Circular to Licensed Corporations and Associated Entities - Anti-Money Laundering / Counter-Financing of Terrorism
(1) FATF Statement on Democratic People’s Republic of Korea and Iran
(2) FATF Statement on Improving Global AML/CFT Compliance: On-Going Process
(3) Outcomes from the Meeting of the FATF Plenary, 16-18 October 2019
(4) FATF Business Bulletin

29 Oct 2019



Circular to Licensed Corporations and Associated Entities

Anti-Money Laundering / Counter-Financing of Terrorism

(1)  FATF Statement on Democratic People’s Republic of Korea and Iran

(2)  FATF Statement on Improving Global AML/CFT Compliance: On-Going Process

(3)  Outcomes from the Meeting of the FATF Plenary, 16-18 October 2019

(4)  FATF Business Bulletin

(1)  FATF Statement on Democratic People’s Republic of Korea and Iran

Further to our circular issued on 5 July 2019, this is to inform you that the Financial Action Task Force (“FATF”) issued an updated statement on 18 October 2019 identifying jurisdictions that have strategic deficiencies in their anti-money laundering and combating the financing of terrorism (“AML/CFT”) regimes. The statement can be found on the website of the FATF (http://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/public-statement-october-2019.html).

Democratic People’s Republic of Korea (“DPRK”)

The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its AML/CFT regime and the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction (“WMDs”) and its financing. The FATF calls on its members and other jurisdictions to continue to apply countermeasures and targeted financial sanctions in accordance with applicable United Nations Security Council Resolutions to protect their financial sectors from money laundering, terrorist financing and WMD proliferation financing risks emanating from the jurisdiction.

Licensed corporations (“LCs”) and associated entities (“AEs”) should give special attention to business relationships and transactions with the DPRK, including DPRK companies, financial institutions and those acting on their behalf, and subject them to increased scrutiny and enhanced due diligence measures.

In addition, LCs and AEs are reminded that it is an offence under section 4 of the Weapons of Mass Destruction (Control of Provision of Services) Ordinance (Cap. 526) for a person to provide any services where he believes or suspects, on reasonable grounds, that those services may be connected to WMD proliferation.

Iran

The FATF expresses its disappointment that the Action Plan that Iran adopted in June 2016 to address its strategic AML/CFT deficiencies, remains outstanding. The FATF calls on its members and other jurisdictions to undertake certain countermeasures Note 1 and financial institutions in members and other jurisdictions to apply enhanced due diligence measures; and warns that if before February 2020, Iran does not enact the Palermo and Terrorist Financing Conventions in line with the FATF Standards, it will fully lift the suspension of countermeasures and call on its members and other jurisdictions to apply effective countermeasures.

Until Iran implements the measures required to address the deficiencies identified with respect to countering terrorism-financing in the Action Plan, the FATF will remain concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system.

LCs and AEs should therefore continue to apply enhanced due diligence, proportionate to the risks, with respect to business relationships and transactions with natural and legal persons from Iran, including (1) obtaining information on the reasons for intended transactions; and (2) conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.

(2)  FATF Statement on Improving Global AML/CFT Compliance: On-Going Process

In addition, please be informed that as part of the on-going process to improve global AML/CFT compliance, the FATF has set out in a separate statement an updated list of jurisdictions that have strategic AML/CFT deficiencies for which they have developed an action plan with the FATF Note 2. The FATF will closely monitor the implementation of those action plans and encourage its members to consider the information presented in the statement which can be found on the website of the FATF (http://www.fatf-gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/fatf-compliance-october-2019.html).

As the FATF will continue to assess the progress made by these jurisdictions in addressing the deficiencies in their AML/CFT systems and issue updated statements from time to time, LCs and AEs are reminded to browse the website of the FATF for the latest information. 

(3)  Outcomes from the Meeting of the FATF Plenary, 16-18 October 2019 

In addition to the statements in (1) and (2) above, the FATF has also published various other outcomes of its recent Plenary Meeting which may be of interest to LCs and AEs. They include, for example, (i) adoption of changes to the FATF Methodology for assessing how well countries are implementing the new FATF Standards relating to virtual assets Note 3. Such changes apply immediately to all future mutual evaluations as well as follow-up reports for countries that have already undergone their mutual evaluation;  (ii) issuance of a public statement on FATF’s work on regulating virtual assets and monitoring the risks posed by “stablecoins” and other emerging assets to ensure the FATF Standards remain relevant and responsive Note 4; (iii) approval of a public consultation of guidance on the use of digital identity; and (iv) approval of new Best Practices on Beneficial Ownership for Legal Persons.

Further information can be found on the website of the FATF (http://www.fatf-gafi.org/publications/fatfgeneral/documents/outcomes-plenary-october-2019.html).

(4)  FATF Business Bulletin

The FATF from time to time produces business bulletins that highlight the FATF’s decisions (e.g. Mutual Evaluation or Follow-up reports) and new guidance or other products that are particularly relevant to the private sector. For example, the recent bulletin includes a brief summary on the Mutual Evaluation Report of Hong Kong. LCs and AEs are encouraged to read the bulletin to keep updated on recent international AML/CFT developments and may subscribe to the business bulletin at the website of the FATF (http://www.fatf-gafi.org/publications/fatfgeneral/documents/private-sector-business-bulletin.html).

Should you have any queries regarding the contents of this circular, please contact Ms Kiki Wong at 2231 1569 who will assist to refer your queries to the relevant officer.

Intermediaries Supervision Department
Intermediaries Division
Securities and Futures Commission

End

SFO/IS/054/2019

Note 1 These countermeasures are: (a) to require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran; (b) to introduce enhanced relevant reporting mechanisms or systematic reporting of financial transactions; and (c) to require increased external audit requirements for financial groups with respect to any of their branches and subsidiaries located in Iran.
Note 2 The FATF has removed three jurisdictions (namely Ethiopia, Sri Lanka and Tunisia) from, and added three new jurisdictions (namely Iceland, Mongolia and Zimbabwe) to, the list of jurisdictions subject to monitoring under its on-going global AML/CFT compliance process.
Note 3 The FATF adopted new Standards relating to virtual assets: revisions to FATF Recommendation 15 and its new interpretative note in its Plenary meetings held in October 2018 and June 2019 respectively. The relevant FATF Plenary outcomes can be found in our circulars on Outcomes from the Meeting of the FATF Plenary in October 2018 (https://www.sfc.hk/edistributionWeb/gateway/EN/circular/aml/doc?refNo=18EC76) and June 2019 (https://www.sfc.hk/edistributionWeb/gateway/EN/circular/aml/doc?refNo=19EC47) respectively. 
Note 4 The statement can be found on the website of the FATF (http://www.fatf-gafi.org/publications/fatfgeneral/documents/statement-virtual-assets-global-stablecoins.html).


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Page last updated : 29 Oct 2019