FINANCIAL AND MONETARY AFFAIRS
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guideline on risk management of derivatives and other traded instruments, incorporating the lessons learned from its reviews and examination of controls during 1995 and the Baring's and Daiwa Bank incidents.
In 1996, Hong Kong took further steps to improve the transparency of financial reporting by the authorised institutions. Discussion continued between the HKMA, the SEHK and the SFC and further recommendations for disclosure in the 1996 accounts of authorised institutions were issued, including the disclosure of cash flow statement and market risk exposure.
The HKMA formed a Working Group in January 1996 comprising representatives from the HKMA and the industry associations to develop a Code of Banking Practice in Hong Kong. Its purpose is to improve the standard and transparency in the provision of banking services, establish a fair and cordial relationship between banks and customers, and enhance banking stability by fostering customer confidence and loyalty in banks. In view of the public concern on the issues of personal referees and the use of debt collection agencies, the chapters on these two issues were released in August 1996 and the full Code would be ready for issue in the first half of 1997. Pursuant to the Memorandum of Understanding signed between the HKMA and the SFC in October 1995, the two authorities continued to strengthen co-operation to ensure that there will be no gaps in regulation and to minimise unnecessary duplication of effort in their supervision. Regular meetings were held between the two authorities to discuss policy matters and supervisory issues relating to institutions in which they both have an interest.
Hong Kong is a member of the Financial Action Task Force (FATF), an international organisation comprising 26 governments with a mandate to encourage international efforts in the fight against money-laundering. To help combat money- laundering, a guideline on the prevention of the criminal use of the banking system for the purposes of money-laundering was issued in 1989 by the then-Commissioner of Banking. The HKMA has revised guidelines to take into account the revised Forty Recommendations of the FATF and the amendments to the money-laundering legislation. The Organised and Serious Crimes Ordinance, which was enacted in October 1994, has extended the money-laundering offence to all indictable offences. In addition, the enactment of amendment legislation in August 1995 has made the reporting of suspicions of money-laundering transactions a statutory obligation.
In December 1996, the Legislative Council was preparing to enact the Banking (Amendment) Ordinance, which introduces a legal framework for the regulation of the issue of multi-purpose stored value cards and money brokers. On multi-purpose cards, the framework provides that the issue of general purpose multi-purpose cards will be confined to licensed banks (which are the only entities having access to the payment system). Flexibility is, however, allowed for the Monetary Authority to approve a special purpose vehicle (which may be authorised as a deposit-taking company) whose principal business is to issue multi-purpose cards which would have a more restricted usage or to exempt cards where the usage is even more limited and the stored value is below a certain limit.
On money brokers, the framework prohibits any person from acting as a money broker unless he is approved by the Monetary Authority under the Banking Ordinance. The Monetary Authority would be empowered to approve or revoke the approval of a broker on the basis of a set of fit and proper criteria specified in a