Hong Kong Lawyer

April 2017

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INDUSTRY INSIGHTS 業 界 透 視 ANTI-MONEY LAUNDERING Lawyers and Designated Non-Financial Businesses and Professions As reported in the February 2017 edition of the Hong Kong Lawyer ("DNFPBs"), the Financial Services and the Treasury Bureau ("FSTB") has recently undertaken a consultation, proposing to extend client due diligence ("CDD") and record- keeping requirements contained in the Anti-Money Laundering and Counter- Terrorist Financing (Financial Institutions) Ordinance (Cap. 615) (the "Ordinance") to certain professions; including, law firms and registered foreign law firms in Hong Kong. Since the consultation was launched it is has become clearer that the law profession's Practice Direction P ("AML") is the most comprehensive guidance given to any profession in Hong Kong. Indeed, Practice Direction P was recently revised and updated (Law Society Circular 17/167(SD), 13 March 2017, "Amendments to Practice Direction P"). Practice Direction P is not just a set of guidelines; it is a standard for good practice*. Some of its provisions are mandatory (for example, paras. 18–28, including Client identification, verification and due diligence). It is also used as a source of reference by some other professions in Hong Kong. A question posed, in these circumstances, is why has the solicitors' profession in Hong Kong been put in the same category as (for example) estate agents or accountants? Of the Financial Action Task Force Recommendations (on international standards for combating money laundering and terrorist financing), Recommendation 22 relates to DNFBPs' CDD. The underlying principle as regards financial institutions is that CDD and record-keeping requirements should be set out in law (which includes legislation and relevant binding judicial decisions). The means by which it is proposed to extend certain CDD and record-keeping requirements to (among others) lawyers in Hong Kong is for the Ordinance to be amended to contain a definition of DNFBPs (including, solicitors and foreign lawyers). However, Practice Direction P was promulgated pursuant to the statutory powers of the Law Society of Hong Kong, has been tested and approved in court and is enforceable. If the consultation proposals purport to be no more than a codification of current professional practice requirements (insofar as law firms in Hong Kong are concerned), a further question remains – why does FSTB consider there is a "regulatory gap" with respect to lawyers? Particularly, given that it is widely acknowledged that Practice Direction P is fit for purpose and the standard of AML "reporting" by law firms to the relevant authorities is pretty good. Furthermore, consistent with the consultation proposals being a codification exercise, they do not purport to increase the regulatory powers of the Law Society of Hong Kong. Therefore, what appears to be driving the proposals may be something else in (for example) "FATF world", as Hong Kong approaches her fourth on-site mutual evaluation in the last quarter of 2018. - Jason Carmichael, Partner, Smyth & Co in association with RPC * April, 2015 – Industry Insights: " Internal Controls – No Passing the Buck or Turning a Blind-Eye". 打擊清洗黑錢 律師和指定非金融企業及行業 正如《香港律師》2017年2月期刊(「指 定非金融企業及行業」)所報道,財經事 務 及 庫 務 局 ( 「 財 庫 局 」 ) 最 近 進 行 過 諮 詢,諮詢文件建議把《打擊洗錢及恐怖分 子資金籌集(金融機構)條例》(第615章) (「《條例》」)包含的客戶盡職審查及備 存紀錄規定,擴大至涵蓋某些專門行業, 包括香港律師行和註冊外地律師行。 有一件事在諮詢展開以後越發明顯,那就 是,法律專業人員的Practice Direction P( 「打擊洗錢」)是給香港各個專業提供的 最全面的指引。 Practice Direction P事實上最近經過 修 訂 , 更 新 過 內 容 ( 律 師 會 2 0 1 7 年 3 月 13日通告17/167(SD)「Amendments to Practice Direction P」)。Practice Direction P不只是一套指引;它也是良好 實務的標準*。當中某些規定是強制性的 (例如第18–28段,包括客戶身份識別、 核實和盡職審查)。它也被香港其他專業 人士用作為參考資料。 有人會問,在這些情況下,為甚麼香港的 律師與(譬如說)地產代理或會計師被列人 同一個專業類別? 44 www.hk-lawyer.org •  April 2017

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