Definitions

Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO)
Also referred to as Cap. 615, is an ordinance to provide for the imposition of requirements relating to customer due diligence and record-keeping on specified financial institutions and designated non-financial businesses and professions; to provide for the powers of the relevant authorities and regulatory bodies to supervise compliance with those requirements and other requirements under this Ordinance; to provide for the regulation of the operation of a money service and the licensing of money service operators; to provide for the regulation of the operation of a trust or company service and the licensing of trust or company service providers; to establish a review tribunal to review certain decisions made by the relevant authorities under this Ordinance; and to provide for incidental and related matters. Fore more information please visit the Hong Kong Electronic Legislation Website.

Anti-Money Laundering (AML)
Also known as AML, is described as a set of procedures, laws, and regulations designed to stop the practice of generating income through illegal actions.

Anti-Money Laundering Audit (AML Audit)
Also known as an AML audit, works in a similar sense as a financial audit – testing that a company’s policies, procedures, and infrastructure are adequate and commensurate with the risk that the company is facing. It also verifies compliance with local laws and identifies areas of improvement and provides recommendations if any.

Anti-Money Laundering Audit Certificate (AML Audit Certificate)
This is a certificate that is produced once a company passes an AML Audit. This certificate can be used to prove that the institution has been assessed to have an acceptable AML and Compliance standard and produced to any concerned parties to allay any AML compliance concerns they might have. Furthermore, agreements can made with the auditor to rectify any issues highlighted within a set time frame as part of the terms of certificate issuance.

Big Four Accounting Firms
This refers to the following accounting firms who are the biggest accounting companies (by size and by revenue)
– Deloitte (Deloitte Touche Tohmatsu)
– PwC (PricewaterhouseCoopers)
– E&Y (Ernst & Young)
– KPMG (Klynveld Peat Marwick Goerdeler)

Compliance Program
The internal programs and policy decisions made by a company in order to meet the standards set by government laws and regulations.

Combating the Financing of Terrorism (CFT)
This involves investigating, analyzing, deterring and preventing sources of funding for activities intended to achieve political, religious or ideological goals through violence and the threat of violence against civilians. When one mentions AML, it is assumed CFT is being spoken of as well therefore it is not always mentioned.

Counter Terrorist Financing (CTF)
Please see Combating the Financing of Terrorism

De-risking
Refers to financial institutions closing the accounts of clients (individuals, companies, or organisations) perceived as high risk for money laundering or terrorist financing abuse.

Designated Non-Financial Businesses and Professions (DNFBPs)
DNFBP according to FATF include the following:
a) Casinos

b) Real estate agents.

c) Dealers in precious metals.

d) Dealers in precious stones.

e) Lawyers, notaries, other independent legal professionals and accountants

f) Trust and Company Service Providers refers to all persons or businesses that are not covered elsewhere under these Recommendations, and which as a business, provide any of the following services to third parties:

– acting as a formation agent of legal persons;
– acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons;
– providing a registered office; business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement;
– acting as (or arranging for another person to act as) a trustee of an express trust or performing the equivalent function for another form of legal arrangement;
– acting as (or arranging for another person to act as) a nominee shareholder for another person.

Financial Action Task Force on Money Laundering (FATF)
The Financial Action Task Force (on Money Laundering) (FATF), also known by its French name, Groupe d’action financière (GAFI), is an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. In 2001 its mandate expanded to include terrorism financing. It monitors progress in implementing the FATF Recommendations through “peer reviews” (“mutual evaluations”) of member countries.

Its Recommendations are not laws but guidelines that their members must adopt. In 2012, FATF substantially revised its 40 + 9 Recommendations and reduced them to 40. FATF develops annual typology reports showcasing current money laundering and terrorist financing trends and methods.

Hong Kong become has been a member of FATF since 1991. After a damning report from FATF regarding our lax laws and non-compliance in 2008 Hong Kong has tried to catch up, but sadly many laws are not properly enforced, and many high risk industries have yet to be regulated.

FATF 40 Recommendations
FATF first issued the Forty Recommendations on money laundering in 1990 and the 9 Special Recommendations (SR) on Terrorism Financing (TF) after September 11, 2001.

Together, the Forty Recommendation and Special Recommendations on Terrorism Financing set the international standard for anti-money laundering measures and combating the financing of terrorism and terrorist acts. They set out the principles for action and allow countries a measure of flexibility in implementing these principles according to their particular circumstances and constitutional frameworks. Both sets of FATF Recommendations are intended to be implemented at the national level through legislation and other legally binding measures.

The FATF completely revised the Forty Recommendations in 1996 and 2003. The 2003 Forty Recommendations require states, among other things, to:

– Implement relevant international conventions
– Criminalise money laundering and enable authorities to confiscate the proceeds of money laundering
– Implement customer due diligence (e.g., identity verification), record keeping and suspicious transaction reporting requirements for financial institutions and designated non-financial businesses and professions
– Establish a financial intelligence unit to receive and disseminate suspicious transaction reports, and
– Cooperate internationally in investigating and prosecuting money laundering

The FATF issued 8 Special Recommendations on Terrorism Financing in October 2001, following the September 11 terrorist attacks in the United States. Among the measures, “Special Recommendation VIII” (SR VIII) was targeted specifically at nonprofit organizations. This was followed by the International Best Practices Combating the Abuse of Non-Profit Organizations in 2002, released one month before the U.S. Department of Treasury’s Anti-Terrorist Financing Guidelines, and the Interpretive Note for SR VIII in 2006.

In February 2004 (Updated as of February 2009) the FATF published a reference document Methodology for Assessing Compliance with the FATF 40 Recommendations and the FATF 9 Special Recommendations. The 2009 Handbook for Countries and Assessors outlines criteria for evaluating whether FATF standards are achieved in participating countries. In February 2012, the FATF codified its recommendations and Interpretive Notes into one document that maintains SR VIII (renamed “Recommendation 8”), and also includes new rules on weapons of mass destruction, corruption and wire transfers (“Recommendation 16”).[

Small and Medium-sized Enterprises (SMEs)
Also known as small and medium enterprises or small and medium-sized businesses (SMBs) are businesses that maintain revenues, assets, or a number of employees below a certain threshold.

Third Party Payment Processors (TPPPs)
A third-party processor such as PayPal lets you accept online payments without a merchant account of your own. Instead, they let you use their merchant account under their own terms of service, usually with very little setup required.