Financial Action Task Force Set to Rate Hong Kong “Compliant” in Anti-Money Laundering Evaluation

Carol Beaumier, Senior Managing Director Risk and Compliance – New York
Jeffery Naquin, Director Risk and Compliance, Protiviti Hong Kong

According to a press release by the Hong Kong government, Hong Kong is set to receive an overall rating of “Compliant” in what will be its Fourth Financial Action Task Force (FATF) Mutual Evaluation. The Mutual Evaluation Report (MER) is scheduled to be released in September 2019. The expected rating represents a significant improvement over the Partially Compliant rating assigned to Hong Kong on a number of key and core recommendations (including customer due diligence, analysis of unusual transactions and the scope of supervisory authority) in its Third Mutual Evaluation Report, which was issued in July 2008. This improvement was foreshadowed by a series of four follow-up reports issued since the 2008 MER.

FATF Technical Rating Scale*

Compliant The recommendation is fully observed with respect to all essential criteria.
Largely Compliant There are only minor shortcomings, with a large majority of the essential criteria being fully met.
Partially Compliant The country has taken some substantive action and complies with some of the essential criteria.
Non-compliant There are major shortcomings, with a large majority of the essential criteria not being met.
Not applicable A requirement or part of a requirement does not apply, due to the structural, legal or institutional features of a country, e.g., a particular type of financial institution does not exist in that country.

*Rating scale based on relevant methodology at the time of the original evaluation in 2008.

The Hong Kong government press release indicates that the FATF review team found that Hong Kong has a strong legal and institutional framework for combating money laundering (ML) and terrorist financing (TF), and is particularly effective in the areas of risk identification, law enforcement, asset recovery, counter-terrorist financing (CFT) and international co-operation.

The expected results are welcome news to the Hong Kong authorities and the financial services industry, which planned for and participated in the onsite FATF review in the fourth quarter of 2018. However, even a ‘Compliant’ rating doesn’t mean that there are no issues requiring follow-up, so the industry will want to stay tuned for the final report.

Hong Kong is just one of several jurisdictions in APAC that has recently undergone or will shortly undergo a FATF evaluation. Next up is Japan, which expects its onsite review later this year.

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