Hong Kong, China's measures to combat money laundering and terrorist financing

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English

Mutual Evaluation Report of Hong Kong, China 2019

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MER-Hong-Kong-China-2019.pdf
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Paris, 4 September 2019  - Hong Kong, China has a sound regime to fight money laundering and terrorist financing that is delivering good results. However, it must enhance prosecution of money laundering involving crimes committed abroad and strengthen supervision of certain non-financial businesses.

The Financial Action Task Force and the Asia-Pacific Group on Money Laundering assessed Hong Kong, China’s anti-money laundering and counter terrorist financing (AML/CFT) system. The report is a comprehensive review of the effectiveness of Hong Kong, China’s measures and their level of compliance with the FATF Recommendations.

Hong Kong, China is a major financial centre.  While Hong Kong, China has a low domestic crime rate, it faces a significant risk of attracting those who seek to launder the proceeds of crimes such as corruption and tax evasion. 

Authorities in Hong Kong, China generally have a good understanding of the money laundering and terrorist financing risks they are exposed to, as do the larger financial sector entities.  However, some smaller institutions, non-financial businesses and their supervisors do not always understand these risks, or how to mitigate them.

Hong Kong, China actively prosecutes money laundering from domestic offences. It also prioritises the confiscation of proceeds of crime through strong action by law enforcement agencies and prosecutors. Authorities respond effectively to the large number of requests for cooperation from foreign counterparts. However, given the jurisdiction’s position as an international financial centre, and the risks it faces from crimes committed abroad, it is not making sufficient outgoing requests for cooperation.  Authorities could focus more on prosecuting the laundering of proceeds from foreign offences.  

Hong Kong, China faces a medium-low risk of terrorist financing. Nevertheless, it has implemented sound systems to detect and investigate terrorist financing when it occurs.  Due to contextual factors such as its geographic location and its role as an international financial centre, Hong Kong China could attract transactions necessary for the proliferation of weapons of mass destruction. Authorities demonstrated a robust use of financial intelligence and the capacity to conduct complex investigations in this context, although these have not yet exposed proliferation financing cases.

Hong Kong, China’s recent legislative amendments have significantly strengthened its response to fight money laundering and terrorist financing, but these measures have not been operational for long enough to fully demonstrate their effectiveness. 

Hong Kong, China must increase its efforts to prosecute money laundering linked to foreign predicates, increase risk understanding and AML/CFT implementation by smaller institutions, and strengthen supervisory measures for some sectors.

The FATF adopted this report at its June 2019 Plenary meeting.

 

Mutual Evaluation Report of Hong-Kong, China - 2019, Executive Summary

More information:  

The FATF Recommendations

FATF Methodology for assessing compliance with the FATF Recommendations and the effectiveness of AML/CFT systems

Consolidated assessment ratings - an overview of ratings that assessed countries obtained for effectiveness and technical compliance.

 

 

 

Technical Compliance

Ratings which reflect the extent to which a country has implemented the technical requirements of the FATF Recommendations.

Hong Kong, China - Mutual Evaluation 2019

R.1 - Assessing risk & applying risk-based approach
LC
R.2 - National cooperation and coordination
LC
R.3 - Money laundering offence
LC
R.4 - Confiscation and provisional measures
LC
R.5 - Terrorist financing offence
LC
R.6 - Targeted financial sanctions related to terrorism & terrorist financing
C
R.7 - Targeted financial sanctions related to proliferation
C
R.8 - Non-profit organisations
C
R.9 - Financial institution secrecy laws
C
R.10 - Customer due diligence
LC
R.11 - Record keeping
LC
R.12 - Politically exposed persons
PC
R.13 - Correspondent banking
C
R.14 - Money or value transfer services
LC
R.15 - New technologies
LC
R.16 - Wire transfers
LC
R.17 - Reliance on third parties
LC
R.18 - Internal controls and foreign branches and subsidiaries
LC
R.19 - Higher-risk countries
LC
R.20 - Reporting of suspicious transactions
LC
R.21 - Tipping-off and confidentiality
C
R.22 - DNFBPs: Customer due diligence
PC
R.23 - DNFBPs: Other measures
LC
R.24 - Transparency and beneficial ownership of legal persons
LC
R.25 - Transparency and beneficial ownership of legal arrangements
PC
R.26 - Regulation and supervision of financial institutions
LC
R.27 - Powers of supervisors
LC
R.28 - Regulation and supervision of DNFBPs
PC
R.29 - Financial intelligence units
C
R.30 - Responsibilities of law enforcement and investigative authorities
C
R.31 - Powers of law enforcement and investigative authorities
C
R.32 - Cash couriers
C
R.33 - Statistics
C
R.34 - Guidance and feedback
LC
R.35- Sanctions
LC
R.36 - International instruments
LC
R.37 - Mutual legal assistance
LC
R.38 - Mutual legal assistance: freezing and confiscation
LC
R.39 - Extradition
LC
R.40 - Other forms of international cooperation
LC

C = compliant   |   LC = largely compliant     |   PC = partially compliant   |   NC = non-compliant

Effectiveness

Ratings that reflect the extent to which a country's measures are effective. The assessment is conducted on the basis of 11 immediate outcomes, which represent key goals that an effective AML/CFT system should achieve.

Ratings that reflect the extent to which a country's measures are effective. The assessment is conducted on the basis of 11 immediate outcomes, which represent key goals that an effective AML/CFT system should achieve.

Hong Kong, China - Mutual Evaluation 2019

IO1
SE
IO2
SE
IO3
ME
IO4
ME
IO5
ME
IO6
SE
IO7
ME
IO8
SE
IO9
SE
IO10
SE
IO11
ME

HE = high level of effectiveness   |   SE = substantial level of effectiveness    |   ME = moderate level of effectiveness   |   LE = low level of effectiveness