Anti-money laundering checks on customers from NCCTs

2 July 2004

The Chief Executive
All Authorized Institutions

Dear Sir,

Anti-money laundering checks on customers
from NCCTs

There have been reports in the last few days that some customers
from Non-Cooperative Countries and Territories (NCCTs) designated
by the Financial Action Task Force (FATF), specifically Filipino
women, have been encountering difficulties recently in opening bank
accounts with AIs in Hong Kong. This has been linked to the recent
issue by the HKMA of the "Supplement to the Guideline on Prevention
of Money Laundering".

The Supplement does indeed require that AIs should take account
of whether a customer is from an NCCT in determining that
customer's risk profile, and therefore how rigorous the AI's
customer due diligence (CDD) in respect of that customer should be.
I would like to draw attention to the fact, however, that the
Interpretative Notes indicate that:

"AIs should adopt a balanced and common-sense approach with
regard to customers from NCCTs. While extra care may well be
justified in such cases, it is not a requirement that AIs should
refuse to do any business with such customers or automatically
classify them as high risk and subject them to enhanced CDD
process. Rather, AIs should weigh all the circumstances of the
particular situation and assess whether there is a higher than
normal risk of money laundering.

The reason why this was put into the Interpretative Notes was
because the Industry Forum that developed the Supplement was
concerned specifically that, without this clarification, even
low-risk personal customers from NCCTs could suffer inconvenience,
which is not the intention.

I appreciate that AIs may not yet have fully completed the
process of adapting their internal policies and procedures to
reflect this advice and of providing appropriate training to staff,
so there may be some "teething-troubles". It is understandable,
too, that AIs are being cautious. May I please ask you,
nonetheless, to try to make sure that this issue is dealt with
sensitively, and that customers are not unduly inconvenienced.
Could you also ensure, please, that if any customer has a
complaint, their complaint is dealt with speedily and
sensitively.

Yours sincerely,

Simon Topping
Executive Director (Banking Policy)