financing. The
three existing ordinances in Hong Kong are
the Drug Trafficking Recovery of Proceeds
Ordinance (DTROP), the Organised
and Serious Crimes Ordinance (OSCO)
and the United Nations Anti-Terrorism
Measures Ordinance (UNATMO). All
three deal with the reporting of suspicious
transactions and apply to the public as a          important to ask whether the transaction
whole, not just to those groups represented        makes commercial or economic sense.
here. Rosanna, how effective has that
legislation been?                                  Ure The requirement to report suspicious
                                                   activities has been there for over ten years,
Rosanna Ure DTROP was the original                 but discussion and training is still needed,
legislation in Hong Kong imposing an               especially as cases become more complex.
obligation on citizens to report drug-related      Knowing your customer doesn’t just mean
money laundering crime. OSCO copied                ticking boxes – if you have any suspicion at
its reporting requirements but dealt with a        all you may well have information that will
wide range of serious and organised crimes.        be valuable to law enforcement agencies.
UNATMO, the most recently passed
ordinance, further criminalises terrorist          Jill Wong The legislation clearly says that if
financing. Some other jurisdictions have            you know or suspect any money laundering
ranked non-compliant under the FATF                activity you must report it. What amounts to
because they failed to cover a sufficiently wide     suspicion? This can be a tricky judgment call.
spectrum of indictable offences. Along with         A suspicion is more than just idle wondering
this legal framework, Hong Kong also has a         – it’s a positive feeling of apprehension or
strong regulatory framework in the financial        mistrust, amounting to a slight opinion
sector. The guidelines issued by regulators to     with some sufficient evidence. When you
their members in areas like AML have made          have a longstanding relationship with a firm
our regime very robust.                            suspicions come and go – one day you may
                                                   learn something that dispels your suspicion,
Au The 40 recommendations of the FATF              but next week something new throws doubt
establish the principle of “know your client”      over what you learnt previously.
with Hong Kong service industries. If you
can’t discharge your responsibilities by           Au The FATF recommendations originally
alerting your client, is there an expectation to   applied to banks and moneychangers, but
take an extra step?                                will now be extended to specified non-finan-
                                                   cial businesses and professions, including ac-
Samantha Suen Know your client is a                countants, lawyers, company secretaries, real
                                                                                                                   FATF: The Financial
                                                                                                    AML GLOSSARY

big part of the work we provide to our clients,    estate agents, casino owners and traders in
often involving background reference checks        precious stones and metals. Are these groups                    Action Task Force is an
with accountants, bankers and lawyers.             ready to meet the new recommendations?                          intergovernmental body
                                                                                                                   that promotes measures to
Annie Chan You need to know your                   Wong The banks and the Hong Kong                                counter the manipulation
customer in order to know what’s their             Monetary Authority have proved very                             of the financial system by
normal business and what’s abnormal or             successful at implementing procedures and                       criminals. It set out its first
irregular. For example, a large transfer of        controls. AML and terrorist financing issues                     recommendations in 1990,
funds from one jurisdiction to another             became more important after September 2001.                     with revisions in 1996
is not necessarily suspicious – it depends         We can learn a lot from the banks’ experiences                  and 2003.
on the nature of your customer’s business          as they have been working with the FATF and           
and the circumstances of the transfer. It’s        HKMA guidelines for several years.

                                                                                                                                October 2005   +   A Plus [ 29 ]
                                   Keith Stoddart The banks have worked              so how do you expect the recommendations
                                   closely with the government and regulatory        will be introduced and received?
                                   authorities to make sure we are truly
                                   combating money laundering. A lot of              Ure Each of the three core principles must
                                   people have been brought in specifically           be enshrined in law. But we don’t want the
                                   for know your client roles. We have a lot         legislation to be too prescriptive. We have
                                   of experience in reporting that we can share      invited accountants and lawyers to consider
                                   with other groups. We can’t let money             self-regulation of their members in respect of
                                   launderers take advantage of our commercial       AML and anti terrorist financing issues. We
                                   and financial system.                              understand that the AML Regulation in the
                                                                                     United Kingdom also adopts the approach
                                   Wong The FATF recommendations are                 of including the broad principles and legal
                                   well understood by banks and other financial       sanctions, but the implementation of the
                                   institutions but groups like real estate agents   broad principles will be agreed upon by
                                   face different commercial and competitive          the government and the regulatory bodies,
                                   pressures. The costs of enhanced due              taking into account the characteristics of
                                   diligence procedures could be onerous for         individual professions.
                                   small organisations. The banks built up this
                                   expertise over several years and most are large   Au The regulatory emphasis of the
                                   enough to bear the costs of implementing          Hong Kong Institute of CPAs has always
                                   AML controls.                                     been towards practising members of our
                                                                                     profession, as this involves public interest.
                                          Chan I expect it will take some            For instance, the Institute’s practice review
                                          time for groups like real estate agents    programme applies only to members who
                                          to comply with the FATF, as the            are practising accountants. The Institute
                                          requirements will be new to them.          has some questions as to how it could
                                          Maybe the government can consider          effectively discharge the responsibility of
                                          a longer grace period, and allow           self regulation, given that the legislation
                                          companies to progress step-by-step.        would apply to all CPAs, whether they are
                                                                                     in public accounting or in private industry.
                                          Ure Estate agents are well aware of        It is concerned that the legislation only
                                          their obligations. We had a similar        affects some members. We already have a
                                          problem with moneychangers,                self-regulatory role under the Professional
                                          when they had to adopt AML                 Accountants Ordinance – this really targets
                                          measures some time earlier. There          one group, namely our 3,400 practising
                                          were some prosecutions but for             members. The Financial Reporting
                                          the most part they accepted the            Council will also target this section of
                                          requirements. On the other hand,           our members. If we are not regulating the

       Hong Kong’s prosperity depends on our collaborative efforts.
                It is unthinkable that Hong Kong
                        might rank as                           non-compliant
            in the next FATF mutual evaluation.                                                           ROSANNA URE
                                   the Estate Agents Authority has licensing         entire population of our membership in
                                   and regulatory arrangements, that give its        the same way, that could compromise our
                                   members a platform to start with. I would         public standing.
                                   not underestimate the time it takes for the
                                   sector as a whole to achieve full compliance,     Phillip Baldwin This amount of self-
                                   but the Authority is already planning to          regulation must place a lot of demands on
                                   put training and procedures in place.             your secretariat.

                                   Au Hong Kong’s existing legislation only          Au We would be allocating a lot of resources
                                   prescribes reporting on suspicious transac-       to monitor a small segment of our members.
                                   tions, but the FATF recommendations also          Some of our members may also be company
                                   cover due diligence and record keeping. Ac-       secretaries or lawyers, in those cases we need
                                   countants are well accustomed to regulations,     clear guidelines on where our responsibilities

[ 30 ] A Plus   +   October 2005
lie. We prefer to issue guidelines or technical    Baldwin Although we are not a statutory
bulletins that apply to all members.               body, we can exercise an extensive range of
                                                   sanctions, including investigative panels and
Suen Most accounting firms outside the Big          tribunals. We are part of an international
Four still have corporate secretarial divisions.   network that shares any information on
But some firms use lawyers and accountants          malfeasance – so a member can’t dash off to
to handle clients funds, to help them set up       another jurisdiction without consequences.
escrow arrangements or to remit funds on
their behalf.                                      Ure I appreciate the work done by the
                                                   Institute but the government believes
Au The FATF distinguishes between two              company secretaries can’t be regarded in the
issues here – it identifies legal and accounting    same way as accountants and lawyers. For
services applying to particular designated         now the government must step in for those
activities such as real estate and casinos, and    businesses and professions that are either
then it has a separate section applying to         unwilling or unable to regulate themselves. We
specific trust and company service providers.       appreciate that different groups have different
It depends on the way different CPA firms            circumstances requiring different solutions.
are organised.
                                                   Wong I believe most of the 14,000
Ure I think the FATF makes its definition           suspicious transaction reports lodged with

 We can             learn a lot from the banks as they have been
                                           working with the FATF for several years.
of the non-financial groups clear. For              the Joint Financial Intelligence Unit each                                   JILL WONG
example, in the glossary of the FATF               year come from banks. They are certainly
40 recommendations, lawyers, notaries,             aware of their obligations. It looks like other
other independent legal professionals and          groups will now have to follow their lead.
accountants refer to sole practitioners,
partners or employed professionals within          Chan It is good to see that Hong Kong is
professional firms. It is not meant to refer to     taking the necessary steps to implement the
internal professionals that are employees of       40 recommendations proactively. It shows
other types of businesses nor to professionals     that Hong Kong is complying with the best
working for government agencies. So                practice internationally.
my interpretation is that non-practising
accountants, working in companies other            Au There would be nothing more
than professional firms or those working in         damaging for Hong Kong than to be
government, may not be covered in these            associated with money laundering. It’s
requirements. We are giving the professions        a fight that will continue to evolve over
an opportunity to take a self-regulatory role      time and we certainly can’t take our good
but there could be more than one way to            standing for granted.
achieve it. Chartered accountants and law
societies in other countries such as the           Ure There is a huge difference between
United Kingdom have already taken on               the original FATF 40 recommendations
these responsibilities.                            and those we have today. The
                                                   international community has gained a lot
Baldwin Chartered secretaries would also           of understanding about the techniques                            JFIU: The Joint Financial
                                                                                                     AML GLOSSARY

consider adopting this kind of self-regulatory     used by criminals, this forms the basis                          Intelligence Unit is jointly run
role. We have established qualification             for enhancing our AML framework.                                 by the Hong Kong Police
procedures, a comprehensive disciplinary           Fighting money laundering is part of                             Force and the Customs
structure and an ethics-based code of conduct.     the government’s effort in providing                              and Excise Department.
Our codes are being examined closely by the        security to its people and safeguarding                          Its role is to receive and
Bankruptcy Amendment Ordinance.                    the integrity of the financial system.                            process suspicious
                                                   But no government can achieve this                               transaction reports, and to
Suen Yes, we are taking these issues seriously.    goal alone. Banks and other businesses                           assign investigations to the
The chief counsel of the HKMA will be              and professions can do a lot to help the                         appropriate agency.
speaking at our Anti-Money Laundering              government in this respect. You are our
Working Group next month.                          powerful allies.                                       

                                                                                                                                  October 2005   +   A Plus [ 31 ]

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