Anti-money laundering and counter-terrorist financing
What this domain tests
Expect scenario questions on customer due diligence (CDD), enhanced due diligence (EDD), politically exposed persons (PEPs), sanctions screening, suspicious transaction reporting and record keeping.
Core rules
- Hong Kong uses a risk-based approach under the SFC's AML/CFT Guideline for licensed corporations, alongside the Drug Trafficking (Recovery of Proceeds) Ordinance, the Organized and Serious Crimes Ordinance and the United Nations (Anti-Terrorism Measures) Ordinance.
- CDD requires identifying the client and verifying identity, identifying the beneficial owner (25% or more ownership or control) and verifying it, understanding the purpose and intended nature of the relationship, and ongoing monitoring.
- CDD applies to occasional transactions at or above HK$8,000, and to any wire transfer.
- PEPs require senior management approval, source of wealth and source of funds checks, and enhanced ongoing monitoring. High-risk relationships, unusual structures and correspondent relationships also require EDD.
- If you know or suspect a link to crime or terrorist property, report to the Joint Financial Intelligence Unit promptly. Tipping off the client is a criminal offence.
- Keep CDD and transaction records for at least five years after the relationship ends or the transaction completes.
Worked example
A newly onboarded client with a declared salary of HK$30,000 deposits HK$1.5 million in cash and asks to remit it to an unrelated third party overseas. The mismatch with profile, the cash intensity and the third-party destination are red flags: apply EDD, establish source of funds, consider declining the transaction, and file a suspicious transaction report without telling the client.
Traps that cost marks
Assuming introducers remove your CDD duty; thinking a report needs proof rather than reasonable suspicion; and warning the client "for transparency" - that is tipping off.