LCQ12: Anti-money laundering measures concerning Designated Non-Financial Businesses and Professions
Following is a written reply by the Secretary for Security, Mr Lai Tung-kwok, to a question by the Hon Kenneth Leung in the Legislative Council today (October 31):
Although Hong Kong tightened its anti-money laundering legislation with the enactment of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institution) Ordinance (Cap. 615) in April 2012, it was ranked 86th among 144 countries and territories in terms of money laundering risk and assessed to be of medium risk level in money laundering by the Basel Institute on Governance earlier this year. Besides, it is noted that only three circulars on anti-money laundering have been issued to estate agents since 2000 to prevent money laundering activities via the real property sector. According to the Financial Action Task Force Mutual Evaluation Report published in July 2008, only one single suspicious transaction report (STR) was filed by estate agents between 2003 and 2007. In this connection, will the Government inform this Council:
(a) how many STRs were received by the Joint Financial Intelligence Unit each year from 2008 onwards, and how many of such STRs were made by estate agents;
(b) how many estate agents were disciplined, since 2000, by the Disciplinary Committee of the Estate Agents Authority due to failure in observing the anti-money laundering principles contained in the aforesaid circulars;
(c) what measures the Government is going to take to enhance the client identification process, transaction monitoring and the reporting regime for combating money laundering activities via the real property sector; and
(d) whether the Government will examine if it is appropriate to require offshore vehicles holding residential properties in Hong Kong to disclose the names of their shareholders in land records in order to increase the transparency of real property transactions?
As an international financial centre, Hong Kong has been an active participant in the global efforts to combat money laundering. Over the years, Hong Kong has put in place a robust and comprehensive anti-money laundering (AML) regime in line with the relevant international standards through legislation, law enforcement, regulation of the financial sectors, issuance of guidelines, publicity and education, and international co-operation. The AML regime in Hong Kong has been functioning well and is positively recognised by overseas counterparts, international organisations and the relevant standard setting bodies, including the Financial Action Task Force (FATF).
In Hong Kong, the Financial Services and the Treasury Bureau is the overall co-ordinator in relation to AML policies and the implementation of FATF’s requirements, while the Security Bureau (SB) is responsible for implementing FATF’s Recommendations in relation to, amongst others, the AML requirements concerning Designated Non-Financial Businesses and Professions (DNFBPs), including requirements on suspicious transaction reporting, customer due diligence (CDD) and record-keeping to ensure that DNFBPs have in place effective measures against money laundering. The estate agency sector is one of the DNFBPs upon which such requirements should apply.
At present, in line with FATF’s requirements, estate agents are subject to the legal requirements in respect of suspicious transaction reporting. Pursuant to the Drug Trafficking (Recovery of Proceeds) Ordinance (DTROPO), Cap. 405, and the Organized and Serious Crimes Ordinance (OSCO), Cap. 455, where a person, including but not limited to estate agent, knows or suspects that any property represents any person’s proceeds of drug trafficking or crime, he shall disclose that knowledge or suspicion to the Joint Financial Intelligence Unit (JFIU).
In addition to the above-mentioned legal requirements, the Estate Agents Authority (EAA) has in the past years issued four Practice Circulars (PCs) on AML, requiring estate agents to adopt preventive measures against money laundering, including suspicious transaction reporting, CDD and record-keeping, and providing guidance on the implementation of such measures to prevent real estate transactions from being abused for money laundering.
In consultation with relevant policy bureaux, our reply to various parts of the question is as follows:
(a) The number of suspicious transaction reports (STRs) received by the JFIU and the number of STRs made by estate agents since 2008 are as follows:
No.of STRs 2008 2009 2010 2011 2012
(up to Sept)
Total 14,838 16,062 19,690 20,287 17,795
By estate 2 1 0 2 21
(b) According to the record of the EAA, one licensee was disciplined by the EAA’s Disciplinary Committee in 2010 due to failure in observing EAA’s PCs on AML.
(c) As outlined above, existing AML legislation in respect of suspicious transaction reporting applies to the estate agency sector, as with other sectors in the community. To prevent real estate transactions from being abused for money laundering, the EAA has also issued four PCs on AML requiring estate agents to adopt preventive measures against money laundering.
As part of the process to work with DNFBPs to ensure their compliance with FATF’s AML requirements, SB has been working with the EAA and JFIU in the past few years to raise practitioners’ awareness of the money laundering risk in the sector and the AML requirements under the law and the PCs, with training seminars for estate agents. Such capacity building efforts will be sustained as we continue to work with the sector to bring Hong Kong’s AML regime for the DNFBPs towards fuller compliance with relevant FATF’s requirements.
(d) Hong Kong has a robust and comprehensive AML regime in line with relevant international standards, we will continue to work with relevant sectors towards compliance with FATF’s AML requirements for DNFBPs. Since FATF does not have any requirement on the disclosure of names of shareholders of offshore vehicle holding local residential properties in land records, we do not have any plan to examine the suggestion in the context of FATF compliance.