Since March 2018, Company Registry (CR) imply Guideline on Compliance of Anti-Money Laundering (AML) and Counter -Terrorist Financing (CTF) Requirements for Trust or Company Services Providers. On the whole, there has been total of 1800 of TCSP licenses issued within the past 1.5 year. While there has been 1024 TCSP licensed operator being interviewed. Additionally, total of 452 warnings given out to licensed holder and 32 firms has been prosecuted.
In short the revelations shown CR is serious about enforcement & compliance with the AMLO’s AML/CTF regime. Besides the inspection process is likely to continue for Company Registry on-site inspection.
What should you to prepare for CR-AML review?
TCSPs supposes to read and study every line and comply with the following regulations:
- Schedule 2 of Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Cap. 615 (“the AMLO”)
- Guideline on Compliance of Anti-Money Laundering and Counter-Terrorist Financing Requirements for Trust or Company Service Providers.
Centre O has prepared the key areas where a TCSP should focus on to prepare for the AML/CTF compliance inspection.
1. AML/CFT Policy (APPC)
Firstly TCSPs should have adequate AML/CTF risk management, along with AML/CTF Internal Policies, Procedures and Controls (APPC). Hence, TCSPs should establish a policy document which called the AML/CTF Policy.
This policy should contain:
- Customer Due Diligence (CDD) measures
- Ongoing monitoring
- making of suspicious transaction reports
- risk assessment and management
- audit of the internal policies, procedures and controls
- monitoring and management of compliance with, and the internal communication of, the internal policies, procedures and controls
- hiring and training of employees
2. Customer Due Diligence (“CDD”)
The CDD is stated in Schedule 2 to the AMLO. The purpose of CDD is enable the TCSP to form a reasonable belief to know each customers’ true identity. Equally, by understanding the type of business and transactions the customer is likely to undertake. Depending on specific circumstances and risk profiles, TCSPs may also need to conduct additional measures (referred to as enhanced customer due diligence (“EDD”)).
The CDD measures applicable to the TCSPs are:
- Identifying the customer, as well as, verifying the customer’s identity using documents, data or information provided by reliable and independent source;
- Identifying and taking reasonable measures to verify the beneficial owner’s identity. Also, enable the TCSP to understand the ownership and control structure of the legal person or trust;
- Obtaining information on the purpose and intended nature of the business relationship (if any) established with the TCSP. Unless the purpose and intended nature are obvious; and
- Identify the person and taking reasonable measures to verify the person’s identity. As well as to verify the person’s authority to act on behalf of the customer.
3. Management Responsibility
The TCSP should establish an organisational and reporting protocol in relation to AML/CTF. The reporting structure should include a Compliance Officer, preferably also a Money Laundering Reporting Officer (MLRO), and an Internal Auditor. These are key persons who are responsible for AML/CTF. Their names should show in the reporting structure as well as mentioned in the AML/CTF Policy.
4. Risk Assessment
Centre O recommends TCSPs perform an overall risk assessment of its clients. TCSPs can assess clients’ risks based on following
- Customers type,
- Type of services provided,
- Transactions that the client engages in, or the countries or jurisdictions where the customers are from or in.
5. Suspicious Transaction Reporting (STR)
Once Compliance Officer found any suspicious trade. He or she should escalate to Management or report to Joint Financial Intelligence Unit (JFIU) of the Hong Kong Police.
Every businesses are expecting that the auditors or regulators are coming. TCSPs can manage the AML/CTF compliance inspection process proactively. In fact, a more important thing to do is training and briefing your staffs. Make sure of everyone familiar with the policies and procedures before the inspectors arrive. The approach is to avoid any shortcomings, work out the remedial actions with the inspectors.
For further information, please contact us.