The amendments to the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (“AMLO”) and the Companies Ordinance (Cap. 622) (“CO”) have come into operation since 1 March 2018.
They extend the customer due diligence and record-keeping requirements under Schedule 2 of AMLO to four sectors of designated non-financial businesses and professions (“DNFBPs”) (i.e. legal professionals (covering solicitors and foreign lawyers), accounting professionals, estate agents, and trust or company service providers (“TCSPs”)) when they engage in specified transactions. They also introduce a licensing regime for TCSPs and make certain amendments to ensure that AMLO is in line with the latest requirements of the Financial Action Task Force (“FATF”).
FATF is an international organisation established in 1989 to thwart attempts by criminals to launder the proceeds of crime through the financial system. Hong Kong has been a full member of FATF since March 1991 and is under the obligation to implement the organisation’s recommendations on anti-money laundering and counter terrorist financing.
Section 7 of AMLO has been amended to enable the regulatory bodies of the DNFBPs to publish sector-specific guidelines to provide guidance in relation to the operation of the requirements in Schedule 2 to AMLO.
The amended section 7(1) and the new section 7(5A) of AMLO enable the Law Society, as the sole authority for enforcing AMLO requirements for legal professionals, to have the discretion to promulgate guidelines and to determine the content of our Practice Direction P as we consider appropriate for providing guidance in relation to the operation of any provision in Schedule 2.
The Law Society’s Practice Direction P is a comprehensive set of guidelines on anti-money laundering and terrorist financing for solicitors issued in December 2007. In light of the recent amendments to AMLO, Practice Direction P has been revised with effect from 1 September 2018.
The major amendments to Practice Direction P include the following:
(i) Amendments are made to paragraph 1(iii) in Table A of Practice Direction P providing further details on client identification and verification in exceptional or urgent circumstances where it is not practicable to verify a client’s identity;
(ii) A new paragraph 3(iv) is introduced to Table A of Practice Direction P. An applicable situation has been added for enhanced client due diligence where the Government through the Law Society has issued notices informing members of situations which may present a high risk of money laundering or terrorist financing;
(iii) The meaning of “a politically exposed person” in footnote 2 is amended to include elaboration on the meaning of “a partner of an individual” and “a close associate of an individual”;
(iv) The meaning of “an equivalent jurisdiction” is set out in footnote 5;
(v) The meaning of “a beneficial owner” is added as Annexure 8;
(vi) The record keeping requirement for criminal cases is extended from 3 years to 5 years from expiration of any appeal period (paragraph 6(iv) in Table A and paragraph 24.4);
(vii) The reference to “Recommendation 16” in paragraph 37 of Practice Direction P has been amended to “Interpretive Note to Recommendation 23”. The words “their suspicions” have been amended to “suspicious transactions”.
(viii) The meaning of “money laundering” and “terrorist financing” is added as paragraphs 56 and 57;
(ix) Additional guidelines are made for (a) solicitors acting for an attorney or agent of another person (paragraph 91) and (b) non-face to face relationship (paragraph 99);
(x) The categories of specified intermediaries are added as Annexure 9.
The revised Practice Direction P was gazetted on 24 August 2018. The Law Society will organise seminars to update members on the changes made to the Practice Direction in due course.