Due Diligence and Record-Keeping Stocktake for 2018-19

The last twelve months have seen significant developments with regard to the local legislative regime to combat money laundering. These developments took place against the background of the Financial Action Task Force's (the inter-governmental body) mutual evaluation of Hong Kong in November 2018. The FATF's report is awaited with anticipation (and is due for "Plenary Discussion" in June 2019).

Statutory Customer Due Diligence and Record-Keeping Requirements

In March 2018 amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) took effect. These amendments (among other things) extended the Ordinance's statutory customer due diligence and record-keeping requirements ("AMLCTF requirements") to certain designated non-financial businesses and professions (DNFBPs). The original Ordinance came into force in 2012 and (among other things) mandated AMLCTF requirements for financial institutions. The AMLCTF requirements are set out in Schedule 2, Parts 2 and 3 of the Ordinance and now apply to lawyers and accountants.

Where a solicitor or foreign lawyer fails to comply with an AMLCTF requirement this is (among things) potentially a serious matter of professional misconduct. The same is true for a solicitor or foreign lawyer who, while being a director of a corporation that is a Trust or Company Service Provider licensee: (i) causes or allows a breach of an AMLCTF requirement by the corporation, or (ii) fails to take reasonable steps to prevent such a breach (s. 9A(1AAB) of the Legal Practitioners Ordinance).

The government took the view that the extension of the AMLCTF requirements to certain DNFBPs was necessary to enhance Hong Kong's compliance with international standards for combating money laundering.

Significant Controllers Register

At the same time (March 2018), the Companies (Amendment) Ordinance 2018 came into force. In short, companies incorporated in Hong Kong (except those listed on the Hong Kong Stock Exchange) are required to take reasonable steps to ascertain and identify those persons who have a significant control over the company and to maintain a significant controllers register. The register should be available for inspection by law enforcement officers (as defined) and by an officer of the Companies Registry at the place where it is kept. These officers are permitted to take a copy.

Prosecutions for failure to observe these requirements have already followed.

Reporting Requirements

Interestingly, in 2018, the number of suspicious transaction reports (STRs) made to the Joint Financial Intelligence Unit in Hong Kong (effectively, the police) for 2018 was 73,889 (down from 92,115 for 2017). The drop in figures is, in part, explained by a better understanding of the reporting requirements and less "defensive reporting". "Intel" suggests that by and large STRs made by lawyers are generally of a high quality but there is still thought to be some under-reporting. Prosecutions for "failing to report" (pursuant to, for example, s. 25A(7) of the Organized and Serious Crimes Ordinance), while relatively rare, are not unknown.


Solicitors and foreign lawyers in Hong Kong should make sure they comply with Practice Direction P (AMLCTF) and keep up to date with legal developments (including, by attending relevant CPD and RME courses). They should be conducting periodic audits of their compliance with the AMLCTF requirements. Prosecutions against lawyers for anti-money laundering offences in Hong Kong do happen and, in the current environment, it is probably only a matter of time until the next one.