STR : Legal Obligations/Statistics/ Case Examples

JOINT FINANCIAL INTELLIGENCE UNIT

Ricky WONG

Joint Financial Intelligence Unit

STR : Legal Obligations/Statistics/STR : Legal Obligations/Statistics/ Case Examples Case Examples


Overview of current Laws in Hong Kong for (a) What Money Laundering (ML) and Terrorist

Financing (TF) are ; (b) Disclosure,Protection and Restriction Identify ML/TF activities; Statistics Case Examples

Session Outline


The Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405 (DTROP) – drug proceeds

The Organised & Serious Crimes Ordinance, Cap 455 (OSCO) – extends to serious crime proceeds

United Nations Anti-Terrorism Measures Ordinance, Cap. 575 (UNATMO) – terrorist property

ML and TF Laws in HK


s.25(1) of OSCO/DTROP*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)

Money Laundering


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)

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)

Key Features


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

Key Features


“A person shall not provide or collect, by any means, directly or indirectly, funds-

(a) with the intention that the funds be used; or(b) knowing that the funds will be used,

in whole or in part, to commit one or more terrorist acts (whether or not the funds are actually so used).

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

Terrorist Financing – s.7 of UNATMO


Penalty:- 14 years of imprisonment at maximum, but Unspecified fine

Terrorist Financing – s.14 of UNATMO


In ML, the focus is on the handling of criminal proceeds, i.e. the source of funds is matters.

In TF, the focus is on the destination or use of funds, which may have been derived from legitimate sources.

Difference between ML & TF


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 & $50K fine

s.25A OSCO / DTROP / s.12 UNATMO

Disclosures


DISCLOSURE is SUSPICION based

No Threshold Reporting (CTR)

PROSECUTION is based on REASONABLE KNOWLEDGE

Key Features


“Suspicion” is a state of conjecture or surmise where proof is lacking.

The test is purely subjective.

Standard of Suspicion


Benefits of Making an STR?

Immunity from Prosecution for Dealing in the Property


s.25A(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

(ii) STR made- after the act- on his own initiative- as soon as reasonably practicable

Statutory Defence to ML/TF


‘CONSENT’ Means you have our consent to carry on your normal business;

‘NO CONSENT’ Means if you deal you loose the Section 25(A)(2)(a) protection from an actual money laundering charge.

CONSENT or NO CONESENTCONSENT or NO CONESENT ??


s.25A(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) the disclosure;(ii) any act done or omitted to be done in

relation to the property concerned in consequence of the disclosure.

Statutory Protection


s.25A(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 & $500K fine

Tipping Off


expertise is required in moving criminal proceeds

have associations in many parts of the world give money launders a global reach

FATF Recommendations 13-16 HKICPA’s Guidelines

Accountants as Gatekeepers


How to identify ML/TF activities ?


Use Your Common Sense


Knowledge of why there is a need to Disclose:- Self/Business Protection. Knowledge of the law/procedure;

How to Disclose :- Level of details; Good KYC and Record Keeping Policy; Good Sources of Information;

Good Awareness of Issues

What makes a good AML systemWhat makes a good AML system ??


Established in 1989

Jointly operated by Police and Customs

Housed within Police Headquarters

Primary function is to receive, analyze and disseminate STR to law enforcement agencies

JFIU


Suggested format & content detailed in JFIU website (www.jfiu.gov.hk)

Email

Fax

Post

Verbal (urgency - follow-up by hardcopy)

STR Filing


Web based Platform – Suspicious Transaction Report and Management System (STREAMS)

e-form e-STRXML format

Internet

JFIU

e-Acknowledge/Resulte-STR

STREAMSSTREAMS

Encrypted

e-Reporting - STREAMS


Acknowledgement of Receipt File Ref. Contact Person Details

Consent / No Consent Letter

Arrest / Prosecutions / Convictions

STR Quarterly Analysis Report

Feedback


JFIU

Case Example 1 – Good KYC/CDD

ABC Company

ABC Company


ABC Company $60M

Case Example 2 – Good Audit

Accountant

Buying IPO shares on ABC’s behalf

Year-end Audit

Amount due from a director

$60M + i


Q & A


Contact us:2866 3366www.jfiu.gov.hk

Thanks for your attention!Thanks for your attention!

STR : Legal Obligations/Statistics/ Case Examples

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