14 December 2020
Mr Ashley Alder, SBS, JP
Chief Executive Officer
Securities and Futures Commission
54/F, One Island East
18 Westlands Road, Quarry Bay
Dear Mr Alder,
Re: Consultation Paper on Proposed Amendments to the Securities and Futures
Commission’s Anti- Money Laundering and Counter-Terrorist Financing Guideline (the Guideline)
The Hong Kong General Chamber of Commerce welcomes the opportunity to express our views on the subject consultation.
The Chamber supports the proposed amendments to the Commission’s Guideline subject to these being proportionate and conducive to licensed corporations’ ability to comply with existing obligations under the city’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). To achieve these, we believe that any additional compliance requirements should be facilitative in nature, as well as being reasonably practicable to achieve rather than overly prescriptive.
We hope you will give our comments your due consideration.
Securities and Futures Commission’s Consultation Paper (CP) on Proposed Amendments to its Anti- Money Laundering and
Counter-Terrorist Financing Guideline (the Guideline) September 2020
Response by The Hong Kong General Chamber of Commerce
i. the suggested compliance actions in the proposed amended Guideline should be facilitative, not (as is current proposed for many of them) mandatory; and
ii. these suggested compliance actions should be reasonably practicable to achieve, and not excessively granular.
i. The use of the word “must” or “should” should be confined to references to LCs’ existing legal requirements, or at most to actions that are a necessary consequence of complying with these requirements. For example, the statement in the proposed amended Guideline that “FI’s should have in place a process to identify and understand the ML/TF risks to which they are exposed…” seems unobjectionable since, without such a process, it is difficult to see how LCs can comply with their duty under the AMLO to “take all reasonable measures…(a) to ensure that proper safeguards exist to prevent a contravention of any requirement under Part 2 or 3 of this Schedule”.
ii. Where actions are required by an existing legal requirement, or are a necessary consequence of complying with such a requirement, the Guideline should refer to the relevant statutory provision. This would help make a clear distinction between actions that are mandatory, and those that are merely suggested actions for LCs to consider.
iii. Where the suggestions and examples of actions that might be taken by LCs are not expressly required by the legislation, or implied as a necessary consequence of compliance with it, the use of the word “should” needs to be avoided, and the wording should be expressed as facilitative, rather than mandatory. In the Annex, we give a non-exhaustive list of examples of how the use of the word “should’’ in the proposed amended Guideline should be changed to facilitative language such as “may wish to consider”. As this is a general point about how the proposed amended Guideline should be changed, we have not sought to produce an exhaustive list of precisely where the changes need to be made.
2) The suggested compliance actions should be reasonably practicable to achieve, and not excessively granular
i. Obtaining detailed information about a respondent institution’s business, and in particular its underlying customers; and
ii. Obtaining detailed information for assessing whether the AML/CTF controls of the respondent institution are effective.
Question 2: Do you consider the expanded list of illustrative examples of risk indicators to be sufficiently comprehensive? Please state your views.
We believe that the expanded list is sufficiently comprehensive. But we defer to the views of LCs on whether all the examples are (a) reasonably practicable for them to achieve and/or (b) not excessively granular (see our General Comment (2) above). In other words, whether any of the examples should be reviewed or modified.
Question 3: Do you agree with the scope of application for the cross-border correspondent relationships provisions for the securities sector? Please explain.
Question 4: Do you have any views on the additional due diligence and other risk mitigating measures applied to cross-border correspondent relationships in the securities sector? Please state your views.
Please see our General Comments 1 and 2 above. As explained in General Comment 1, the word “should” in respect of many of the suggested actions in section 4 on cross-border relationships is inappropriate, and should be replaced by facilitative language, so as not to purport to create additional legal obligations. Moreover, as explained in General Comment 2, some of these suggested actions may be impracticable to be achieve or excessively granular, and should be simplified or removed.
Question 5: Do you have any views on the expanded list of illustrative examples of possible simplified and enhanced measures under a risk-based approach? Please state your views.
We defer to the views of LCs on this question, being those directly affected by these examples and in the best situation to assess their potential impact in practice.
Question 6: Do you have any views on the list of illustrative red-flag indicators of suspicious transactions and activities set out in Appendix B to the Proposed Revised Guideline? Please state your views.
Question 7: Do you have any views on the facilitative guidance permitting delayed third-party deposit due diligence? Please state your views.
Please see our General Comments 1 and 2 above. As a minimum, the word “should” be removed and replaced by facilitative language. But even if this is done, we believe that many of the suggested compliance actions in the relevant section of the CP (section 11) are excessively granular, and could be simplified or removed, as explained in our General Comment 2.
 AMLO s 6.
 Guideline para 1.8.
 Paragraph 2.1. The term “FI” as used in the proposed amended Guideline appears to equate to the term “LC” as used in the CP.
 AMLO s 7(4).
 Para 1.4.
 AMLO Schedule 2 s 23.
 Paras 4.20.6 and 4.20.7.
 Para 4.20.9.
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