HKMA “strongly recommends” PEPs profiling

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HONG KONG – The Prevention of Money Laundering and Terrorist Financing industry working group (IWG), chaired by the Hong Kong Monetary Authority (HMKA), has issued its first guidance paper on the subject of politically exposed persons (PEPs).

The paper highlights the risk that PEPs can misuse positions of power and influence for personal gain or to the advantage of family or associates, committing fraud, bribery and corruption, and spiriting funds away through foreign jurisdictions, under aliases and within various funds, private companies, trusts and foundations.

Institutions are recommended to mitigate this risk by carrying out specific profiling and recording of PEP customers and their transactions.

The IWG was established in June 2006, with representatives from 20 Hong Kong authorised institutions and the Joint Financial Intelligence Unit (JFIU), to strengthen the banking industry’s anti-money laundering (AML) and counter-terrorist financing (CFT) defences by developing industry standards and best practice.

The report was developed by an IWG sub-group, which looked into non-retail customer due diligence (CDD) processes. The IWG consists of three user sub-groups: general CDD; CDD processes for non-retail banking; and suspicious transaction monitoring and reporting.

The conclusions do not represent formal HKMA regulation, but rather strong recommendations. The HKMA is asking for “full consideration to the adoption of these practices” unless they do not apply or alternate measures for complying with the HKMA’s AML and CFT guidelines are already in place.

The HKMA says it will continue to study issues such as CDD processes for offshore companies and address proof for personal customers, with guidance papers where appropriate.

The IWG will also have a webpage on the HMKA site, with online access to guidance papers.

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