Accountants role in combating money laundering and ... · Experience Sharing Session Mary Wong Associate Director AML/ Sanctions Service, Forensic 20 February 2013. Agenda • Recent

Accountants’ role in combating money laundering and terrorist financingExperience Sharing Session

Mary WongAssociate Director AML/ Sanctions Service, Forensic

20 February 2013

Agenda

• Recent AML/ CFT Framework in Hong Kong

• How to Set Up a Compliance System

o AML/ CFT Control Framework

o Risk Based Approach

o Customer Due Diligence

o Suspicious Transactions Reporting

o Record Keeping

• Case Study

• Health Check Questions

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Recent AML/ CFT Framework in Hong Kong

• Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (“AMLO”) - April 2012

• Guidelines issued by the relevant authorities to provide practical guidelines and recommended procedures for financial institutions – revised July 2012

• Similar legislation for Designated non-Financial Businesses and Professions (“DNFBP”)


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Procedures

AML/ CFT Control Framework

Procedures

Controls

Policies

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Senior Management Oversight

Compliance Officer/ Money Laundering Reporting Officer

Staff Training Compliance and Audit Function

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AML/ CFT Control FrameworkEffective Controls

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1) Compliance Officer (CO)/ Money Laundering Reporting Officer (MLRO)

• Sufficient Seniority

• Act as the focal point for the oversight of all activities relating to the prevention and detection of money laundering (ML)/ terrorist financing (TF) and providing support and guidance to the senior management

• Responsible to make disclosures to the JFIU

• Acknowledge the receipt of the disclosure and provide a reminder of obligation regarding tipping off

2) Staff Training

• Reasonable steps have been taken to ensure all employees are in general aware of their responsibilities and reasonably familiar with the policies, procedures and controls in relation to AML/ CFT controls

• Adequate and sufficient regular AML/ CFT training has been provided to all employees

3) Compliance and Audit Function

• Regularly review the AML/ CFT system to ensure effectiveness




Risk Based ApproachAssesses the customer’s ML/TF risk

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Product/ Service risk Channel risk

Delivery/ Distribution

Channel risk

Customer’s AML/CFT risk

Assesses the customer’s ML/TF risk

Keep records and relevant documents of the risk assessment

Customer risk Country risk


Risk Based ApproachOngoing customer risk assessment

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Customer acceptance/ risk assessmentat the inception of a customer relationship

Informationreceived from a

competent authority

Adjust Risk Assessment

Appropriate Customer Due Diligence and Ongoing Monitoring

Transacting through an account

Comprehensive risk profile

Change over time

Risk factors


Customer Due Diligence (CDD)

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• Risk Assessment Form to standardize the information and documents collected, for examples o Screening

o Purpose and intended nature of business relationship

o Information from public register, from the client or from other reliable source

• Basic, simplified and enhanced due diligence procedures

• Conduct on-going due diligence on the business relationship and scrutiny of transactions undertaken throughout the course of that relationship


Customer Due Diligence (CDD)

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• Examples of high risk indicatorso Complex corporate structures which obscure the ultimate

beneficial ownership.

o Frequent changes in the legal structure of a client’s company which has no clear justifications.

o Customer has a history of changing bookkeepers or accountants yearly.

o Politically Exposed Persons (PEP)

• Enhanced Due Diligence (EDD)o Additional identification and verification steps e.g.

additional information on the customers, additional documentary proof

o Senior management approval

o Enhanced Monitoring


Customer Due Diligence (CDD)Politically Exposed Person (PEP)

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• Enhanced Due Diligence (EDD)o Have appropriate risk management systems to determine

whether the customer is a politically exposed person;

o Obtain senior management approval for establishing business relationship with such customers;

o Take reasonable measures to establish the source of the wealth and source of funds; and

o Conduct enhanced ongoing monitoring of the business relationship


Suspicious Transactions Reporting

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• Systematic investigation into unusual transactions and potential suspicious transaction reportings

• Importance of timely reporting of suspicious transactions to the JFIU

• Make report on further suspicious transactions of the same nature in relation to the previous suspicion to the JFIU

• “Tipping-off”

• Establish and maintain records of all ML/ TF reports made to MLRO and all disclosures made to the JFIU


Record Keeping

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• Information/ documents (e.g. screening records) to identify and verify the client and the ultimate beneficial owner

• Additional information for the purpose of EDD or ongoing monitoring

• Information/ documents on the CDD measures e.g. purpose and intended nature of the business relationship, risk assessment form

• Business correspondence (at a minimum, material to CDD measures or significant changes to the operation of the account) with the customer and any beneficial owner

• All records of all ML/ TF reports made to MLRO and all disclosures made to the JFIU

• Training records


Case Study


Health Check Questionsþ Who are/ is the appointed Money Laundering Reporting

Officer and Compliance Officer and their deputy within your company?

þ Are there any up-to-date AML/ CFT policies and procedures, including CDD and record keeping, in place?

þ What is your risk based approach to CDD and ongoing monitoring to combat money laundering and terrorist financing?

þ What are the approval and monitoring procedures for higher risk customers (e.g. Politically Exposed Persons)?

þ What are the procedures to report suspicious transactions?

þ Is there appropriate and sufficient AML/ CFT training being provided to senior management and staff?

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Thank You!


Mary Wong

Associate Director

AML/ Sanctions Service

Direct: +852 2238 7458

E-mail: [email protected]

mailto:[email protected]

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Accountants role in combating money laundering and ... · Experience Sharing Session Mary Wong Associate Director AML/ Sanctions Service, Forensic 20 February 2013. Agenda • Recent