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AML Frequently Asked Questions
1. What is Money Laundering and Terrorist Financing?2. What are the penalties for facilitating Money Laundering or Terrorist Financing?3. What are the key regulations?4. What are the key Anti-Money Laundering and Counter-Terrorist Financing requirements?5. Which legal services are subject to AML / CTF Regulations?6. What should legal practitioners do?7. What are the Record Keeping requirements?8. When and how to report suspicion?
1. What is Money Laundering and Terrorist Financing?

What is Money Laundering and Terrorist Financing?

  1. Money Laundering – the legal definition 
    Money laundering is defined in Part 1 of Schedule 1 to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO) to mean an act intended to have the effect of making any property: 
    1. that is the proceeds obtained from the commission of an indictable offence under the laws of Hong Kong, or of any conduct which if it had occurred in Hong Kong would constitute an indictable offence under the laws of Hong Kong; or 
    2. that in whole or in part, directly or indirectly, represents such proceeds, 
      not to appear to be or so represent such proceeds.
  2. Terrorist Financing – the legal definition 
    Terrorist financing is defined in Part 1 of Schedule to the AMLO to mean: 
    1. the provision or collection, by any means, directly or indirectly, of any property – 
      1. with the intention that the property be used; or
      2. knowing that the property will be used,
        3. in whole or in part, to commit one or more terrorist acts (whether or not the property is actually so used); 
    2. the making available of any property or financial (or related) services, by any means, directly or indirectly, to or for the benefit of a person knowing that, or being reckless as to whether, the person is a terrorist or terrorist associate; or
    3. the collection of property or solicitation of financial (or related) services, by any means, directly or indirectly, for the benefit of a person knowing that, or being reckless as to whether, the person is a terrorist or terrorist associate.
  3. Money laundering and terrorist financing offences
    The money laundering offence is an offence of dealing with property known or suspected of representing criminal proceeds (s.25(1) of the Organized and Serious Crimes Ordinance (Cap. 455) (OSCO)) or knowing or suspecting that any property represents criminal proceeds or any property that was or will be used in connection with a criminal offence, in which case a disclosure to an authorised officer (of the Joint Financial Intelligence Unit (JFIU)) of the knowledge or suspicion should be made (s. 25A of the OSCO).

    In Hong Kong, criminal proceeds are typically generated from various illegal activities. They can be derived from drug trafficking, smuggling, illegal gambling, bookmaking, blackmail, extortion, loan sharking, tax evasion, controlling prostitution, corruption, robbery, theft, fraud, copyright infringement, insider dealing and market manipulation.

    The majority of reported cases of “money laundering” in Hong Kong are cases of dealing (or handling) known or suspected criminal proceeds. Therefore, legal practitioners should understand the money laundering risk of “dealing” with criminal proceeds when accepting legal instructions and what measures to undertake to identify, assess and manage such risk. In particular, law firms are at risk of “dealing” with criminal proceeds in the purchase and sale of property.

    The terrorist financing offence is an offence of providing or collecting funds with an intention or knowledge that the funds will be used to commit terrorist acts (s.7 of the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575) (UNATMO) or knowing or suspecting that any property is terrorist property, in which case a disclosure to an authorised officer (of the JFIU) of the knowledge or suspicion should be made (s. 12 of the UNATMO).

    Terrorist financing is a term used to describe the provision of financial support for terrorism purposes and certain other types of involvement in the funding of terrorist activities or dealings with funds intended or likely to be used for terrorist purposes or funds that represent the proceeds of terrorist activities. Funds may stem from both legal (e.g. profits from businesses and charitable organizations) and illicit sources. Therefore, legal practitioners should check whether a prospective client, representative or beneficial owner(s), or anyone who directly or indirectly owns / controls or act on behalf of such entities, is on the list of designated terrorists or terrorist associates and properties published by the Security Bureau and the Commerce and Economic Development Bureau (CEDB).

    The Security Bureau maintains lists of designated individuals and entities under the UNATMO, while the CEDB maintains list of designated individuals and entities under the United Nations Sanctions Ordinance (Cap. 537).

    Link to the Commerce and Economic Development Bureau:
    https://www.cedb.gov.hk/en/policies/united-nations-security-council-sanctions.html

    Link to the Law Society of Hong Kong website:
    https://www.hklawsoc.org.hk/en/Support-Members/Professional-Support/AML 

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The Law Society of Hong Kong Annual Report 2022

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