launderers hung out to dry - Hong Kong Institute of Certified Public ...

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Anti-money laundering ing moneychangers and remittance agents to be licensed entities.” Second, Morris says the ordinance provides some teeth to existing regulations enabling criminal sanctions to be imposed on top of administrative penalties. Third, it provides some additional clarification on steps regulated entities can take to ensure an adequate compliance programme. “This could include the use of a risk-based approach to determine the level of due diligence needed around a customer,” Morris explains. The Hong Kong ordinance is now closer to international anti-money laundering standards. “Although U.S. and [the previous] Hong Kong legislation were both enacted to combat terrorist financing, the U.S. legislation was more comprehensive and far reaching,” says Sara Nelson, a Miami lawyer who has compared the two regimes. “This moves Hong Kong closer to global standards.” Another significant change is terminology. “The amendment redefines terms 32 October 2012 so that the law now relates to ‘property’ instead of ‘funds,’ which was an unnecessarily restrictive term,” says Nigel Morris-Cotterill, a Kuala Lumpur lawyer who heads the “ The amended ordinance brings Hong Kong into line with the United Nations standard of phraseology.” Anti-Money Laundering Network, a nonprofit consultancy that provides training to the financial sector. “That increases the scope of property that can be frozen, seized and confiscated and the persons whom orders can be made,” he adds. “Basically, the amended ordinance brings Hong Kong into line with the United Nations standard of phraseology.” Morris-Cotterill adds that the effect of the changes go beyond mere wording. “Underneath, it has an impact on the financial institutions…and puts lending on exactly the same risk management footing as deposit taking. It’s not just simple lending: it’s leasing, trade finance and all other business areas that might have previously appeared relatively low risk in relation to money laundering.” Burden of compliance One significant issue for Hong Kong financial institutions looking to beef up controls is the costs involved. “We see banks having to spend more on anti-money laundering sanctions compliance,” says Paul McSheaffrey, a partner at KPMG and an Institute member, who added that compliance with the U.S. Foreign Account Tax Compliance Act and the Wall Street Reform and Consumer Protection (Dodd-Frank) Act were already
affecting bottom lines. A recent KPMG survey noted that Hong Kong financial institutions have already seen their margins squeezed due to global economic malaise, a cautious investment market and lower trade flows. “The new legislation imposes a heavy compliance burden on financial institutions,” says Barry Tong, a partner at Grant Thornton and an Institute member. “Financial institutions have to ensure that they have enough manpower, resources and systems to meet the anti-money laundering requirements of the relevant legislation.” With their financial acumen, accountants have an important role to play. “We have already seen an increase in requests from companies for us to submit proposals to conduct independent reviews of their existing anti-money laundering programmes,” says Wong at BDO. “Professional firms can assist in helping clients understand the requirements under the legislations and the impact to their businesses, advising them on the adequacy of their compliance functions and pro- The China connection One of the reasons why the anti-money laundering spotlight sheds on Hong Kong is the large cross boundary currency flows to and from the mainland. In 2007, the Financial Action Task Force examined the People’s Bank of China’s anti-money laundering programmes and considered China fully or largely compliant with almost all its recommendations. However, Institute members say the realities of the mainland financial system tell a different story. “Given exchange controls in the mainland, the amount of funds coming out of China into the Hong Kong economy should be readily identifiable,” says Rob Morris, managing director of AlixPartners and an Institute member. “Practically, however, this is not the case.” Morris worked as an expert witness on a case in 2008 in which a jury in Las Vegas convicted Xu Chaofan and Xu Guojun of defrauding the Bank of China of US$485 million over 10 years. The two men were sentenced to more than 20 years in prison for laundering the proceeds of their fraud through the United States, Macau, Australia and other countries. Much of the cash flow between China and Hong Kong occurs viding training to the relevant staff,” says Lo at RSM. “As part of our induction training for new staff, we have the Independent Commission Against Corruption to talk about matters including identifying and reporting on money laundering cases.” Institute members say it is important for the senior management within companies to understand the latest legislation and regulatory requirements and make these systematically work for them. “They can do so by setting up formal policies and procedures,” says Annie Chan, managing director of corporate recovery and forensics at through remittance agents that will now come under greater scrutiny since the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance came into effect on 1 April. “There are probably more than 1,000 agents now who are actually registered and quite a few of them are quite large organizations,” says Jim Wardell, executive chairman of Baker Tilly Hong Kong Restructuring and Recovery and an Institute member. But the largest hole in the fence is Macau, given its status as a popular destination for Hong Kong and mainland visitors. “If you look at Europe, if you go into a casino you have to be a member, which means they have details about you, your identity, your photograph,” says Wardell. “In Macau you take your cash and walk in and gamble. There is no effective monitoring.” The Financial Action Task Force is keen that Macau controls this in a more effective way. Wardell says political will is the main obstacle. “The Macau population is happy with the status quo,” he says. “There’s hardly any unemployment, there’s hardly any taxation. They can build what they need.” October 2012 33
Page 1 and 2: ISSUE 10 VOLUME 8 OCTOBER 2012 PLUS
Page 3 and 4: REGULARS 01 President’s message 0
Page 5 and 6: Mobile revolution to be focus of IT
Page 7 and 8: European Central Bank may gain powe
Page 9 and 10: NEWS GREATER CHINA Wen stands by mo
Page 11 and 12: Entrepreneurs in pledge to strength
Page 13 and 14: October 2012 15
Page 15 and 16: “Should their role be expanded? S
Page 17 and 18: October 2012 19
Page 19 and 20: Making a start Here in Hong Kong, c
Page 21 and 22: Success ingredient Tang Nai Hoi, ch
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Page 25 and 26: In 2000, Tang was appointed CFO of
Page 27: a convenient place for money launde
Page 31 and 32: Work-life balance Creature comforts
Page 33 and 34: Work-life balance 38 October 2012 R
Page 35 and 36: Work life balance Alfred Chung and
Page 37 and 38: IFRS/HKFRS 8 IASB starts its post-i
Page 39 and 40: IFRS/HKFRS 8 fail the above quantit
Page 41 and 42: tal principle of confidentiality an
Page 43 and 44: Careers People on the move The late
Page 45 and 46: Romantic Rome To experience Rome is
Page 47 and 48: Beyond port and plonk There’s mor
Page 49: The Gap store recently opened near

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