WMLRO.Com: AML/CFT regulation: have some people learned nothing?
As Hong Kong starts a second round of consultation on its seemingly never-ending road to reform of its woefully outdated law, the Hong Kong government has revealed some of the responses from the first round which started in April. Honestly: some of the comments are simply jaw dropping. Have these people learned nothing?
This is a direct quote from the Hong Kong consultation document issued today:
"A few respondents suggested to exclude non face-to-face transactions and correspondent banking relationship from the EDD requirement."
One has to ask whether those who made this suggestion have even a tenuous grasp on reality.
First, let's be clear: around most of the world, so-called Enhanced Due Diligence is, at its heart, what Hong Kong businesses that are subject to regulations requiring counter-money laundering systems have been doing since 1994. The primary reason it is called "enhanced" is to make Americans come up to the standard that the rest of the world was already applying. Calling it "enhanced" is wrong: it should be called "standard."
In fact, Hong Kong's proposal is to do just that: it calls it "customer due diligence" and it is intended that it will apply to everyone who does not fall into two exceptions: identifiable low risk (which it defines) and acceptable but otherwise high risk. The latter is subject to enhanced due diligence. So, immediately, it can be seen that the range of EDD business in Hong Kong is to be restricted to a small portion of the overall market.
Of course, the most likely candidates to want to exclude face to face business from standard due diligence is the offshore industry - by definition one in which there is a disproportionately high risk of being used by tax evaders, transfer pricing operators and those seeking de facto (but not legally binding) secrecy for funds they don't want to keep at home. And that includes, of course, the private banking sector.
The paper says "The relevant authorities will provide guidance on the EDD requirements for these customers in their future guidance to facilitate compliance."
And slap them round the head with a large stick, one hopes.
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