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International Standards on Regulating DNFBPs & The way forward. Narcotics Division, Security Bureau. Mr Peter KWOK Assistant Secretary for Security 27 February 2009. Agenda. Financial Action Task Force (FATF) requirements on Trust & Company Service Providers (TCSPs)

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international standards on regulating dnfbps the way forward

International Standards on Regulating DNFBPs &The way forward

Narcotics Division, Security Bureau

Mr Peter KWOK

Assistant Secretary for Security

27 February 2009

slide2
Agenda
  • Financial Action Task Force (FATF) requirements on Trust & Company Service Providers (TCSPs)
  • Highlight of the FATF recommendations relevant to TCSPs
  • Way Forward in regulating TCSPs
slide3
Designated Non-Financial Businesses

and Professions (DNFBPs)

  • DNFBPs as defined by Financial Action Task Force (FATF) are:
    • Lawyers
    • Accountants
    • TCSPs
    • Real Estate Agents
    • Dealers in Precious Metals/ Stones
    • Casinos
slide4
FATF Requirements

FATF requirements on

Trust & Company Service Providers (TCSPs)

slide5
FATF Requirements for TCSPs

Requirements to be specified in law:

  • CDD (Rec. 5)
  • Record Keeping (Rec. 10)
  • Suspicious Transaction Reporting (Rec. 13)

Other requirements:

  • Internal Controls (Rec. 15)
  • Sanctions (Rec. 17)
slide6
FATF Requirements for TCSPs

Other requirements:

  • Politically Exposed Persons (PEPs) (Rec. 6)
  • New technology/ Non-face-to-face Business (Rec. 8)
  • Reliance on 3rd parties/ intermediaries (Rec. 9)
  • Complex / unusual transactions (Rec. 11)
slide7
FATF Requirements for TCSPs

Other requirements:

  • No tipping-off (Rec. 14)
  • Special attention to parties from non- complying jurisdictions (Rec. 21)
  • Self Regulatory Organisation (SRO)(Rec. 24)
  • Competent authorities to establish guidelines (Rec. 25)
slide8
FATF Requirements for TCSPs

When Trust and Company Service Providers

  • 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.
slide9
Highlight

Highlight of

FATF recommendations

relevant to TCSPs

slide10
Rec. 5 and 9 (CDD)
  • To identify the customer and verify his ID
  • To identify the beneficial owner
  • The purpose and intended nature of the business relationship
  • On-going CDD and enhanced CDD
  • Reliance on 3rd parties/ intermediaries
slide11
Rec. 10 (Record Keeping)
  • To retain all documents relating to transactions
  • At least 5 years after the completion of transactions
slide12
Rec. 13 and 14 (STRs)
  • Suspicious Transactions Reporting (STR) requirements
  • Protection from criminal/ civil liabilities
  • No tipping-off
slide13
Rec. 15 (Internal Control)
  • To establish/ maintain internal policies/ procedures to prevent ML/TF
  • To ensure high standards in hiring
  • employees
  • On-going staff training
  • Audit function to test the system
slide14
Rec. 24 and 25 (SRO & Guidelines)
  • Government authority or Self-regulatory Organisation (SRO) to monitor and ensure compliance with AML/CFT requirements
  • Power to sanction in case of non-compliance
  • Government authority or SRO to establish guidelines
slide15
Rec. 17 (Sanctions)
  • Sanctions are effective, proportionate and dissuasive
  • Sanctions can be meted out by Government authority or SRO
slide16
Rec. 6 (PEPs)
  • Have appropriate risk management systems to determine whether clients are Politically Exposed Persons (PEPs) or not
  • Senior management approval for having business relationships
  • To establish source of wealth/ fund
slide17
Rec. 8 (New Technology)

To take measures:

  • To prevent misuse of technological developments for ML
  • To address risk associated with non- face-to-face business relationships
slide18
Rec. 11 (Complex Transactions)
  • To pay special attention to all complex, unusual large transactions and unusual patterns of transactions
  • To examine the background/ purpose of such transactions
slide19
Rec. 21 (Special Attention)
  • To give special attention to dealings with parties from countries which do not comply with the FATF Recommendations
slide20
*

*

*

FATF Recommendations relevant to DNFBPs

slide21
Mutual Evaluation by FATF
  • The Third round of Mutual Evaluation (ME) is underway
  • 23 jurisdictions have been assessed
  • www.fatf-gafi.org
slide22
Way Forward

Way Forward

in regulating TCSPs

slide23
Way Forward (1)
  • Establishment of Central Co-ordinating Committee (CCC), chaired by Financial Secretary, in April 2008
  • To steer & co-ordinate the strategic development of HK’s AML/CFT regime in line with internationally recognised standards
slide24
Way Forward (2)
  • FSTB assumes the role of overall co-ordinator for AML/CFT matters and with specific responsibilities on financial sectors
  • SB (Narcotics Division) is to look after DNFBPs and Non-profit Organisations
slide25
Way Forward (3)

Legislation on CDD & Record Keeping

  • Phase I : Financial Sectors
  • Phase II: DNFBPs
  • No time table and open-minded
slide26
Way Forward (4)
  • To prepare for Phase II, SB will step up outreaching activities to raise awareness on AML/CFT and work closely with regulatory/ professional bodies
  • CPD Seminars
  • Sector Specific Guidelines
  • Revised Interactive Training Kit
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