ENG-1997 — Page 115

FINANCIAL AND MONETARY AFFAIRS

co-operation. As a member of the BIS, the HKMA participates more fully in BIS activities and policy discussions. The People's Bank of China is also a member, which clearly shows that the international financial community is supportive of the 'One Country, Two Systems' principle enshrined in the Joint Declaration and the Basic

Law.

The HKMA promotes co-operation among central banks in the region, principally through the Executives' Meeting of East Asia and Pacific Central Banks (EMEAP), whose activities cover supervisory liaison and co-operation, development of financial markets and infrastructure, and various areas of central bank operations. The HKMA has chaired a study group on banking supervision since its establishment in August 1996 under the direction of the EMEAP. This comprises experts in banking supervision from EMEAP members and meets on a half-yearly basis to hold discussions in areas of mutual interest. It also conducts research and analysis on banking supervisory issues with a view to improving the understanding of such issues in the region.

The HKMA will participate in the 1998 BIS triennial global survey on foreign. exchange and derivative activity.

Hong Kong is a member of the Financial Action Task Force (FATF), an international organisation of 26 governments and two international organisations with a mandate to encourage international efforts in the fight against money laundering. To help combat money laundering, a revised Guideline on Prevention of Money Laundering was issued by the HKMA under section 7(3) of the Banking Ordinance on October 17, 1997. It replaced the previous guideline on this subject issued in July 1993. It has taken into account the latest legislative changes on money laundering in Hong Kong as well as the stocktaking review of the 40 recommendations by the FATF. In particular, the customer identification requirements have been significantly strengthened with new provisions incorporated in relation to shell companies, trust and nominee accounts and other types of intermediaries.

The Banking (Amendment) Ordinance 1997 was enacted by the Legislative Council on January 8, 1997. Provisions relating to the regulation of the issue of multi-purpose stored value cards (MPCs) and the approval and regulation of money brokers commenced operation on May 15, 1997. Concurrent with the commencement of these provisions, the HKMA has published detailed guidelines to explain the authorisation criteria and detailed supervisory requirements for stored value cards (SVCs) and money brokers.

The legal framework for SVCs generally provides that the issue of general purpose MPCs is confined to licensed banks (which are the only entities having access to the payment system). A special purpose vehicle whose principal business is to issue MPCs may be authorised as a deposit-taking company under the Ordinance for the principal purpose of issuing, or facilitating the issue of SVCs. Flexibility is available also for the Monetary Authority to exempt an SVC not to be an MPC where the usage of the card is very limited and the risk to the payment system and cardholders is slight.

The legal framework prohibits any person to act as a money broker unless approved by the Monetary Authority under the Banking Ordinance and empowers the Monetary Authority to revoke the approval of a broker on the basis of a set of prescribed criteria. The main approval criteria include a company's fitness and

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