This page provides links to the key legislation, guidance, supporting publications and templates to help members detect and prevent Money Laundering (“ML”), Terrorist Financing (“TF”) and Proliferation Financing (“PF”).
|AML Policies and Procedures Template|
|This template was designed to serve as a practical example of key procedures and controls that should be documented by members to assist with the mitigation of money laundering and terrorist financing risks and with meeting regulatory obligations.
There is no ‘one-size-fits-all’ document, as each member firm is different in terms of size, practice areas, type of clients and countries that clients are from or do business in. However, this document highlights some of the key AML and CTF requirements, with supporting guidance on the level of information that should be included.
Download the document
|Guidance on Alternative Processes to Verify a Client’s Identity|
|This guidance on alternative methods to verify a client’s identity was developed as a response to the COVID-19 situation and circumstances where it is neither practical nor possible for a client to meet with a legal practitioner face-to-face before accepting instructions. In such circumstances, members can apply one of the alternative methods set out in this document.
Download the guidance
|Sample Client Due Diligence Forms|
The CDD forms are designed to provide members with examples and good practice on how CDD, including client risk assessment requirements contained in the PDP and the AMLO, may be met by legal practitioners.
In particular, legal practitioners must have established adequate CDD procedures, including client- and matter-level risk assessments to identify and manage risks associated with ML, TF and PF. There is no prescribed approach to conducting client risk assessments, however, they must be documented. Therefore, the CDD forms were designed to serve as a practical example of how the client risk assessment could be undertaken and documented to determine the extent and quality of information required and the steps needed to meet the requirements.
The Law Society has developed two versions of CDD forms, one that may be more suitable for smaller firms and one that may be more suitable for larger firms. The CDD forms are a learning tool only and are not a prescribed requirement or a formal guideline, the examples stated in the templates may differ from the existing practices of law firms, especially those with an established AML framework. Depending on the firm’s complexity and operations, the templates can be adopted or modified to reflect the firm’s AML procedures.
All CDD forms contain the required steps for the identification and verification of the client, its representatives and beneficial owner(s), as well as key considerations set out in the client risk assessment to identify potential ML, TF and PF risks, and finally measures to manage those risks in the context of a new client relationship or matter.
The enhanced version of the CDD forms provide further practical examples on how the AML / CTF requirements could be met and provides an alternative method for completing the client risk assessment, based on a risk scoring methodology. The risk scoring methodology entails allocating points against different risk factors, to produce an overall AML risk rating which informs the level of CDD required (i.e. Simplified / Standard / Enhanced).
When weighting risk factors, legal practitioners should take a holistic approach and make an informed judgement about the relevance of different risk factors in the context of a particular customer relationship or occasional matter. The weight given to each factor is likely to vary across practices, clients and matters, and can be adjusted by lowering the scoring if there are valid reasons for it. Similarly, there may be risk(s) that outweigh other risks, which would suggest that an Enhanced, as opposed to a Standard, CDD is more appropriate.
The enhanced version of the CDD forms further expands and includes:
| Simplified version
CDD Form for Natural Persons
CDD Form for Legal Persons
| Enhanced version
CDD Form for Natural Persons
CDD Form for Legal Persons
|AML Leaflet for Clients|
|Legal practitioners, are often challenged by clients, and sometimes third parties, on the level of information that must be provided to confirm a client’s identity, and on the supporting documents relating to the particulars of the transaction. Clients may also not be aware of the strict AML obligations applicable to the legal sector, and can question the need for such information.
To assist legal practitioners with such situations, the AML Leaflet has been designed to be shared with clients. It explains the anti-money laundering responsibilities applicable to legal practitioners, and the identification documents required to prove a client’s identity.
The AML Leaflet is not a prescribed requirement or a formal guideline.
AML Leaflet – English version
AML Leaflet – Chinese version
The Hong Kong Risk Assessment (“HKRA”) of money laundering and terrorist financing sets out the key ML / TF risks for Hong Kong, and mitigating measures. The HKRA examines the ML / TF threats and vulnerabilities facing various sectors in Hong Kong and the city as a whole. The Report also identifies areas for further work and the follow-up actions already taken.
This report is therefore central to understand and estimate the ML / TF risks that firms are exposed to and should be considered as part of a firm's firm-wide risk assessment.
The Financial Action Task Force (“FATF”) published the Mutual Evaluation Report of Hong Kong (the “Report”) on 4 September 2019, commending Hong Kong's efforts in combating ML and TF.
The Report, which assesses the compliance and effectiveness of Hong Kong's AML and CTF regime against the international standards, confirms that Hong Kong has a strong legal foundation and effective system for combating ML and TF. The Report notes that the system is particularly effective in the areas of risk identification, law enforcement, asset recovery, counter-terrorist financing and international co-operation.
Hong Kong's AML / CTF regime is assessed to be compliant and effective overall, making it the first jurisdiction in the Asia-Pacific region to have achieved an overall compliant result in the fourth round of FATF evaluation.
Click here to access the Report.
|Topic||Publication Title||Issue Date|
|Risk Based Approach for Legal Professionals||Risk Based Approach Guidance for Legal Professionals 2019||June 2019|
|ML / TF vulnerabilities and typologies||Money Laundering and Terrorist Financing Vulnerabilities of Legal Professionals||June 2013|
|TF Risk Assessment||Terrorist Financing Risk Assessment Guidance||July 2019|
|PF Risk Assessment||Guidance on Proliferation Financing Risk Assessment and Mitigation||June 2021|
|Guidance on PEPs||Guidance on Politically Exposed Persons||June 2013|
|Beneficial Ownership||Best Practices On Beneficial Ownership for Legal Persons||October 2019|
|Digital ID Verification methods||Guidance on Digital ID||March 2020|
|COVID-19 ML / TF Risks||COVID-19-Related Money Laundering and Terrorist Financing Risks||December 2020|
|Trade-Based ML||Trade-Based Money Laundering: Trends and Developments||December 2020|
Legal practitioners are required to apply Enhanced Client Due Diligence (“EDD”) measures when acting for clients, persons or entities from or in non-cooperative countries and territories identified by the Financial Actions Task Force (“FATF”) (PDP, Table A, paragraph 3(ii)).
FATF identifies jurisdictions with weak measures to combat money laundering and terrorist financing in two FATF public documents: the High-Risk Jurisdictions subject to a Call for Action (Black List) and Jurisdictions under Increased Monitoring (Grey List).
Click here to access FATF Lists: here
Click here to access latest updates of the FATF Lists: here
Generally, legal practitioners should consider the jurisdiction in which services will be delivered, the location of the client, beneficial owners and the client’s counterparties, as well as the source and destination of funds.
FATF does not maintain lists of all high-risk jurisdictions, countries with a high risk of corruption, tax evasion, drug trafficking, or that are subject to sanctions. Legal practitioners should determine whether a country is a high-risk or not, to decide whether EDD should be applied.
Here are some of the resources that may help legal practitioners to decide whether a country is high risk:
The contents are intended to provide a general guide to the subject matter only and should not be treated as a substitute for specific advice concerning individual situations. While every effort has been made to ensure the accuracy of the content provided, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept responsibility for liabilities arising from reliance upon the content provided.