SFC to Amend the Guideline of AML and Counter-Terrorist Financing

The Hong Kong regulator has launched a consultation paper and gives market participants until August to reply.

The Securities and Futures Commission (SFC) on Thursday launched a consultation paper that proposes amendments to the Guideline of Anti-Money Laundering and Counter-Terrorist Financing. The changes seek to make the guidelines for Associated Entities more useful and relevant, while also keeping them in line with international standards.

With the launch of the consultation, market participants and interested parties can now submit their feedback to the watchdog. According to the statement, the regulator welcomes feedback and amendments to the proposal by August 9, 2018.

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Proposed amendments

The amendments aim to streamline the identification and verification processes when onboarding customers. According to the statement, this should allow licensed corporations the flexibility to adopt reasonable risk-based measures. It will also give them the ability to determine the extent of the verification process.

The changes also want to expand the definition of politically exposed persons, a term which describes someone who has been entrusted with a prominent public function. The regulator wants to include customers who have been entrusted with a prominent function by an international organization.

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Commenting on the launch of the consultation, Ashley Alder, the SFC’s Chief Executive Officer said: “the SFC is committed to adhering to international AML/CFT standards to reinforce Hong Kong’s reputation as a major international financial center.

“In formulating the proposed amendments, we adopted a balanced regulatory approach to give firms flexibility while ensuring our requirements are effective to prevent money laundering and terrorist financing.”

The adjustments also propose that licensed corporations can use technology to allow non-face-to-face account opening. However, this is only if they can clearly demonstrate they have adequate safeguards against impersonation risk.

Derivatives regulation

The SFC is also updating regulation in other areas of Hong Kong’s securities and futures markets. Only last week, Finance Magnates reported that the watchdog announced the conclusion of its consultation on over-the-counter (OTC) derivatives regulation.

The consultation included proposals to mandate the use of legal entity identifiers (LEIs), expand firms’ clearing obligations and enforce a trading determination process for introducing a platform trading obligation.

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