What should legal practitioners do?

Client identification and verification

• Client identification is required in all situations when acting for or on behalf of the client
• Client verification is required when a solicitor acts for a client in any of the “Applicable Circumstances” referred to in question 5 (Which legal services are subject to AML / CTF Regulations?). 

Client Due Diligence

• Establishing business relationships 
• Carrying out occasional transactions 
• In exceptional or urgent circumstances where it is not practicable to conduct CDD at the time of instructions, as soon as possible after preliminary client information is obtained.  

• obtaining information on the nature and intended purpose of the transaction 
• identifying when there’s a beneficial owner who is not the client and taking reasonable measures to verify their identity and to understand the ownership and control structure of a legal person, trust, company, foundation or similar legal arrangement
• obtaining information on the Source of Funds 
• screening a customer’s name against the Sanctions and terrorist suspects lists.

• background and origin of the client
• nature of the client's business 
• the complexity and structure of ultimate beneficial ownership 
• purpose of the transaction to be undertaken
• delivery channel 
• Source of Funding 
• other information suggesting a higher risk of money laundering or terrorist financing.

• Enhanced Due Diligence (EDD) for the Applicable Situations listed in paragraph 3 of Table A of the PDP
• Simplified Due Diligence (SDD) in the Applicable Situations listed in paragraph 9 of Table A of the PDP 
• “Standard” Due Diligence for all other situations.

Enhanced Due Diligence

• a politically exposed person (PEP) or a family member or known associate of a PEP
• a person, entities or a transaction connected with a higher-risk jurisdiction 
• complex, unusual transactions or transactions, or an unusual pattern of transactions, which have no apparent economic or lawful purpose 
• overseas companies where corporate information is not readily accessible or with nominee shareholders or a significant portion of capital in the form of bearer shares 
• a preliminary interview which leads to suspicion of money laundering or terrorist financing
• doubt about the veracity or adequacy of previously obtained client identification data 
• a situation which may present a high risk of money laundering or terrorist financing, as established by the HKSAR Government through a Law Society notice to members.

Simplified Due Diligence

• A government or public institution established in HK or in equivalent jurisdiction that has measures in place to ensure compliance with requirements similar to those imposed under AMLO
• A financial institution incorporated in Hong Kong or jurisdiction subject to, and supervised in relation to, compliance with AML/CTF consistent with standards set by FATF 
• A company listed on a regulated market subject to disclosure requirements
• An investment vehicle fulfilling requirements contained in Section 4 (3) (d) of the AMLO
• Low risk products such as a provident, pension retirement or superannuation scheme that provides retirement benefits, an insurance policy that does not contain a surrender clause or can be used as collateral for the purpose of the above products, or a life insurance policy as defined in Section 4 (5) (c) of the AMLO.

• a client or transaction presents a high risk of money laundering/terrorist financing as defined in paragraph 3 of Table A (Enhanced client due diligence)
• the risk assessment changes during the course of business
• there is a suspicion of money laundering/terrorist financing 
• there are doubts about the veracity or accuracy of documents or information previously obtained for the purposes of identification or verification.

• not need to identify and verify beneficial owner
• accept other documents, data or information (e.g. proof of FI’s license, listed status or authorization status only etc.)
• reduce the degree of ongoing monitoring
• not need to collect specific information or carry out specific measures to understand the purpose and intended nature of the business relationship, but can infer the purpose and intended nature from the type of transactions or business relationship established. 

Ongoing monitoring and record keeping

• a client is categorised as “high risk” (see examples listed in paragraph 3 of Table A)
• there are changes to instructions or to the relationship between a client and relevant party(ies) which gives rise to suspicion
• a client or beneficiary owner is a PEP. 

• by virtue of the amount or nature of the transaction, unusual or suspicious
• not consistent with the legal practitioner’s knowledge of the client or the client’s business, risk profile, or the client’s Source of Funds.

• scrutinize transactions and instructions of the client to ensure that they are consistent with the firm’s knowledge of the client and its business, risk profile and Source of Funds
• undertake reviews of existing records and keep the documents, or information obtained for the purpose of applying CDD, up to date
• identify transactions that are complex, unusually large or that form an unusual pattern or that have no apparent economic or lawful purpose.