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Cablegate: Hong Kong Anti-Money Laundering Legislation

VZCZCXRO2905
RR RUEHCN RUEHGH
DE RUEHHK #0327 0560939
ZNR UUUUU ZZH
R 250939Z FEB 10
FM AMCONSUL HONG KONG
TO RUEHBJ/AMEMBASSY BEIJING 3993
RUEHC/SECSTATE WASHDC 9723
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS HONG KONG 000327

SENSITIVE
SIPDIS

STATE FOR EAP/CM
BEIJING FOR TREAS ATTACHE
TREASURY FOR DAS GLASER

E.O. 12958: N/A
TAGS: ECON EFIN HK
SUBJECT: HONG KONG ANTI-MONEY LAUNDERING LEGISLATION
UPDATE: PUBLIC CONSULTATIONS CLOSED

REF: A. 09 HONG KONG 2175
B. 09 HONG KONG 289

1. (SBU) On February 6, Hong Kong completed its second and
final round of public consultations on Financial Action Task
Force (FATF)-compliant anti-money laundering (AML)
legislation to codify requirements on customer due diligence
(CDD) and record keeping. The proposed legislation would
also establish a licensing regime for Hong Kong's remittance
agents and money changers (RAMCs) under oversight from the
Hong Kong Customs and Excise Department (HKCED). Financial
Services and Treasury Bureau (FSTB) Principal Assistant
Secretary Angelina Kwan told EconOff February 24 that the
Hong Kong Government would present the draft legislation to
the Legislative Council (LegCo) in June. She was optimistic
LegCo would pass the bill in early 2011 with an
implementation date of early 2012, after a one-year grace
period.

2. (SBU) Kwan informed us that many of Hong Kong's RAMCs had
expressed strong concerns during the second round of public
consultations over compliance costs associated with the
proposed licensing regime. They feared the current profits
of their low-tech operations could not support the
requirements and would force them to consolidate or go out of
business, she said. To deter RAMCs from going underground,
the proposed legislation would grant search and seizure
enforcement authority to HKCED and impose strong sanctions on
those who contravene the legal obligations, including
criminal liability charges. The current RAMC registration
scheme operated by the Hong Kong Police Force only imposes
fines to those who fail to register.

3. (SBU) On the other hand, Hong Kong's banking, securities
and insurance sectors were very supportive of the proposed
legislation, Kwan commented. She added that most of the
participants in these sectors, many with headquarters in the
US and Europe, already have internationally accepted
compliance systems on AML. The guidelines issued by Hong
Kong's three existing regulators (Hong Kong Monetary
Authority, Securities and Futures Commission, and the Office
of the Commissioner of Insurance) were also compliant with
FATF and would likely only require minor technical
adjustments after the law is passed. The Hong Kong
Government remained committed to a sound AML regime to retain
the city's status as an international financial center of
choice, she stressed.
MARUT

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