ENG-2018 — Page 109

4

Financial and Monetary Affairs

Anti-money Laundering and Counter-terrorist Financing

Money laundering and terrorist financing is a global problem that can undermine the integrity and stability of international financial markets. Being an international financial centre and an externally oriented economy, Hong Kong is inevitably exposed to such threats from within the city and more so from other places. As a member of the Financial Action Task Force, Hong Kong has a robust, mature and effective regulatory regime in place to combat money laundering and terrorist financing, which effectively safeguards the integrity of its business environment and reputation as an international financial centre.

During the year, the city's regulatory framework was reinforced with the enactment of several pieces of legislation - the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Ordinance 2018, which prescribes statutory customer due diligence and record-keeping requirements for designated non-financial businesses and professions, and introduces a licensing regime for trust or company service providers; the Companies (Amendment) Ordinance 2018, which requires companies incorporated in Hong Kong to maintain beneficial ownership information; the Cross-boundary Movement of Physical Currency and Bearer Negotiable Instruments Ordinance, which establishes a declaration and disclosure system to detect the cross-boundary movement of large quantities of currency and bearer negotiable instruments; the United Nations (Anti-Terrorism Measures) (Amendment) Ordinance 2018, which strengthens the freezing mechanism of terrorist property and prohibits the financing of travel of foreign terrorist fighters; and the United Nations Sanctions (Amendment) Ordinance 2018, which enables regulations made under the ordinance to impose sanctions directly against persons designated by the United Nations Security Council.

Resolution Regime for Financial Institutions

The Financial Institutions (Resolution) Ordinance establishes a cross-sectoral resolution regime for financial institutions in Hong Kong and confers powers on the Monetary Authority, the SFC and the IA as the resolution authorities for within-scope financial institutions under their respective purview. Its main provisions came into operation in July 2017. In February 2018, the FSB noted in its publication, the Peer Review Report of Hong Kong, that the city was 'one of the few FSB jurisdictions with a fully cross-sectoral resolution regime?

The Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements - Banking Sector) Rules came into effect on 14 December, requiring Als and certain group companies of Als to maintain minimum loss-absorbing capacity. The requirements are designed to implement, and are broadly aligned with, the FSB's Total Loss-Absorbing Capacity standard.

The resolution authorities will continue to develop resolution planning and the associated standards for financial institutions in order to improve the resolvability of financial institutions such that, in the event of a financial institution's non-viability, resolution may take place in an orderly manner. This work would support the operation of the resolution regime in Hong Kong, which would in turn contribute to financial stability.

71