Guidelines for Submission of AML/CFT Policy
by Applicant for Money Service Operator Licence/Licensee
These guidelines aim to provide practical guidance to assist applicants to draw up their own
policies, procedures and controls (collectively known as “policy”) in the relevant operational
areas, taking into consideration of their proposed business plan and special circumstances so
as to meet the relevant anti-money laundering and counter-terrorist financing (“AML/CFT”)
statutory and regulatory requirements.
Please note that each applicant has its unique way of conducting money service businessincluding products and services offered, distribution channels, organizational structure,
customer base and geographical risks, etc. It is important for applicant to complete a self
AML/CFT risk assessment and put in place a set of policy to mitigate the risks of money
laundering and terrorist financing (“ML/TF”). The policy must be based on the applicant’s
risk assessment and meet its particular business risk profile.
The items tabulated below are by no mean exhaustive and applicant must consider any otherimportant issues that are peculiar to its business model and to facilitate the formulation ofpractical and effective policy.

ItemNo.

Requiredinformation

1Introduction tothe Policy

Detail of the required information
The applicant (Name) must take all reasonable measures toensure that proper safeguards exist to prevent acontravention of any requirement under Part 2 or 3 ofSchedule 2 to the Anti-Money Laundering andCounter-Terrorist Financing Ordinance (“AMLO”) and to
mitigate ML/TF risks.

The applicant is required by section 19(3) of the AMLO toestablish and maintain effective procedures not inconsistentwith the AMLO for the purpose of carrying out the duties
under sections 3, 4, 5, 9, 10 and 15 of Schedule 2.

The applicant adopts a risk-based approach in the design
and implementation of the AML/CFT policies with a viewto managing and mitigating ML/TF risks.

Qualified Compliance Officer (Name) and Money
Laundering Reporting Officers (Name) are employed toimplement appropriate AML/CFT policies and procedures
including suspicious transaction report. The line ofreporting should be clearly stated.
1Ver. (12/2019)

2

3

AML/CFTFramework inHong Kong

Customer Due
Diligence(CDD)

Elaborate the relevant AML/CFT frameworkWhat is Money Laundering (“ML”), Terrorist Financing(“TF”) and Proliferation Financing (“PF”).

State the legal obligations of money service operator(“MSO”) in respect of ML, TF and PF under different
legislation.



Why is it important to have an AML/CFT system for theapplicant’s business.

What are the three stages of ML.



Typical signs or indicators for ML, TF and PF.

What is Suspicious Transaction Report (“STR”) and theapplicant’s legal obligations.

Actions required by applicant if a suspicion arises.

Procedure of handling STR and timing.

What is tipping off and the applicant’s legal obligations.
Elaborate the relevant workflow and AML/CFT procedures



What is CDD.

Statutory obligations of CDD requirement.

State company policy on different transaction thresholds forcarrying CDD including treatment of one-off transaction
for walk-in customer.

What is Customer Risk Assessment (“CRA”) and theapplicant’s legal obligation.

Procedures for carrying out the CRA.

Regular CDD and its application within the company
1. MSO should indicate how the paragraphs 4.2.1- 4.2.6 ofthe Guideline on AML/CFT issued for MSOs (“AMLGuideline”) will be complied with and how linked
transactions will be dealt with.

Simplified Due Diligence (“SDD”) and its application
within the company.

Enhanced Due Diligence (“EDD”) and its application
within the company.
1. What is Politically Exposed Person (“PEP”)
2. What is the MSO’s policy on Domestic, Foreign andInternational Organization PEPs
2

Ver. (12/2019)

3. Non-face-to-face channel
4. High risk countries (e.g. countries identified by theFinancial Action Task Force)
5. Any situation that is assessed to be high risk by theapplicant (e.g. remit HK$200,000 in cash to Mainland
by a walk-in customer)What are Source of Funds(“SOF”) and Source of Wealth(“SOW”).

How SOF and SOW measures are incorporated into theapplicant’s EDD process.

Funding provided by third party requires the applicant to
identify and verify its ultimate beneficial owner including
legal person, partnership, trust and other legal arrangement(procedures and steps taken by the applicant to comply withthese requirements).

What are the consequences of failure to carry out CDDmeasures.

How the applicant obtains information on the purpose andintended nature of the business relationship as part of thecompany’s CDD process).

On-going Monitoring
1. Customer monitoring
2. Transaction monitoring
What is a “normal” level of business activity and what
is not? Is the transaction consistent with the MSO’s
knowledge of the customer and profile?

Record keeping
1. Elaborate on how CDD, transaction, screening andCRA records will be recorded and kept.
2. Whether the system can retrieve those records within areasonable timeframe say one day.

4Products &Services

Money changing and/or remittance services.

5

Distribution
ChannelsElaborate the distribution channels. For example, counter
service, internet or mobile etc. Percentage of face-to-face andnon-face-to-face transactions.

6

Type ofcurrencies

Elaborate the main types of currencies provided in the money
service business.

7

Targetcustomers

Elaborate the target customers in the money service business.

8

Targetjurisdictions for

Elaborate the target jurisdictions for “inward remittancetransaction” and “outward remittance transaction”.
3Ver. (12/2019)

remittance9

Revenue model

Elaboration of the way by which the applicant makes profit
from the business.
For example, profit is made from a certain percentage of eachtransaction, handling charge, etc.

10

Elaboration of
the “paymentsystems” and“AML/CFTprocedures”
in remittancetransaction(i.e. s.13 inSchedule 2 tothe AMLO)
and/or wiretransfer (i.e.
s.12 in Schedule
2 to the AMLO)

1112

Elaborate the relevant workflow and AML/CFT procedures,
which should include, among others: the relevant payment system, fund flow, settlement system(by bank transfer, cash etc.)
 procedures for taking other reasonable measures in
mitigation of ML/TF risks, such as identifying the source offunds, identity and legality of any counterparts/relatedparties in processing the transaction.
 procedures for monitoring the company’s overseas branch
and agent’s compliance with the AML/CFT policy.

AML/CFT
screeningprocess

Elaborate the procedures in conducting sanctions screening.

Risk assessment
procedures

Elaborate the risk assessment methodology of the applicant for
AML/CFT purpose.

For example, screening against customers for mitigating therisks of (a) targeted financial sanctions (“TFS”) related toterrorism and TF, (b) TFS related to proliferation, and (c) PEP.

For example, relevant risk factors, procedures to conduct risk
assessment of customer, products and services, etc.
13

Compliancefunction

Elaborate the AML/CFT compliance function of the applicant.
For example, management oversight, the roles of compliancedepartment, any relevant committee/panel, the duties andresponsibilities of compliance officer and compliance staff.

14

Reporting ofsuspicioustransaction

Elaborate the procedures of the company in the process ofreporting suspicious transaction, relevant reporting lines, andthe roles of money laundering reporting officer and relevant
staff.

15

AML/CFTaudit function

Elaborate the AML/CFT audit function of the applicant toensure their AML/CFT systems/programmes are commensuratewith the up-to-date business risk profile and the AML/CFT
circumstances.
For example, by internal/external audit function, relevant policy
and procedures, etc.
4Ver. (12/2019)

16

Training
programme

Elaborate the training programme of the company.
Staff must be trained in what they need to do to carry out
their particular duties with respect to AML/CFT.

Scope of training to be provided
1. Staff’s personal statutory obligations and consequence
for failure to report STR
2. statutory obligations on the MSO and the consequenceof breaches of the relevant legislation
3. the MSO’s policies and procedures relating toAML/CFT
4. any new and emerging techniques, methods and trends
in ML/TF that are needed by the staff to carry out their
particular duties
5. other issues set out in para. 9.7 of the AML GuidelineMSO will monitor the effectiveness of training by testing
their staff’s understanding on the above issues and theirability to recognize suspicious transactions.

MSO will monitor and maintain records of who have been
trained, when the staff received the training and type oftraining provided.

17

Other internalcontrols
systems

If there are other internal controls systems for AML/CFT
purpose, elaborate the relevant policies and procedures.

18

Other
information

Applicant is advised to provide/attach other information tofacilitate the elaboration of the business plan and AML policy,
such as the company’s internal forms for reporting suspicioustransactions, customer on-boarding, account opening,
conducting CRA, brochures, and publications, etc.

19

Cooperation
with regulator
and lawenforcement
agencies

The applicant will cooperate with the Customs & Excise
Department about their routine inspection or investigation. This
company will also cooperate with other law enforcement
agencies wherever required under the laws of Hong Kong.
The applicant will implement the above AML/CFT policy tomitigate the ML and TF risks.

5Ver. (12/2019)