International Standards on Regulating DNFBPs & The way forward
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Transcript of International Standards on Regulating DNFBPs & The way forward
InternationalInternational Standards on Regulating DNFBPs &The way forward
Mr Ping-Yiu MAAssistant Secretary for Security
4 March 2010
Narcotics Division, Security Bureau
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Agenda
Financial Action Task Force (FATF) requirements on accountants
Highlight of the FATF recommendations relevant to accountants
Way Forward in regulating accountants
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FATFFATF
The Financial Action Task Force (FATF) : an inter-governmental body created in 1989 by ‘G7’ sets standards, develops and promotes po
licies to combat money laundering and terrorist financing
has published 40+9 Recommendations to achieve its purpose
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Designated Non-Financial Businessesand Professions (DNFBPs)
DNFBPs as defined by Financial Action Task Force (FATF) are:
Lawyers Accountants Trust and Company Service Providers
(TCSPs) Real Estate Agents Dealers in Precious Metals/ Stones Casinos
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You Play an Important Role
Designated Non-Financial Businesses and Professions (DNFBP)
Trust and Company Services
Providers
Lawyers
Accountants
Casino
Estate Agents
Banks
Securities House Insurance
Firms
Dealers in Precious
Stones and Metals
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Be a Gatekeeper for Hong Kong
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FATF Requirements on Accountants
New Technology (Rec. 8)
Accountants – operating individually or in a f
irm
CDD (Rec. 5 & 9)Complex Tran
sactions (Rec. 11)
Record Keeping
(Rec. 10)
STRs (Rec. 13 & 14)
Internal Control
(Rec. 15)PEPs
(Rec. 6)
Special Attention
(Rec. 21)
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FATF Requirements on the Accounting Profession
The Accounting Professio
n
Sanctions(Rec. 17)
Guidelines(Rec. 25)
SRO(Rec. 24)
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FATF Requirements on Accountants
Customer Due Diligence (Rec. 5) Record Keeping (Rec. 10) Suspicious Transaction Reporting (STR)
(Rec. 13)
Risk-based Approach Guidance for Accountants
Requirements to be specified in law:
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When to Conduct CDD?
When accountants prepare for or carry out transactions in relation to: Buying and selling of real estates;
Managing of client money, securities or other assets;
Management of bank, savings or securities accounts;
Organisation of contributions for the creation, operation or management of companies;
Creation, operation or management of legal persons or arrangements, and buying and selling of business entities.
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When to Conduct CDD?
When accountants act as Trust and Company Service Providers and Acting as a formation agent of legal person;
Acting as a director or secretary of a company;
Providing a registered office, etc for a company;
Acting as a trustee of an express trust;
Acting as a nominee shareholder for another person.
They have to comply with Rec. 5, 6, 8-11, 21.
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FATF Requirements on Accountants
Other selected requirements:
Internal Controls (Rec. 15) Self Regulatory Organisation (SRO)
(Rec. 24)
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Internal Controls
To establish / maintain internal policies / procedures to prevent ML / TF.
Policies / procedures to cover CDD, record keeping and STR obligations.
To communicate these to employees.
To develop appropriate compliance management (e.g. AML/CFT Compliance Officer at management level).
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Internal Controls
On-going staff training. Independent audit function to test
compliance with the policies and procedures.
To put in place screening procedures to ensure high standards in hiring employees.
The type and extent of measures to be taken should commensurate with: the level of ML / TF risk; and the size of the business.
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SRO – Responsibilities & Sanctions
Government authority or SRO to monitor and ensure compliance with AML / CFT requirements.
Power to sanction in case of non-compliance.
Effective, proportionate and dissuasive criminal, civil or administrative sanctions be available.
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SRO - Sanctions
Range of sanctions available should be broad and proportionate to severity of non-compliance.
Sanctions should be available to legal persons, their directors and senior management.
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SRO - Resources
Adequate structuring, funding, staff with sufficient technical and other resources to fully and effectively perform their functions.
Sufficient operational independence and autonomy to ensure freedom from interference.
Staff be of high professional standard & integrity and adequately trained for AML / CFT.
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SRO - GuidelinesSRO - Guidelines
Government authority or SRO to establish guidelines to include the following:
ML / FT techniques and methods; and any additional measures that accounting
firms/accountants could take to ensure their AML / CFT measures are effective.
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FATF Recommendations Relevant to DNFBPs
1 2 3 4 5 6 78 9 10 11 12 13 1415 16 17 18 19 20 2122 23 24 25 26 27 2829 30 31 32 33 34 3536 37 38 39 40 41 4243 44 45 46 47 48 49
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*
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Rec. 12 (applying Rec. 5, 6 & 8-11) : NC
Rec. 16 (applying Rec. 13-15 & 21) : NC
Rec. 24 : NC
Results of HK Mutual Evaluation
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Establishment of Central Co-ordinating Committee (CCC), chaired by Financial Secretary.
To steer & co-ordinate the strategic development of HK’s AML/CFT regime in line with internationally recognised standards.
Post ME Development (1)
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Financial Services & the Treasury Bureau (FSTB) is the overall co-ordinator for AML / CFT matters and with specific responsibilities on financial sectors.
Security Bureau (Narcotics Division) looks after DNFBPs and Non-profit Organisations.
Post ME Development (2)
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Phase I : Financial Sectors
Phase II: DNFBPs
Way Forward (1)
Legislation on CDD & Record Keeping
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FSTB Consultation on Legislative Proposals Against Money Laundering ended on 6 February 2010.
Proposes to allow continued reliance on unregulated Third Parties by Financial Institutions.
To be introduced into LegCo – Q2 2010.
Way Forward (2)
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To prepare for Phase II, SB will step up outreaching activities to raise awareness on AML / CFT and work closely with professional bodies.
CPD Seminars.
Sector Specific Guidelines.
Revised Interactive Training Kit.
Way Forward (3)
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Consultation with Non-Financial Sectors
Timeline
Compliance costs
Regulatory Authority
Issues
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2010201120122013
201420152016
Timeline (1)
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FATF35 members
Timeline (2)
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Internal Control SystemsStaff Training
Audit FunctionPolicies and ProceduresCompliance Officer
Compliance Costs (1)
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International StandardsCompliance Cost
Compliance Costs (2)
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Professional Status and Reputation
Business Costs and Legal Obligations
Compliance Costs? (1)
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Compliance Costs? (2)
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Open-minded
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Partnership
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Thank you!