ENG-2004 — Page 111

Financial and Monetary Affairs 81

management practices and internal controls in respect of various types of risks faced by Als. On-site examinations are typically focused on areas of higher risk at Als.

On the international front, the HKMA continues to promote cooperation among central banks in the region, principally through the Executives' Meeting of East Asia- Pacific Central Banks (EMEAP)6, whose activities cover supervisory liaison and cooperation, development of financial markets and infrastructure, and various areas. of central bank operations. The HKMA currently chairs the EMEAP Working Group on Financial Markets, and continues to participate in various regional and international forums for banking supervisors. These include the Core Principles Liaison Group established by the BCBS, the EMEAP Working Group on Banking Supervision, the Offshore Group of Banking Supervisors, as well as the South-East Asia, New Zealand and Australia (SEANZA) Forum of Banking Supervisors. To facilitate supervisory training in the region, the HKMA is active in organising seminars for regional banking supervisors in collaboration with the BIS Financial Stability Institute. In addition, Hong Kong is an active member of both the Financial Action Task Force on Money Laundering (FATF), and the Asia/Pacific Group on Money Laundering, which are inter- governmental bodies charged with the objective of developing and promoting legal, law enforcement and financial regulation policies to combat money laundering.

Recent Developments

In line with its policy of adhering closely to international regulatory standards, the HKMA is committed to adopting the new Basel capital adequacy framework. promulgated by the BCBS (commonly referred to as "Basel II") in Hong Kong from January 1, 2007 in accordance with the BCBS timetable. In view of the complexity of Basel II, the HKMA has been working closely with the industry to ensure that the implementation approach is both practicable and appropriate for Hong Kong. Following the publication of Basel II in June 2004, the HKMA issued for public consultation in the third quarter of 2004 a detailed package of implementation proposals. The banking industry endorsed the proposals as a pragmatic means of implementing the new standards in Hong Kong. Recognising the importance of cross- border supervisory cooperation to the implementation of Basel II, the HKMA will continue to interact with overseas supervisors through the exchange of views and experience on relevant practical issues.

The HKMA continued with its efforts to enhance the supervisory framework for the prevention of money laundering and terrorist financing. In June 2004, the HKMA issued a statutory guideline to supplement the existing guideline on Prevention of Money Laundering, together with a set of Interpretative Notes. The supplementary guideline incorporates the latest international standards in this area. The Interpretative Notes were produced in collaboration with the banking industry to provide practical guidance to Als on implementing the requirements of the supplementary guideline.

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The EMEAP Group comprises 11 central banks and monetary authorities in the East Asia and Pacific region: Reserve Bank of Australia, People's Bank of China, Hong Kong Monetary Authority, Bank Indonesia, Bank of Japan, Bank of Korea, Bank Negara Malaysia, Reserve Bank of New Zealand, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore and Bank of Thailand.