InternationalInternational Standards on Regulating DNFBPs &

The way forward

Mr Peter KWOK

Assistant Secretary for Security 19 February 2009

Narcotics Division, Security Bureau

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Agenda

Financial Action Task Force (FATF) requirements on accountants

Highlight of the FATF recommendations relevant to accountants

Way Forward in regulating accountants

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Designated Non-Financial Businessesand Professions (DNFBPs)

DNFBPs as defined by Financial Action Task Force (FATF) are:

Lawyers

Accountants

Trust and Company Service Providers (TCSPs)

Real Estate Agents

Dealers in Precious Metals/ Stones

Casinos

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FATF requirements on accountants

Financial Action Task Force (FATF) requirements on accountants

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• CDD (Rec. 5)

• Record Keeping (Rec. 10)

• Suspicious Transaction Reporting (Rec. 13)

Requirements to be specified in law:

Other requirements:

• Internal Controls (Rec. 15)

• Sanctions (Rec. 17)

FATF requirements on accountants

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Other requirements:

• Politically Exposed Persons (PEPs) (Rec. 6)

• New technology/ Non-face-to-face Business (Rec. 8)

• Reliance on 3rd parties/ intermediaries (Rec. 9)

• Complex / unusual transactions (Rec. 11)

FATF requirements on accountants

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Other requirements:

• No tipping-off (Rec. 14)

• Special attention to parties from non-complying jurisdictions (Rec. 21)

• Self Regulatory Organisation (SRO)(Rec. 24)

• Competent authorities to establish guidelines (Rec. 25)

FATF requirements on accountants

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When accountants prepare for or carry out transactions in relation to:

• Buying and selling of real estates;

•Managing of client money, securities or other assets;

•Management of bank, savings or securities accounts;

•Organisation of contributions for the creation, operation or management of companies;

• Creation, operation or management of legal persons or arrangements, and buying and selling of

business entities.

FATF requirements on accountants

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When accountants acts as Trust and Company Service Providers and

• Acting as a formation agent of legal person;

• Acting as a director or secretary of a company;

• Providing a registered office, etc for a company;

• Acting as a trustee of an express trust;

• Acting as a nominee shareholder for another person.

They have to comply with Rec 5, 6 & 8-11.

FATF requirements on accountants

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Highlight

Highlight of

FATF recommendations

relevant to accountants

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Rec. 5 and 9 (CDD)

• To identify the customer and verify his ID

• To identify the beneficial owner

• The purpose and intended nature of the business relationship

• On-going CDD and enhanced CDD

• Reliance on 3rd parties/ intermediaries

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Rec. 10 (Record Keeping)

• To retain all documents relating to transactions

• At least 5 years after the completion of transactions

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Rec. 13 and 14 (STRs)

• Suspicious Transactions Reporting (STR) requirements

• Protection from criminal/ civil liabilities

• No tipping-off

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Rec. 15 (Internal Control)

• To establish/ maintain internal policies/ procedures to prevent ML/TF

• To ensure high standards in hiring employees

• On-going staff training

• Audit function to test the system

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Rec. 24 and 25 (SRO & Guidelines)

• Government authority or Self-regulatory Organisation (SRO) to monitor and ensure compliance with

AML/CFT requirements

• Power to sanction in case of non-compliance

• Government authority or SRO to establish guidelines

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Rec. 17 (Sanctions)

• Sanctions are effective, proportionate and dissuasive

• Sanctions can be meted out by Government authority or SRO

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Rec. 6 (PEPs)

• Have appropriate risk management systems to determine whether clientsare Politically Exposed Persons (PEPs)

or not

• Senior management approval for having business relationships

• To establish source of wealth/ fund

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Rec. 8 (New Technology)

• To prevent misuse of technological developments for ML

• To address risk associated with non-face-to-face business relationships

To take measures:

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Rec. 11 (Complex Transactions)

• To pay special attention to all complex, unusual large transactions and unusual patterns of transactions

• To examine the background/ purpose of such transactions

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Rec. 21 (Special Attention)

• To give special attention to dealings with parties from countries which do not comply with the FATF Recommendations

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FATF Recommendations relevant to DNFBPs

1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

22 23 24 25 26 27 28

29 30 31 32 33 34 35

36 37 38 39 40 41 42

43 44 45 46 47 48 49

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• The Third round of Mutual Evaluation (ME) is underway

• 23 jurisdictions have been assessed

• www.fatf-gaif.org

Mutual Evaluation by FATF

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Way Forward

Way Forward

in regulating accountants

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• Establishment of Central Co-ordinating Committee (CCC), chaired by Financial Secretary, in April 2008

• To steer & co-ordinate the strategic development of HK’s AML/CFT regime in line with internationally recognised standards

Way Forward (1)

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• FSTB assumes the role of overall co-ordinator for AML/CFT matters and with specific responsibilities on financial sectors

• SB (Narcotics Division) is to look after DNFBPs and Non-profit Organisations

Way Forward (2)

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• Phase I : Financial Sectors

• Phase II: DNFBPs

• No time table and open-minded

Way Forward (3)

Legislation on CDD & Record Keeping

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• To prepare for Phase II, SB will step up outreaching activities to raise awareness on AML/CFT and work closely with regulatory/ professional bodies

• CPD Seminars

• Sector Specific Guidelines

• Revised Interactive Training Kit

Way Forward (4)

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Thank you!