Ricky WONG

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STR Legal Obligations/Statistics/
Case Examples

• Ricky WONG
• Joint Financial Intelligence Unit

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Session Outline

• Overview of current Laws in Hong Kong for (a)
  What Money Laundering (ML) and Terrorist
  Financing (TF) are
• (b) Disclosure,Protection and Restriction
• Identify ML/TF activities
• Statistics
• Case Examples

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ML and TF Laws in HK

• The Drug Trafficking (Recovery of Proceeds)
  Ordinance, Cap 405 (DTROP)
  drug proceeds
• The Organised Serious Crimes Ordinance, Cap 455
  (OSCO) extends to serious crime proceeds
• United Nations Anti-Terrorism Measures Ordinance,
  Cap. 575 (UNATMO) terrorist property

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Money Laundering
s.25(1) of OSCO/DTROP Dealing with property
known or having reasonable grounds to believe to
represent proceeds of an indictable offence/ drug
proceeds Penalty 14-year Imprisonment and HK5
Million Fine
Organized and Serious Crimes Ordinance, Cap.455
(OSCO) Drug Trafficking (Recovery of Proceeds)
Ordinance, Cap.405 (DTROP)
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Key Features

• Having reasonable grounds to believe is an
  objective and subjective test (e.g. CACC 555/2001
  YAM Ho-keung, FAMC 26/1998 SENG Yuet-fong)
• Indictable offence includes reference not only to
  a HK indictable offence but to conduct abroad
  which would constitute an indictable offence had
  it occurred in HK (e.g. CACC 4361997 LI Ching)

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Key Features

• Wide definition of dealing in property
• Can be committed by the person who committed the
  underlying indictable offence himself, or by any
  other person.
• Not necessary to prove the property is proceeds
  of an indictable offence.
• The emphasis is on what the defendant knew or had
  reasonable grounds to believe.

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Terrorist Financing s.7 of UNATMO

• A person shall not provide or collect, by any
  means, directly or indirectly, funds-
• (a) with the intention that the funds be used
  or(b) knowing that the funds will be used,
• in whole or in part, to commit one or more
  terrorist acts (whether or not the funds are
  actually so used).
• generally refers to the carrying out of
  transactions involving funds that are owned by
  terrorists, or that have been, or are intended to
  be, used to facilitate the commission of
  terrorist acts

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Terrorist Financing s.14 of UNATMO

• Penalty-
• 14 years of imprisonment at maximum, but
• Unspecified fine

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Difference between ML TF

• In ML, the focus is on the handling of criminal
  proceeds, i.e. the source of funds is matters.
• In TF, the focus is on the destination or use of
  funds, which may have been derived from
  legitimate sources.

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Disclosures
s.25A OSCO / DTROP / s.12 UNATMO
Any person who knows or suspects any property
represents the proceeds of crime or terrorist
property shall make a report to an authorized
officer. Penalty 3-months imprisonment 50K
fine
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Key Features

• DISCLOSURE is SUSPICION based
• No Threshold Reporting (CTR)
• PROSECUTION is based on REASONABLE KNOWLEDGE

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Standard of Suspicion

• Suspicion is a state of conjecture or surmise
  where proof is lacking.
• The test is purely subjective.

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Benefits of Making an STR?
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Statutory Defence to ML/TF
s.25A(2) DTROP/OSCO, s.12(2) UNATMO If a person
deals with property STR relates to that act,
that person has a defence to ML/TF, provided-
(i) STR made before act act done with the
consent of an authorized officer or (ii) STR
made - after the act - on his own
initiative - as soon as reasonably practicable
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CONSENT or NO CONESENT ?

• CONSENT Means you have our consent to carry on
  your normal business
• NO CONSENT Means if you deal you loose the
  Section 25(A)(2)(a) protection from an actual
  money laundering charge.

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Statutory Protection
s.25A(3) of DTROP/OSCO, s.12(3) of
UNATMO (a) shall NOT be treated as a breach of
any restriction upon the disclosure of
information imposed by contract or by any
enactment, rule of conduct or other
provision (b) shall NOT render the person who
made it liable in damages for any loss arising
out of- (i) the disclosure (ii) any act done
or omitted to be done in relation to the
property concerned in consequence of the
disclosure.
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Tipping Off
s.25A(5) of DTROP/OSCO, s.12(5) of UNATMO A
person commits an offence if, knowing or
suspecting that a disclosure has been made, he
discloses to any other person any matter which is
likely to prejudice any investigation which might
be conducted following that first-mentioned
disclosure Penalty 3-years imprisonment 500K
fine
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Accountants as Gatekeepers

• expertise is required in moving criminal proceeds
• have associations in many parts of the world give
  money launders a global reach
• FATF Recommendations 13-16
• HKICPAs Guidelines

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How to identify ML/TF activities ?
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Use Your Common Sense
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What makes a good AML system ?

• Knowledge of why there is a need to Disclose-
  Self/Business Protection. Knowledge of the
  law/procedure
• How to Disclose - Level of details
• Good KYC and Record Keeping Policy
• Good Sources of Information
• Good Awareness of Issues

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JFIU

• Established in 1989
• Jointly operated by Police and Customs
• Housed within Police Headquarters
• Primary function is to receive, analyze and
  disseminate STR to law enforcement agencies

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STR Filing

• Suggested format content detailed in JFIU
  website (www.jfiu.gov.hk)
• Email
• Fax
• Post
• Verbal (urgency - follow-up by hardcopy)

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e-Reporting - STREAMS

• Web based Platform Suspicious Transaction
  Report and Management System (STREAMS)

e-Acknowledge/Result
e-STR
JFIU
Encrypted
Internet
e-form
e-STR XML format
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Feedback

• Acknowledgement of Receipt
• File Ref.
• Contact Person Details
• Consent / No Consent Letter
• Arrest / Prosecutions / Convictions
• STR Quarterly Analysis Report

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Case Example 1 Good KYC/CDD
?
JFIU
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Case Example 2 Good Audit
?
Buying IPO shares on ABCs behalf
Amount due from a director
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Q A
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• Contact us
• 2866 3366
• www.jfiu.gov.hk
• Thanks for your attention!