New AML/CTF Rules for Money Lenders in Hong Kong

Hong Kong continues to keep up the pace on anti-money laundering and counter-terrorist financing (AML/CTF) reforms in 2018.

The Companies Registry (CR) has become the latest Hong Kong Government body to issue an AML/CTF industry guideline. The new Guideline on Compliance of Anti-Money Laundering and Counter-Terrorist Financing Requirements for Licensed Money Lenders (Guideline) was published on September 21, 2018.

PLUGGING THE GAP

To date, licensed money lenders were only subject to non-binding industry AML/CTF standards if they were members of the Licensed Money Lenders Association aside for the general law. This made licensed money lenders amongst the few left in the financial industry that were not directly regulated for AML/CTF compliance.

A NEW RISK-BASED REGIME

The Guideline aims to license money lenders in the implementation of effective risk-based AML/CTF measures. It is virtually identical to the CR Guideline on Compliance of AML/CTF Requirements for Trusts or Company Service Providers and very much in line with similar guidelines issued by regulatory bodies such as the Hong Kong Monetary Authority, the Securities and Futures Commission, and the Insurance Authority. All of which share the common goal of setting requirements of Schedule 2 to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap 615).

WHY COMPLY?

The Guideline does not have the force of law. However, it can impact the ongoing ability of money lenders to remain licensed.

In the opening paragraph of the Guideline (paragraph 1.1), it is clearly specified that any non-compliance with the Guideline ”may cast a doubt on whether a licensee is fit and proper to carry on business as a money lender and whether its officers are fit and proper to be associated with the business of money-lending”. This sends a clear warning that failure to comply with the Guideline could lead to a money lender’s license being revoked and individuals facing disqualification from holding a license.

NEXT STEPS

Licensed money lenders should carefully review their AML/CTF policies and procedures to ensure they have the necessary controls and any required data sources and technology solutions (e.g. for screening, monitoring, and record keeping) in place. An institutional risk assessment is also valuable to determine the extent of measures required. Additional resources are likely to be necessary, including appropriate staff members who can assist with the procedures.

This all takes time and should commence as soon as possible.

Jurisdictions: 

Senior Associate, King & Wood Mallesons (Hong Kong)

Leonie Tear is a senior associate in Hong Kong, specialising in multi-jurisdictional financial crime investigations and compliance advisory. Tear has led a number of internal investigations on behalf of corporates, financial institutions and individuals being investigated by a range of prosecuting authorities. She has led financial crime compliance reviews for multi-national companies, stress testing AML, sanctions compliance and anti-bribery systems and controls against global best practice. Tear is qualified to practice in Hong Kong and England & Wales.