HONG KONG ANTI-MONEY LAUNDERING LEGISLATION

UNCLAS HONG KONG 000327 SENSITIVE SIPDIS STATE FOR EAP/CM BEIJING FOR TREAS ATTACHE TREASURY FOR DAS GLASER E.O. 12958: N/A TAGS: ECON EFIN HK SUBJECT: HONG KONG ANTI-MONEY LAUNDERING LEGISLATION UPDATE: PUBLIC CONSULTATIONS CLOSED REF: A. 09 HONG KONG 2175 ¶B. 09 HONG KONG 289 ¶1. (SBU) On February 6, Hong Kong completed its second and final round of public consultations on Financial Action Task Force (FATF)-compliant anti-money laundering (AML) legislation to codify requirements on customer due diligence (CDD) and record keeping. The proposed legislation would also establish a licensing regime for Hong Kong's remittance agents and money changers (RAMCs) under oversight from the Hong Kong Customs and Excise Department (HKCED). Financial Services and Treasury Bureau (FSTB) Principal Assistant Secretary Angelina Kwan told EconOff February 24 that the Hong Kong Government would present the draft legislation to the Legislative Council (LegCo) in June. She was optimistic LegCo would pass the bill in early 2011 with an implementation date of early 2012, after a one-year grace period. ¶2. (SBU) Kwan informed us that many of Hong Kong's RAMCs had expressed strong concerns during the second round of public consultations over compliance costs associated with the proposed licensing regime. They feared the current profits of their low-tech operations could not support the requirements and would force them to consolidate or go out of business, she said. To deter RAMCs from going underground, the proposed legislation would grant search and seizure enforcement authority to HKCED and impose strong sanctions on those who contravene the legal obligations, including criminal liability charges. The current RAMC registration scheme operated by the Hong Kong Police Force only imposes fines to those who fail to register. ¶3. (SBU) On the other hand, Hong Kong's banking, securities and insurance sectors were very supportive of the proposed legislation, Kwan commented. She added that most of the participants in these sectors, many with headquarters in the US and Europe, already have internationally accepted compliance systems on AML. The guidelines issued by Hong Kong's three existing regulators (Hong Kong Monetary Authority, Securities and Futures Commission, and the Office of the Commissioner of Insurance) were also compliant with FATF and would likely only require minor technical adjustments after the law is passed. The Hong Kong Government remained committed to a sound AML regime to retain the city's status as an international financial center of choice, she stressed. MARUT