Anti-Money Laundering and Terrorist Financing - Guidance Paper on Politically Exposed Persons


13 Nov 2007

Anti-Money Laundering and Terrorist Financing - Guidance Paper on Politically Exposed Persons

Our Ref. : B10/1C

13 November 2007

The Chief Executive
All authorized institutions

Dear Sir/Madam,

Anti-Money Laundering and Terrorist
Financing -
Guidance Paper on Politically Exposed Persons

I am pleased to inform you that the Industry Working Group on
Prevention of Money Laundering and Terrorist Financing (IWG) has
issued its first guidance paper to AIs, which focuses on the
handling of politically exposed persons (PEPs). A copy of the
guidance paper is attached to this letter.

The IWG was established in June 2006 for the purpose of further
strengthening the banking industry's ability to guard against money
laundering and terrorist financing activities. It is chaired by the
HKMA and consists of representatives from 20 AIs and the Joint
Financial Intelligence Unit. Three User Sub-groups, namely Customer
Due Diligence (CDD) Process (General), CDD Process (Non-retail
Accounts) and Suspicious Transaction Monitoring and Reporting, were
formed under the IWG to study specific anti-money laundering and
terrorist financing issues with a view to promoting industry
standards and best practices.

As mentioned, this guidance paper is the first produced under
the auspices of the IWG. It is developed by the User Sub-group on
CDD Process (Non-retail Accounts). It seeks to provide AIs with
guidance, in the form of questions and answers, on the handling of
PEPs, an area presenting challenges to AIs as revealed in the
self-assessment exercise conducted in 2005.

As noted in the preamble to the guidance paper, the practices
recommended in the paper do not form part of the formal regulatory
requirements of the HKMA. However, the HKMA considers that the
adoption of these practices would strengthen an AI's systems and
procedures for combating money laundering and terrorist financing.
It therefore expects every AI to give full consideration to the
adoption of these practices. In cases where the management of an AI
decide not to follow the recommended practices, they should satisfy
themselves that either the recommended practices are not applicable
to their institution, or their institution has adopted alternative
control measures which are equally effective and which enable their
institution to fully comply with the HKMA's AML/CFT guidelines and

The IWG will continue to study other AML/CFT issues of interest
to AIs such as CDD process for offshore companies and address proof
for personal customers. Guidance papers will be produced where

The HKMA is developing a designated webpage for the IWG on its
public website. On-line access to the guidance papers developed by
the IWG will soon be available.

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)
Securities and Futures Commission (Attn: Ms Alexa Lam)
Office of the Commissioner of Insurance (Attn: Mr Clement
IWG Guidance PEPs (PDF file,
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Last revision date : 01 August 2011