Home' A Plus Magazine : Oct 2012 Contents 32 October 2012
ing moneychangers and remittance agents
to be licensed entities."
Second, Morris says the ordinance pro-
vides some teeth to existing regulations en-
abling criminal sanctions to be imposed on
top of administrative penalties.
Third, it provides some additional clarifi-
cation on steps regulated entities can take to
ensure an adequate compliance programme.
"This could include the use of a risk-based ap-
proach 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. legisla-
tion was more comprehensive and far reach-
ing," says Sara Nelson, a Miami lawyer who
has compared the two regimes. "This moves
Hong Kong closer to global standards."
Another significant change is termi-
nology. "The amendment redefines terms
so that the law now relates to 'property' in-
stead of 'funds,' which was an unnecessarily
restrictive term," says Nigel Morris-Cotter-
ill, a Kuala Lumpur lawyer who heads the
Anti-Money Laundering Network, a non-
profit 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. "Un-
derneath, it has an impact on the financial
institutions...and puts lending on exactly
the same risk management footing as de-
posit 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
Burden of compliance
One significant issue for Hong Kong finan-
cial 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 McShe-
affrey, a partner at KPMG and an Institute
member, who added that compliance with
the U.S. Foreign Account Ta x Compliance Act
and the Wall Street Reform and Consumer
Protection (Dodd-Frank) Act were already
Hong Kong into line
with the United
Nations standard of
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