Guidelines for Submission of AML/CFT Policy

by Applicant for Money Service Operator Licence/Licensee

These guidelines aim to provide practical guidance to assist applicants to draw up their
own policies, procedures and controls (collectively known as “policy”) in the relevant
operational areas, taking into consideration of their proposed business plan and special
circumstances so as to meet the relevant anti-money laundering and counter-terrorist
financing (“AML/CFT”) statutory and regulatory requirements.

Please note that each applicant has its unique way of conducting money service business
including products and services offered, distribution channels, organizational structure,
customer base and geographical risks, etc. It is important for applicant to complete a self
AML/CFT risk assessment and put in place a set of policy to mitigate the risks of money
laundering and terrorist financing (“ML/TF”). The policy must be based on the applicant’s
risk assessment and meet its particular business risk profile.

The items tabulated below are by no mean exhaustive and applicant must consider any
other important issues that are peculiar to its business model and to facilitate the
formulation of practical and effective policy.

Item Required Detail of the required information

No. informatio
n  The applicant (Name) must take all reasonable measures to
1 Introduction to
the Policy ensure that proper safeguards exist to prevent a
contravention of any requirement under Part 2 or 3 of
Schedule 2 to the Anti-Money Laundering and Counter-
Terrorist Financing Ordinance (“AMLO”) and to
mitigate ML/TF risks.
 The applicant is required by section 19(3) of the AMLO to
establish and maintain effective procedures not
inconsistent with the AMLO for the purpose of carrying
out the duties under sections 3, 4, 5, 9, 10 and 15 of
Schedule 2.
 The applicant adopts a risk-based approach in the design
and implementation of the AML/CFT policies with a
view to managing and mitigating ML/TF risks.
 Qualified Compliance Officer (Name) and Money
Laundering Reporting Officers (Name) are employed
to implement appropriate AML/CFT policies and
procedures including suspicious transaction report. The
line of reporting should be clearly stated.

1
Ver.
(12/2019)
2 AML/CFT Elaborate the relevant AML/CFT framework
Framework in
Hong Kong  What is Money Laundering (“ML”), Terrorist
Financing (“TF”) and Proliferation Financing (“PF”).
 State the legal obligations of money service operator
(“MSO”) in respect of ML, TF and PF under
different legislation.
 Why is it important to have an AML/CFT system for
the applicant’s business.
 What are the three stages of ML.
 Typical signs or indicators for ML, TF and PF.
 What is Suspicious Transaction Report (“STR”) and
the applicant’s legal obligations.
 Actions required by applicant if a suspicion arises.
 Procedure of handling STR and timing.
 What is tipping off and the applicant’s legal obligations.

3 Customer Due Elaborate the relevant workflow and AML/CFT procedures

Diligence
(CDD)  What is CDD.
 Statutory obligations of CDD requirement.
 State company policy on different transaction thresholds
for carrying CDD including treatment of one-off
transaction for walk-in customer.
 What is Customer Risk Assessment (“CRA”) and the
applicant’s legal obligation.
 Procedures for carrying out the CRA.
 Regular CDD and its application within the company
1. MSO should indicate how the paragraphs 4.2.1- 4.2.6 of
the Guideline on AML/CFT issued for MSOs
(“AML Guideline”) will be complied with and how
linked transactions will be dealt with.
 Simplified Due Diligence (“SDD”) and its application
within the company.
 Enhanced Due Diligence (“EDD”) and its application
within the company.
1. What is Politically Exposed Person (“PEP”)
2. What is the MSO’s policy on Domestic, Foreign
and International Organization PEPs
 3. Non-face-to-face channel
4. High risk countries (e.g. countries identified by
the Financial Action Task Force)
5. Any situation that is assessed to be high risk by the
applicant (e.g. remit HK$200,000 in cash to Mainland
by a walk-in customer)
 What are Source of Funds(“SOF”) and Source of
Wealth (“SOW”).
 How SOF and SOW measures are incorporated into
the applicant’s EDD process.
 Funding provided by third party requires the applicant to
identify and verify its ultimate beneficial owner
including legal person, partnership, trust and other legal
arrangement (procedures and steps taken by the applicant
to comply with these requirements).
 What are the consequences of failure to carry out
CDD measures.
 How the applicant obtains information on the purpose and
intended nature of the business relationship as part of
the company’s CDD process).

 On-going Monitoring
1. Customer monitoring
2. Transaction monitoring
What is a “normal” level of business activity and what
is not? Is the transaction consistent with the MSO’s
knowledge of the customer and profile?
 Record keeping
1. Elaborate on how CDD, transaction, screening and
CRA records will be recorded and kept.
2. Whether the system can retrieve those records within a
reasonable timeframe say one day.

4 Products & Money changing and/or remittance services.

Services

5 Distribution Elaborate the distribution channels. For example, counter

Channels service, internet or mobile etc. Percentage of face-to-face and
non-face-to-face transactions.

6 Type of Elaborate the main types of currencies provided in the

currencies money service business.

7 Target Elaborate the target customers in the money service business.

customers
8 Target Elaborate the target jurisdictions for “inward remittance
jurisdictions for transaction” and “outward remittance transaction”.
 remittance
9 Revenue model Elaboration of the way by which the applicant makes profit
from the business.

For example, profit is made from a certain percentage of each

transaction, handling charge, etc.

10 Elaboration of Elaborate the relevant workflow and AML/CFT

the “payment procedures, which should include, among others:
systems” and
“AML/CFT  the relevant payment system, fund flow, settlement
procedures” system (by bank transfer, cash etc.)
in remittance
transaction  procedures for taking other reasonable measures in
mitigation of ML/TF risks, such as identifying the source
(i.e. s.13 in of funds, identity and legality of any counterparts/related
Schedule 2 to parties in processing the transaction.
the AMLO)
and/or wire  procedures for monitoring the company’s overseas
transfer (i.e. branch and agent’s compliance with the AML/CFT policy.
s.12 in Schedule
2 to the AMLO)
11 AML/CFT Elaborate the procedures in conducting sanctions
screening screening.
process
For example, screening against customers for mitigating
the risks of (a) targeted financial sanctions (“TFS”) related to
terrorism and TF, (b) TFS related to proliferation, and (c) PEP.
12 Risk Elaborate the risk assessment methodology of the applicant for
assessment AML/CFT purpose.
procedures
For example, relevant risk factors, procedures to conduct risk
assessment of customer, products and services, etc.

13 Compliance Elaborate the AML/CFT compliance function of the

function applicant.

For example, management oversight, the roles of

compliance department, any relevant committee/panel, the
duties and responsibilities of compliance officer and
14 Reporting of compliance
Elaborate thestaff.
procedures of the company in the process of
suspicious reporting suspicious transaction, relevant reporting lines, and
transaction the roles of money laundering reporting officer and
relevant staff.

15 AML/CFT Elaborate the AML/CFT audit function of the applicant to

audit function ensure their AML/CFT systems/programmes are
commensurate with the up-to-date business risk profile and
the AML/CFT circumstances.

For example, by internal/external audit function, relevant

policy and procedures, etc.
16 Training Elaborate the training programme of the company.
programme
 Staff must be trained in what they need to do to carry
out their particular duties with respect to AML/CFT.
 Scope of training to be provided
1. Staff’s personal statutory obligations and consequence
for failure to report STR
2. statutory obligations on the MSO and the
consequence of breaches of the relevant legislation
3. the MSO’s policies and procedures relating
to AML/CFT
4. any new and emerging techniques, methods and trends
in ML/TF that are needed by the staff to carry out
their particular duties
5. other issues set out in para. 9.7 of the AML Guideline
 MSO will monitor the effectiveness of training by
testing their staff’s understanding on the above issues
and their ability to recognize suspicious transactions.
 MSO will monitor and maintain records of who have been
trained, when the staff received the training and type
of training provided.

17 Other internal If there are other internal controls systems for AML/CFT
controls purpose, elaborate the relevant policies and procedures.
systems
18 Other Applicant is advised to provide/attach other information to
information facilitate the elaboration of the business plan and AML
policy, such as the company’s internal forms for reporting
suspicious transactions, customer on-boarding, account
opening, conducting CRA, brochures, and publications, etc.

19 Cooperation The applicant will cooperate with the Customs & Excise
with regulator Department about their routine inspection or investigation.
and law This company will also cooperate with other law
enforcement enforcement agencies wherever required under the laws of
agencies Hong Kong.

The applicant will implement the above AML/CFT policy to

mitigate the ML and TF risks.