Key Information

Speeches by Speaker
Norman T.L. Chan
Peter Pang
Eddie Yue
Arthur Yuen
Zeti Akhtar Aziz
Raymond Li
Edmond Lau
Esmond Lee
Meena Datwani
Vincent W.S. Lee
James Lau
Joseph Yam
Y K Choi
William Ryback
David Carse
Tony Latter
Andrew Sheng
Hans Genberg
Simon Topping
Michael Taylor
The Honourable Donald Tsang
Chen Yuan
Dai Xianglong
Don Brash
Jaime Caruana
Andrew Crockett
Mario Draghi
David Eldon
Stanley Fischer
Timothy F. Geithner
Stephen Grenville
Kenneth G. Lay
William McDonough
Ernest Patrikis
Glenn Stevens
Jean-Claude Trichet
Tarisa Watanagase
Zeti Akhtar Aziz
Carmen Chu
Alan Au
Press Releases
Press Releases by Category
Bogus Voice Message Phone Calls
Banking in Hong Kong
Fraudulent Websites, E-mails and Telephone System, and other fraud cases
Granting of Banking Licences
Exchange Fund
Table of Multiples of Notes and Payments for Allotted Amount under non-competitive tender
Table of Multiples of Notes and Payments of Application Amount under non-competitive tender
Tender of Exchange Fund Bills and Notes
Tender Results of Exchange Fund Bills and Notes
Tentative Issuance Schedule for Exchange Fund Bills and Notes
Appointments and Departures
HKMA Pay Review
HKMA Publications
The Hong Kong Mortgage Corporation
Hong Kong Note Printing Limited
Hong Kong Institute for Monetary Research
Exchange Fund Investment Limited
Hong Kong Financial Infrastructure
International Relations
Investment Products Related to Lehman Brothers
Monetary Policy
Notes and Coins
Renminbi business
Credit Card Lending Survey
Monetary Statistics
Residential Mortgage Survey
Year 2000
Guidelines and Circulars

Guidelines & Circulars

Our Ref.:

13 November 2007

The Chief Executive
All authorized institutions

Dear Sir/Madam,

Anti-Money Laundering and Terrorist Financing -
Amendments to the Supplement to the Guideline on Prevention of Money Laundering

I am writing to inform you that, following consultation with the industry, the HKMA has made several amendments to the Supplement to the Guideline on Prevention of Money Laundering ("Supplement") and the Interpretative Notes ("INs") attached thereto to take into account latest developments in relation to anti-money laundering and counter terrorist financing. The major amendments are discussed below.

Jurisdictions which do not or insufficiently apply FATF Recommendations

Section 14 and some other sections of the Supplement require AIs to pay special attention to customers from Non-Cooperative Countries and Territories ("NCCTs"). However, since the delisting of Nigeria and Myanmar, there are no longer any countries or territories remaining on the NCCT list published by the Financial Action Task Force on Money Laundering ("FATF") and the FATF has recently declared an end to the NCCT exercise. Although the relevant provisions in the Supplement refer primarily to NCCTs, in practice, the HKMA expects AIs to exercise the same level of care in dealing with any jurisdiction which does not apply or insufficiently applies the FATF Recommendations.

To reflect this development, the HKMA has amended the Supplement to make it clear that AIs should be cautious in dealing with customers from jurisdictions which do not or insufficiently apply the FATF Recommendations. In addition, we have specified several key factors that should be taken into account by AIs in determining whether jurisdictions do not or insufficiently apply the FATF Recommendations or otherwise pose a higher risk to AIs. These factors are consistent with the guidance provided in the FATF's recent paper on Risk-Based Approach to Combating Money Laundering and Terrorist Financing.

Jurisdictions that are in compliance with and have effectively implemented the FATF Recommendations

Section 4.4 of the Supplement provides that a simplified customer due diligence ("CDD") process may be adopted in dealing with non-bank financial institutions which are authorized and supervised by the relevant authority in a jurisdiction that is a FATF member or an "equivalent jurisdiction". Section 6.4 of the Supplement states that AIs should, to the extent possible, rely on intermediaries which are incorporated in, or operating from a FATF member jurisdiction or an "equivalent jurisdiction" to perform CDD procedures. A list of equivalent jurisdictions is currently provided in Paragraph 14 of the INs.

The existing approach of providing a list of equivalent jurisdictions does not allow AIs to conduct their own assessment on whether or not a jurisdiction sufficiently applies FATF standards and meets the criteria for an equivalent jurisdiction. The HKMA has amended the Supplement to enable AIs to do so. The HKMA has further specified in the Supplement the key principles to be followed by AIs in making such risk assessments. The term "equivalent jurisdiction" has been replaced by "comparable jurisdiction" which better reflects the intention of the HKMA. AIs will continue to be permitted to regard those jurisdictions currently listed in Paragraph 14 of the INs as comparable jurisdictions.

Recognised stock exchanges

Section 4.2 of the Supplement states that simplified CDD measures may be applied to customers which are companies listed on a "recognised stock exchange". Paragraph 10 of the INs and Annex 1 to the INs currently provide (i) a list of recognised stock exchanges and (ii) the following definition of a "recognised stock exchange":

"Stock exchange of a country which is a member of FATF or a specified stock exchange as defined under the Securities and Futures Ordinance (but excluding those exchanges in NCCTs)."

The existing list of recognised stock exchanges in Annex 1 to the INs has become outdated following the delisting of the Philippines from the NCCT list (Philippine Stock Exchange Inc. is a specified stock exchange under the Securities and Futures Ordinance) and the admission of China as a member of FATF. To obviate the need for updating the list on an ongoing basis, the HKMA has repealed Annex 1 to the INs (thereby removing the list of recognised stock exchanges) and replaced this by providing a slightly amended definition of "recognised stock exchange" in paragraph 10 of the INs.

Requirement to obtain information on the purpose and intended nature of the business relationship with customers

The existing Supplement does not explicitly require AIs to obtain information on the purpose and intended nature of the business relationship from the customer, although it has in many places emphasised the importance for AIs to know their customers, including their nature of business, risk profile and the types of transactions to be conducted on their accounts to facilitate on-going transaction monitoring.

To reflect this more clearly in the Supplement, the HKMA has incorporated a new requirement under section 3.2 of the Supplement, requiring AIs to obtain information from the customer on the purpose and reason for opening the account or establishing the relationship, unless it is self-evident.

Management information systems

The HKMA has also made a minor change to section 13.5 of the Supplement to make it clear that AIs should take appropriate follow-up actions on any unusual activities identified in their MIS reports and that the findings and any follow-up actions taken should be properly documented and maintained for a period not less than six years following the date when the unusual activity is identified.

Please refer to Annex 1 for details of these amendments. A revised Supplement is at Annex 2. Since changes to AIs' policies and procedures may be necessary, AIs will have a 6-month grace period to implement these requirements. The revised Supplement will be published in the Gazette shortly.

If there are any questions relating to this letter, please feel free to contact Mr Ronnie Wong on 2878-1399 or Ms Sophia Lam on 2878-8281. On-line access to this letter and the annex is available under the icon "Circulars and Guidelines" in the HKMA's public ( and private ( websites.

Yours faithfully,

Simon Topping
Executive Director (Banking Policy)

The Chairman, The Hong Kong Association of Banks
The Chairman, The DTC Association
FSTB (Attn: Ms Angelina Kwan)
Narcotics Division (Attn: Ms Kitty Yu)
Annex 1 (PDF file, 43KB)
Annex 2 (PDF file, 193KB)
Last revision date: 1 August 2011
Tender Invitations
Legislative Council Issues
The HKMA Information Centre
Monetary Stability
Banking Stability
International Financial Centre
Exchange Fund
Annual Report
Half-Yearly Monetary & Financial Stability Report
Quarterly Bulletin
HKMA Background Briefs
Reference Materials
CMU Bond Price Bulletin
Economic & Financial Data for Hong Kong
Monthly Statistical Bulletin
Monetary Statistics
Press Releases
Guidelines & Circulars
Forthcoming Events
Information in Other Languages (Bahasa Indonesia, हिन्दी, नेपाली, ਪੰਜਾਬੀ, Tagalog, ไทย, اردو)
Account Opening
Consumer Corner
Consumer Education Programme
Complaints about Banks
Complaints about SVF Licensees
Internet Banking
Fraudulent Bank Websites, Phishing E-mails and Similar Scams
Be Careful of Bogus Phone Calls and SMS Messages
Authenticate the Callers and Bank Hotline Numbers
Register of AIs & LROs
Register of Securities Staff of AIs
Register of SVF Licensees
Investment Products Related to Lehman Brothers
Photo Gallery