On April 30, the Hong Kong Financial Services and the Treasury Bureau has released the Money Laundering / Terrorist Financing (ML/TF) Risk Assessment Report.
The report examines ML/TF threats and vulnerabilities facing Hong Kong and the steps taken to the remediate gaps accordingly.
According to a Government spokesman:
The Government is committed to combating ML and TF together with the international community. Over the years, we have put in place a mature and robust anti-money laundering/counter-terrorist financing (AML/CTF) regime having regard to international standards. As part of our ongoing efforts to strengthen the regime, we have conducted this risk assessment to facilitate the formulation of more targeted responses. Our AML/CTF regime has been reinforced further with the enactment of four pieces of primary legislation in the past year to address the identified risks.”
Hong Kong is a member of the Financial Action Task Force (FATF), and the FATF is expected to conduct an AML/CFT evaluation on the city by the end of this year. Part of the evaluation will assess the level of implementation of the FATF’s 40 recommendation.
Hong Kong’s ability to combat money laundering is assessed as “medium-high”, characterised by its robust legal framework, high-level political commitment, close partnerships among Government agencies and between the public and private sectors, fair and efficient prosecution and judicial process, and good external and international cooperation. The report has noted that its Financial Intelligence Unit, the Joint Financial Intelligence Unit (JFIU) has seen an increasing trend of reported suspicious transaction reports (STRs). JFIU has attributed this trend to the growing awareness of AML/CFT.
On cryptocurrencies, companies exchanging cryptocurrencies for cash requires licensing. Initial Coin Offerings (ICOs) that are offered or sold may fall under the regulatory ambit of the Securities and Futures Commission if they meet the statutory definition of “securities” under the Securities and Futures Ordinance (Cap 571).
Stored Value Facilities products (such as Octopus card, Alipay and Paypal) were given the risk rating of “Medium”, while cryptocurrencies “Medium-low”.
Lastly, on terrorism risks, Hong Kong has assessed to have a “moderate” level of terrorism threat and a “medium-low” level of terrorism financing threat.
The report acknowledges that there is room for improvements in some areas, such as:
- Enhancing the AML/CFT legal framework
- Expanding AML/CFT Partnerships, such as the FMLIT project
- Strengthening external and international cooperation
The Hong Kong Government will continue to remain vigilant in monitoring the ML/TF landscape and will provide updates to the risk assessment from time to time.