Anti-Money Laundering / Counter-Financing of Terrorism

LCs should apply enhanced due diligence measures, including obtaining information on the reasons for intended transactions, and conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination, to business relationships and transactions with natural and legal persons from the concerned countries. LCs are further advised that the type of enhanced due diligence measures applied should be effective and proportionate to the risks, and in line with the standards as specified in the SFC circulars.

Please refer details of the Circular by the following link:

Circulars to Licensed Corporations and Associated Entities – Anti-Money Laundering / Counter-Financing of Terrorism :
Frequently Asked Questions
Circular :

Early Alert on United Nations Sanctions – ISIL (Da’esh) and Al-Qaida

FATF Updates

Reference : SFC Circular

Source: Compliance Commit

SFC issued a revamped Business and Risk Management Questionnaire (BRMQ). Licensed corporations and associated entities are required to complete and electronically submit the new BRMQ to the SFC for financial years ending on or after 31 March 2019.

The SFC also launched a new online portal, WINGS, as a common platform for making electronic submissions to the SFC, including the new BRMQ. All functions and submission services available on the existing SFC Online Portal and other SFC systems will be migrated to WINGS in phases.

Please refer details of the Circular by the following link:

Circular to Licensed Corporations and Associated Entities, Launch of revamped Business and Risk Management Questionnaire and new online portal

Reference : SFC Circular

Source: Compliance Commit

Due to The Securities and Futures (Financial Resources) (Amendment) Rules 2018 were enacted on 12 December 2018 and some amendments which relate to the exclusion of certain lease liabilities from licensed corporations’ liquid capital calculations came into operation on 1 January 2019. SFC specifies new electronic form of financial return published on their website which shall be used for a return required to be submitted under section 56 of the FRR and such forms supersede all previous versions of such form with effect from 1 February 2019.

In summary, Form 2 has been amended with an additional new cell “2006A”, which allows LCs to report excluded lease liabilities.

Please refer details of the Circular by the following link:

Circular to licensed corporations – Revised financial return
Issued Date: 25 Jan 2019

Link to the new FRR Form:

Reference : SFC Circular

Source: Compliance Commit

Usually there are two ways to apply for the SFC licenses (i) applying for a brand new SFC license and (ii) acquiring a SFC-licensed corporation. In the past few years, from the perspective of processing time by the SFC, (ii) is faster than (i). However, this has been changed since the SFC issues a circular on 2 June 2017.

Since then, our recent experience tells us that the SFC is getting more stringent on (ii), that is, acting as a substantial shareholder of a licensed corporation through acquisition. That is because the SFC may concern that the new substantial shareholder is seeking to avoid the normal assessment and vetting process involved with a new licensed corporation application. Therefore, sometimes the SFC may take a longer time to approve the application of substantial shareholder rather than a new licensed corporation application.

Accordingly it worth a thorough analysis conducted by external consultant before your company decides to apply for a new SFC license or acquire a SFC-licensed corporation.

Reference : SFC Circular

Source: Compliance Commit

China’s ever-widening anti-corruption campaign has begun to target even those close to the children of its founding fathers, with a high-flying businessman seen as the latest figure ensnared amid an apparent power struggle within a Communist Party approaching a leadership reshuffle.

Anbang Insurance Group on Tuesday said that its chairman, Wu Xiaohui, was no longer able to fulfill his duties for “personal reasons.” He has not been seen in public since May, and local media report that he has been detained by the authorities.

Wu hails from Zhejiang Province. He married the daughter of a local official, and started a car-leasing business in the 1990s before founding Anbang in 2004. He is friends with Chen Xiaolu, son of Marshal Chen Yi, and supposedly remarried, wedding a granddaughter of revolutionary leader Deng Xiaoping. He is believed to be close with former Chinese President Jiang Zemin as well.

Anbang began as an auto insurer. It has since expanded into other areas, and even purchased New York’s landmark Waldorf Astoria hotel. Last fall, Wu met with U.S. President Donald Trump’s son-in-law Jared Kushner.

Amid Anbang’s breakneck growth, Chinese news outlet Caixin had repeatedly reported on the insurer’s questionable fundraising practices and its connections to members of the “red second generation” — children of leading revolution-era figures.

Wu claims the reports are false and plans to sue. But many believe Caixin’s investigation has the backing of Wang Qishan, a close ally of Chinese President Xi Jinping and the head of the Communist Party’s disciplinary commission.

Wang himself has come under scrutiny after Guo Wengui, a fugitive businessman, revealed to an American news outlet in April that he had been asked to investigate the party discipline chief’s family finances. Some suspect a connection between Wu and Guo.

That month, the party watchdog detained Xiang Junbo, who was then China’s chief insurance regulator, over alleged disciplinary violations. In addition to colluding with Guo, speculation holds that he helped Wu and Anbang with illicit activities. The authorities are also expected to investigate whether Xiang, Guo and Wu all conspired together.

Power struggles tend to intensify before the Communist Party congress, a major political event held once every five years. Before the last congress, Bo Xilai, then-party chief in Chongqing and Xi’s rival, fell from grace amid a corruption scandal and murder for which his wife was convicted.

Source: NAR

The Taipei Fubon Commercial Bank (台北富邦) has been fined NT$1 million (US$33,200) for failing to file reports on large cash transactions as required by the Money Laundering Control Act, the Financial Supervisory Commission (FSC) said Tuesday.
The incident is the second time the FSC has fined a local bank over such violations following a NT$1.8 million fine that was imposed on Chang Hwa Commercial Bank (彰銀) earlier this year.

Under the Act, financial institutions are required to report to relevant authorities each cash transaction or withdrawal by their clients that exceeds NT$500,000.

A recent investigation led by the FSC found that Fubon has failed to report some 20 suspicious financial transactions carried out by its clients last year, according to Chen Yen-yi (陳妍沂), chief secretary of the FSC’s Banking Bureau.

The bank did not comply with the rules and failed to report the transactions to the Investigation Bureau under the Ministry of Justice, she said.

The regulation was drawn up to prevent cases such as the Mega Bank New York branch being fined US$180 million by the New York State Department of Financial Services in August last year for violating the state’s anti-money laundering laws, after the bank failed to explain alleged violations by its Panama branch of money laundering laws and involvement in other suspicious transactions.

Source: CP

The Securities and Futures Commission (SFC) today entered into an agreement with the Australian Securities & Investments Commission (ASIC) to establish a framework for cooperation on financial technology (Fintech). (Note 1)

Under the agreement, the SFC and ASIC will cooperate to share information on emerging Fintech trends, developments and related regulatory issues as well as on organisations which promote innovation in financial services. In addition, the agreement provides for a bilateral mechanism for referrals of innovative firms seeking to enter one another’s markets.

“Greater regulatory cooperation is important for us to stay abreast of the rapid pace of innovation in financial services and how it intersects with securities regulation,” said Mr. Ashley Alder, the SFC’s Chief Executive Officer.

The agreement follows the creation of the SFC’s Fintech Contact Point in 2016 (Note 2) and ASIC’s Innovation Hub in 2015 (Note 3).


  1. The cooperation agreement is posted on the SFC website.
  2. The SFC established its Fintech Contact Point in March 2016 to enhance communication with businesses involved in the development and application of financial technology in Hong Kong, to facilitate the Fintech community’s understanding of the current regulatory regime and to enable the SFC to stay abreast of the development of Fintech.
  3. ASIC established its Innovation Hub in March 2015 to assist innovative Fintech businesses understand ASIC’s regulatory system. Through its Innovation Hub, ASIC engages with the Fintech community, provides assistance to innovative Fintech start-ups and liaises with Fintech experts through ASIC’s Digital Finance Advisory Committee.

Source: SFC

The Fraud and Money Laundering Intelligence Taskforce (FMLIT) was unveiled in a ceremony last week, at which the above photo, of deputy police commissioner Lau Yip-shing (left), executive director of enforcement and AML of the Hong Kong Monetary Authority Meena Datwani (middle) and acting chairperson of the Hong Kong Association of Banks Ann Kung (right) was taken.

In a joint statement, the organisations detailed how the new task force would address the problem of “financial crime”, by making use of an anti-money laundering and terrorist financing regime that the HKMA says the Hong Kong Government “has developed an over many years to protect the integrity of the financial system and citizens, and ensure that Hong Kong remains a safe and stable business environment”.

According to the statement, ten retail banks in Hong Kong have signed up to participate in the FMLIT, including Bank of China (Hong Kong), Standard Chartered Bank (Hong Kong), The Hongkong & Shanghai Banking Corp, Hang Seng Bank, Dah Sing Bank, Citibank (Hong Kong), DBS Bank (Hong Kong), The Bank of East Asia, Industrial and Commercial Bank of China (Asia), and China Construction Bank (Asia).

“FMLIT brings together, under one roof, the collective expertise and resources of government and industry to enhance the detection, prevention and disruption of serious financial crime and money laundering threats,” the statement, which may be viewed on the HKMA and Hong Kong Police Force websites, adds.

“A ‘Strategic Group’, comprising senior representatives from law enforcement, the regulator and the banking industry, will oversee FMLIT’s strategic direction and guide its work.

“At the core of FMLIT will be the Operations Group, where government and industry intelligence professionals will work side-by-side in tackling serious financial crime and money laundering threats impacting Hong Kong.

FMLIT reflects the determination of the government and the banking sector to work together in the global fight against serious financial crime and money laundering.”

The announcement of the anti-money-laundering and fraud task force comes as Chinese authorities have been seeking to crack down on the flow of money out of mainland China, and less than two months after the HKMA announced that it had “reprimanded” Coutts & Co’s Hong Kong branch for lapses in its compliance with anti-money-laundering regulations between 2012 and 2015, and fined it HK$7m (£721,720, US$900,720).

The Coutts operation in Hong Kong had been part of what had been Coutts’s international private banking and wealth management business, which it agreed in 2015 to sell to Switzerland’s Union Bancaire Privée. The deal, which resulted in a £200m goodwill write-down for RBS in 2015, completed in 2016.

Source: II

The new MIC regime seeks to regulate the senior management of a licensed corporation, including directors of the corporation (including shadow directors), responsible officers (“ROs”) and individuals appointed as an MIC of one of the eight new “Core Functions”.

Licensed corporations must appoint a MIC to be responsible for managing the “Core Functions” of the corporation, namely:

(i) the overall management oversight; (ii) key business line; (iii) operational control and review; (iv) risk management; (v) finance and accounting; (vi) information technology; (vii) compliance; and (viii) anti-money laundering and counter-terrorist financing.

Although there is no requirement that MICs must be employees of the licensed corporation, they must hold positions of authority within the licensed corporation. They cannot be external parties merely providing outsourced services.

Licensed corporations will have a continuing obligation to notify the SFC of up-to-date information with respect to the MICs within seven business days of change, and to ensure that the information submitted is complete and accurate.

Background to the MIC regime

Against the backdrop of the global financial crisis, there has been a general trend to increase scrutiny of senior management personnel in the financial sector with a view to improving the compliance culture within financial institutions. The SFC is the first regulator in Asia to adopt a regime which raises the standards of accountability and conduct of executives in the financial industry following the introduction of similar rules by the UK Financial Conduct Authority.

Timeline of implementation of the MIC regime

On 18 April 2017, the SFC will commence the collection of up-to-date management structure information (including MIC information and organisation charts) from licensed corporations. Licensed corporations are expected to submit the information on or before 17 July 2017. MICs, who are not already ROs, must apply for approval to become ROs on or before 16 October 2017.

Compliance implications

Given the number of licensed corporations in Hong Kong being part of a group headquartered overseas, there will be a substantial number of MICs based outside Hong Kong who are required to be registered as ROs by 16 October 2017. While some of these overseas MICs may not be comfortable with being regulated under the Hong Kong regime, it is expected that some firms may switch responsibilities to Hong Kong-based MICs or fill the roles locally.

It could be challenging for the industry to implement the new regime in a short timeframe. It remains to be seen whether the guidance in the Circular and the FAQs are comprehensive enough to cover the numerous situations in the affected firms captured by the regime. Licensed corporations should consider allocating sufficient time to identify the appropriate MICs for each of its eight Core Functions and set them out in an organisational chart in accordance with the Circular. It is advisable for corporations to start planning as soon as possible in light of the regulatory changes.

In assessing misconduct under the SFO, the SFC will have regard to the compliance status of various codes and guidelines. Senior management (especially overseas MICs) should familiarise themselves with their obligations under the new regime, so that they have in place a robust framework and an adequate record-keeping system to help demonstrate their compliance with the various codes and guidelines.


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