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Hong Kong

In the aftermath of the terrorist attacks in the US, "know your customer" has taken on greater importance for banks. On September 26 the Hong Kong Monetary Authority (HKMA) issued 2 circulars to banks on this topic in reaction to the US President's Executive Order of September 24 aimed at freezing the assets of named terrorist organizations and stopping financial support for terrorists. The circulars predate the Basle Committee's guidance on customer due diligence for banks of October 4. While acknowledging the Order's extra-territorial basis, the HKMA again stressed the importance of banks in Hong Kong cooperating in international efforts against terrorist activities and not becoming involved (even innocently or accidentally) in facilitating such activities.

Banks already have the benefit of HKMA's Guideline on Prevention of Money Laundering (December 2000) reflecting the Basle Committee's principles on this area. In the circulars, the HKMA again emphasized the strict application of "know your customer" principles under the Guideline, notably the need to obtain satisfactory evidence of the identity/legal existence of customers, and a close focus and regular checks on cash and other forms of funds transfer.

Additionally, banks should follow strict reporting procedures laid down under the Organized and Serious Crimes Ordinance and the Drug Trafficking (Recovery of Proceeds) Ordinance to the Joint Financial Intelligence Unit (operated jointly by the police and the Customs and Excise Department). It is a bank's responsibility to ensure that its employees dealing with customers engaged in money laundering acts report such acts, it being a criminal offence to fail to report either knowledge or circumstances giving rise to a reasonable belief in the existence of a money laundering act. More recently, the HKMA sought to remind banks of their obligations to suppress terrorist financings and funds in two further circulars addressing UN sanctions already turned into law and those (such as UN Security Council Resolution 1373) soon to be turned into law in Hong Kong.

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