Hong Kong is proposing to expand scrutiny on “politically exposed persons” (PEP) to officials from the rest of China, following recommendations from the Financial Action Task Force (FATF).
The Financial Services and the Treasury Bureau has outlined a raft of proposed changes to money laundering regulations in a consultation paper.
These include a change to the definition of PEPs to include officials outside of Hong Kong, rather than outside of the People’s Republic of China as currently. This will mean requirements on financial institutions to apply enhanced customer due diligence to Chinese officials in Hong Kong.
The FATF’s most recent Mutual Evaluation Report for Hong Kong, published in September 2019, urged Hong Kong to close the “technical gap” in relation to coverage of PEPs in other parts of China.
It said: “Weaknesses in understanding and implementation of PEP requirements among financial institutions derive from technical deficiencies with respect to obligations for PEPs from other parts of China”
The consultation paper also seeks to make it easier for financial institutions to conduct enhanced customer due diligence on former PEPs.
As part of the proposals, Hong Kong is also seeking to tighten requirements for virtual asset trading operations and introduce a two-tier registration regime for business dealings in precious-asset-based instruments.
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