VZCZCXRO1240
RR RUEHCN RUEHGH RUEHVC
DE RUEHHK #2175 3310416
ZNR UUUUU ZZH
R 270416Z NOV 09
FM AMCONSUL HONG KONG
TO RUEHBJ/AMEMBASSY BEIJING 3738
RUEHC/SECSTATE WASHDC 9052
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS HONG KONG 002175 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
BEIJING FOR TREAS ATTACHE 
TREASURY FOR DAS GLASER 
 
E.O. 12958: N/A 
TAGS: ECON EFIN HK
SUBJECT: HONG KONG ANTI-MONEY LAUNDERING LEGISLATION 
UPDATE: MONEY CHANGERS EMBRACE LICENSE PROPOSAL 
 
REF: HONG KONG 289 
 
¶1. (SBU) Hong Kong is making progress on Financial Action 
Task Force (FATF)-compliant anti-money laundering (AML) 
legislation that would establish licensing and oversight 
requirements for Hong Kong's remittance agents and money 
changers (RAMCs).  On October 8, the Financial Services and 
Treasury Bureau (FSTB) completed the first round of public 
AML legislation consultations.  A second round of 
consultations, lasting two months, will start in December. 
Hong Kong's Legislative Council would receive a draft of the 
proposed legislation in the second quarter of 2010.  FTSB's 
Principal Assistant Secretary Angelina Kwan expected the 
bill's implementation by early 2011, with RAMCs "embracing" 
the proposed AML framework in hopes a government-issued 
license would facilitate more access to banking services. 
 
¶2. (SBU) The proposed legislation would address weaknesses in 
Hong Kong's AML regime identified in FATF's 2007 Mutual 
Evaluation of Hong Kong.  Specifically, it would create 
statutory requirements and civil penalties for customer due 
diligence and record-keeping in the banking, securities and 
insurance sectors (reftel).  Additionally, the legislation 
would establish a robust licensing program for RAMCs under 
the authority of the Hong Kong Customs and Excise Department 
(HKCED), Trade Controls Branch.  This new licensing program 
would replace existing Hong Kong Police Force RAMC 
registration procedures for over 2,100 RAMCs and give HKCED 
enforcement powers. 
 
¶3. (SBU) FSTB presented the legislation's objectives and 
collected feedback from affected sectors during a three-month 
public consultation period that ended October 8.  Most RAMCs 
"surprisingly" embraced the sector's unprecedented licensing 
regime, Kwan told us.  Traditionally considered "high-risk" 
ventures, Hong Kong's RAMCs had complained that Hong Kong 
banks would often refuse to provide them needed banking 
services.  RAMCs now hope HKCED's licensing approval will 
open the door to normal banking relationships.  Kwan 
predicted the RAMC industry would likely undergo 
consolidation as small operators pooled resources to meet the 
legislation's administrative requirements. 
 
¶4. (SBU) FTSB's proposed legislation still does not meet all 
of Hong Kong's FATF-identified weaknesses, however.  For 
example, it does not establish regulatory oversight and 
supervision over non-financial professions (e.g., lawyers, 
accountants, real estate agents, etc.) and does notestablish 
a cross-border bulk cash declaration ad disclosure system. 
However, Kwan stated Hong Kog's Security Bureau would take 
up these issues in the near future and had already begun 
discussions with law enforcement an cross border agencies on 
the feasibility of estblishing a cash declaration mechanism. 
 
MARUT