The Financial Action Task Force (“FATF”) and Asia-Pacific Group’s mutual evaluation report for Hong Kong is due to be published in September 2019, pending a quality and consistency review. It appears to have been widely reported that Hong Kong will be found to be compliant (or largely compliant) with the FATF’s “Forty Recommendations” and intended outcomes*. Overall, this is a good result and much as was hoped for; albeit, it required a lot of hard work on the part of the Government’s representatives (in particular, the Financial Services and the Treasury Bureau) and various industry stakeholders.
Each of the designated non-financial and businesses and professions (“DNFBP”) have played their part – not least the members of the Law Society’s AML Committee and the Law Society Secretariat.
There are likely to be areas for improvement. Some of these include the following.
• The number of suspicious transactions reports to the Joint Financial Intelligence Unit (“JFIU”) for the six months to 30 June 2019 was 24,027 (compared with 73,889 for the whole of 2018). In some industry sectors, the problem is not so much the quantity of the reports but their quality. Among the DNFBP sectors, there are still concerns regarding the level of reporting.
• The number of convictions for money laundering related offences (essentially, “dealing” offences), has been in decline in the last few years. This is expected to change. The value of assets restrained by law enforcement agencies (the Police and Customs & Excise) is likely to increase and herald a rise in prosecutions in the future. For more on the relevant statistics, readers can refer to the JFIU’s website.
• For the DNFBP (including, solicitors and foreign lawyers) they must adhere to their professional guidelines. For example, solicitors and foreign lawyers must adhere to the mandatory aspects of Practice Direction P (revised in August 2018) and familiarise themselves with its general guidance. Practice Direction P has been in place for well over ten years. It has been considered by the courts in Hong Kong and has been found to be tantamount to a code of good practice for lawyers in Hong Kong. Solicitors and foreign lawyers should keep their training up to date and report relevant money laundering concerns to their compliance personnel.
• Those law firms, solicitors or foreign lawyers that fail to observe the customer due diligence and record-keeping requirements, pursuant to amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) implemented in March 2018, do so at their own risk. Such failures expose lawyers to the risk of (among other things) serious regulatory sanctions, pursuant to s. 9A(1AA) of the Legal Practitioners Ordinance (Cap. 159) – the same is true for solicitors or foreign lawyers while serving as a director of a corporation that is a trust or company service provider licensee.
The AMLCTF customer due diligence and record-keeping requirements for DNFBP have been on the statute book for well over a year – a not untypical period during which (for example) things may be allowed to “bed in” and after which regulatory proceedings may begin to “kick in”. In the last few years in England and Wales there have been a series of investigations and disciplinary proceedings involving solicitors arising out of anti-money laundering and account rule breaches, which have resulted in serious fines and regulatory sanctions. Law firms in England have also been known to report their lawyers to their regulator (the Solicitors Regulation Authority).
*Editorial Note: See HKSAR Government’s Press Release, dated 26 June 2019 (“Hong Kong has a strong framework and effective system for combating money laundering and terrorist financing”).