Circular to Licensed Corporations and Associated Entities – Anti-Money Laundering / Counter-Financing of Terrorism Amendments to Anti-Money Laundering and Counter-Financing of Terrorism Guidelines

The Securities and Futures Commission of Hong Kong, SFC, has published a circular to announce upcoming changes to the Guideline on Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT). The changes reflect the changes in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance brought about by the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022 which primarily introduces a new licensing regime for virtual asset service providers and a registration regime for dealers in precious metals and stones (DPMS) and revises the requirements pertaining to beneficial owners and ownership verification. The revised guidelines will come into force upon official gazettal.
#### According to the circular, the key changes are as follows:
(a) Changes have been made to align with the updated legal definition of a „politically exposed person“ (PEP). The definition now refers to individuals outside of Hong Kong instead of outside the People’s Republic of China. Additionally, the term „foreign PEP“ has been replaced with „non-Hong Kong PEP“, while „domestic PEP“ is now referred to as „Hong Kong PEP.“
(b) The guideline now incorporates the definition of a „former non-Hong Kong PEP“ and allows for the exclusion of special requirements and additional measures for non-Hong Kong PEPs, if a thorough risk assessment determines that a former non-Hong Kong PEP no longer poses a high risk of money laundering and terrorist financing (ML/TF).
(c) Modifications have been made to reflect the updated statutory definition of a beneficial owner of a trust customer. The 25% threshold has been eliminated, and the definition now includes trustees, beneficiaries, and classes of beneficiaries. Furthermore, the guideline provides risk-based guidance to determine the reasonable measures required for verifying the identities of beneficiaries and classes of beneficiaries in trust customer relationships.
(d) Guidance has been added to acknowledge that data or information obtained from a recognized digital identification system is a reliable and independent source for verifying a customer’s identity. Additionally, the guideline allows for the exclusion of additional measures for customers (or natural persons acting on their behalf) who are not physically present for identification purposes if their identity has been verified using a recognized digital identification system.
(e) In addition to the aforementioned amendments, a newly introduced Chapter 12 of the AML/CFT Guideline offers guidance on the risks of money laundering and terrorist financing associated with virtual assets. This chapter outlines the regulatory requirements and standards that address these risks. It also clarifies how certain existing requirements pertain to transactions and activities involving virtual assets. Furthermore, the chapter provides a non-exhaustive list of risk indicators to assess ML/TF risks and identify suspicious transactions and activities involving virtual assets. The guidance presented in Chapter 12 applies to licensed corporations engaging in virtual asset-related businesses or businesses that pose ML/TF risks concerning virtual assets.