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Hong Kong plans tighter money laundering controls on Chinese officials

Mainland Chinese officials who hide ill-gotten wealth in Hong Kong will face a fresh review of their financial affairs amid a planned tightening of money laundering regulations in the territory.

The Hong Kong government has proposed changes to the requirements for financial institutions and advisers that would introduce checks to mainland Chinese bank accounts and transactions of politically related persons.

Currently, Hong Kong companies only need to apply more stringent money laundering controls to Politically Exposed Persons (PEPs) “outside the People’s Republic of China.” But Hong Kong’s Joint Financial Intelligence Unit, the money laundering watchdog, has proposed to change the rules apply to anyone outside the territory.

“The amendment will make it clear to banks, lawyers, accountants and others in Hong Kong that the enhanced due diligence requirements that apply to foreign PEPs must also apply to PEPs from China,” said Alan Linning, partner at the firm of ‘lawyers Mayer. Brown. “Banks and law firms will have to treat all PEPs from China on their client lists as high risk clients.”

The Chinese government has long been concerned illicit capital outflows and indicated that he was keen to curb officials and others using Hong Kong and other jurisdictions to hide their wealth.

President Xi Jinping has declared the fight against corruption a hallmark of his leadership, vowing to catch both “tigers and flies” – that is, senior leaders as well as rank bureaucrats. inferior.

The effort was extended to monitor Chinese officials in Hong Kong and the territory’s own rulers. Xi recently appointed an anti-corruption czar in Hong Kong, Shi Kehui, who will look into the affairs of local officials.

The Hong Kong government closed consultations with the financial and legal services industries on proposed changes to money laundering late last month.

The plans will align the territory with recommendations from the Financial Action Task Force, a global body that coordinates dirty money policy.

In a review of money laundering controls in Hong Kong in 2019, the FATF criticized the city’s adherence to standards aimed at preventing the risk of PEP violations and ordered it to “bridge the technical gap” over the rules applicable to PEPs in China.

The changes will make it more difficult for anyone linked to the Chinese Communist Party to transfer money to or around Hong Kong without verifying their identity, public office, associates and close family.

PEPs are considered to be at higher risk of potential money laundering violations because they are exposed to more opportunities to accept bribes or participate in corruption.

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