STR Legal ObligationsStatistics Case Examples Ricky WONG Joint

STR : Legal Obligations/Statistics/ Case Examples Ricky WONG Joint Financial Intelligence Unit JOINT FINANCIAL INTELLIGENCE UNIT

Session Outline w Overview of current Laws in Hong Kong for (a) What Money Laundering (ML) and Terrorist Financing (TF) are ; (b) Disclosure, Protection and Restriction w Identify ML/TF activities; w Statistics w Case Examples JOINT FINANCIAL INTELLIGENCE UNIT

ML and TF Laws in HK q The Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405 (DTROP) – drug proceeds q The Organised & Serious Crimes Ordinance, Cap 455 (OSCO) – extends to serious crime proceeds q United Nations Anti-Terrorism Measures Ordinance, Cap. 575 (UNATMO) – terrorist property JOINT FINANCIAL INTELLIGENCE UNIT

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 HK$5 Million Fine * Organized and Serious Crimes Ordinance, Cap. 455 (OSCO) * Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405 (DTROP) JOINT FINANCIAL INTELLIGENCE UNIT

Key Features w 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) w 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) JOINT FINANCIAL INTELLIGENCE UNIT

Key Features w. Wide definition of “dealing” in property w. Can be committed by the person who committed the underlying indictable offence himself, or by any other person. w. Not necessary to prove the property is proceeds of an indictable offence. w. The emphasis is on what the defendant knew or had reasonable grounds to believe. JOINT FINANCIAL INTELLIGENCE UNIT

Terrorist Financing – s. 7 of UNATMO w “A person shall not provide or collect, by any means, directly or indirectly, fundsw (a) with the intention that the funds be used; or (b) knowing that the funds will be used, w in whole or in part, to commit one or more terrorist acts (whether or not the funds are actually so used). w 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 JOINT FINANCIAL INTELLIGENCE UNIT

Terrorist Financing – s. 14 of UNATMO Penalty: w 14 years of imprisonment at maximum, but w Unspecified fine JOINT FINANCIAL INTELLIGENCE UNIT

Difference between ML & TF w In ML, the focus is on the handling of criminal proceeds, i. e. the source of funds is matters. w In TF, the focus is on the destination or use of funds, which may have been derived from legitimate sources. JOINT FINANCIAL INTELLIGENCE UNIT

Disclosures s. 25 A 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 & $50 K fine JOINT FINANCIAL INTELLIGENCE UNIT

Key Features q DISCLOSURE is SUSPICION based q No Threshold Reporting (CTR) q PROSECUTION is based on REASONABLE KNOWLEDGE JOINT FINANCIAL INTELLIGENCE UNIT

Standard of Suspicion w “Suspicion” is a state of conjecture or surmise where proof is lacking. w The test is purely subjective. JOINT FINANCIAL INTELLIGENCE UNIT

Benefits of Making an STR? Immunity from Prosecution for Dealing in the Property JOINT FINANCIAL INTELLIGENCE UNIT

Statutory Defence to ML/TF s. 25 A(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 JOINT FINANCIAL INTELLIGENCE UNIT

CONSENT or NO CONESENT ? w ‘CONSENT’ Means you have our consent to carry on your normal business; w ‘NO CONSENT’ Means if you deal you loose the Section 25(A)(2)(a) protection from an actual money laundering charge. JOINT FINANCIAL INTELLIGENCE UNIT

Statutory Protection s. 25 A(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) (ii) the disclosure; any act done or omitted to be done in relation to the property concerned in consequence of the disclosure. JOINT FINANCIAL INTELLIGENCE UNIT

Tipping Off s. 25 A(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 & $500 K fine JOINT FINANCIAL INTELLIGENCE UNIT

Accountants as Gatekeepers w expertise is required in moving criminal proceeds w have associations in many parts of the world give money launders a global reach w FATF Recommendations 13 -16 w HKICPA’s Guidelines JOINT FINANCIAL INTELLIGENCE UNIT

How to identify ML/TF activities ? JOINT FINANCIAL INTELLIGENCE UNIT

Use Your Common Sense JOINT FINANCIAL INTELLIGENCE UNIT

What makes a good AML system ? w Knowledge of why there is a need to Disclose: Self/Business Protection. Knowledge of the law/procedure; w How to Disclose : - Level of details; w Good KYC and Record Keeping Policy; w Good Sources of Information; w Good Awareness of Issues JOINT FINANCIAL INTELLIGENCE UNIT

JFIU q Established in 1989 q Jointly operated by Police and Customs q Housed within Police Headquarters q Primary function is to receive, analyze and disseminate STR to law enforcement agencies JOINT FINANCIAL INTELLIGENCE UNIT

STR Filing q Suggested format & content detailed in JFIU website (www. jfiu. gov. hk) q Email q Fax q Post q Verbal (urgency - follow-up by hardcopy) JOINT FINANCIAL INTELLIGENCE UNIT

e-Reporting - STREAMS q Web based Platform – Suspicious Transaction Report and Management System (STREAMS) e-Acknowledge/Result e-STR STREAMS JFIU Encrypted Internet e-form e-STR XML format JOINT FINANCIAL INTELLIGENCE UNIT

Feedback q q Acknowledgement of Receipt v File Ref. v Contact Person Details Consent / No Consent Letter q Arrest / Prosecutions / Convictions q STR Quarterly Analysis Report JOINT FINANCIAL INTELLIGENCE UNIT

Case Example 1 – Good KYC/CDD ABC Company JFIU ABC Company JOINT FINANCIAL INTELLIGENCE UNIT

Case Example 2 – Good Audit Buying IPO shares on ABC’s behalf Accountant ABC Company $60 M Amount due from a director Year-end Audit $60 M + i JOINT FINANCIAL INTELLIGENCE UNIT

Q&A JOINT FINANCIAL INTELLIGENCE UNIT

Contact us: w 2866 3366 wwww. jfiu. gov. hk Thanks for your attention! JOINT FINANCIAL INTELLIGENCE UNIT