Circular on FATF Statements Regarding High-Risk Jurisdictions and AML/CFT Compliance

Our Ref.: B10/14C
B1/15C
24 October 2019
The Chief Executive
All Authorized Institutions
Dear Sir/Madam,
Statements issued by the Financial Action Task Force I am writing to inform you that on 18 October 2019 the Financial Action Task Force (FATF) published two updated statements identifying jurisdictions that pose a risk to the international financial system and also to draw your attention to a number of outcomes from the FATF Plenary meeting held on 16-18 October 2019. FATF Public Statement The FATF has issued a public statement1 identifying jurisdictions that have strategic deficiencies in their anti-money laundering and counter-financing of terrorism (AML/CFT) regimes. The statement can be found at: http://www.fatf￾gafi.org/publications/high-risk-and-other-monitored-jurisdictions/documents/public￾statement-october-2019.html. (1) Jurisdiction subject to a FATF call on its members and other jurisdictions to apply counter-measures Democratic People’s Republic of Korea (DPRK) The FATF remains concerned by the DPRK’s failure to address the significant deficiencies in its AML/CFT regime and the threat posed by the DPRK’s illicit activities related to the proliferation of weapons of mass destruction and its financing. Authorized institutions (AIs) should give special attention to business relationships and transactions associated with the DPRK, including DPRK companies, financial institutions and those acting on their behalf, and subject them to increased scrutiny and enhanced due diligence. AIs should also terminate correspondent relationships with DPRK banks, where required by relevant United Nations Security Council Resolutions. 1 AIs are reminded of the requirements set out in paragraph 4.15 of the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Authorized Institutions).

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  (2) Jurisdiction subject to a FATF call on its members and other jurisdictions to apply enhanced due diligence measures Iran The FATF expresses disappointment that the Action Plan remains outstanding, and expects Iran to proceed swiftly to address all the remaining items. The FATF remains concerned with the terrorist financing risk emanating from Iran and the threat this poses to the international financial system. AIs should therefore continue to apply enhanced due diligence, proportionate to the risks, with respect to business relationships and transactions with natural and legal persons from Iran, including (1) obtaining information on the reasons for intended transactions; and (2) conducting enhanced monitoring of business relationships, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination. Improving Global AML/CFT Compliance: On-going Process The FATF has also issued an updated statement on jurisdictions that have strategic AML/CFT deficiencies but have developed an action plan and provided a written high level political commitment to address the identified deficiencies. The statement can be found at: http://www.fatf-gafi.org/publications/high-risk-and-other-monitored￾jurisdictions/documents/fatf-compliance-october-2019.html. Other Outcomes from the FATF Plenary, Paris, 16-18 October 2019 The FATF has published various outcomes of the Plenary held on 16-18 October 2019, which may be of reference to AIs. In particular, the FATF is going to launch a public consultation on its draft guidance on the use of digital identity in November and the HKMA will keep the banking sector informed through relevant industry associations. Further information can be found at: http://www.fatf-gafi.org/publications/ fatfgeneral/documents/outcomes-plenary-october-2019.html. FATF Business Bulletin The FATF from time to time produces business bulletins that highlight the FATF’s decisions (e.g. Mutual Evaluation or Follow-up reports) and new guidance or other products that are particularly relevant to the private sector. For example, the recent bulletin includes a brief summary on the Mutual Evaluation Report of Hong Kong. AIs are encouraged to read the bulletin to keep updated on recent international AML/CFT developments and may subscribe to the business bulletin at:
  http://www.fatf-gafi.org/publications/fatfgeneral/documents/private-sector-business￾bulletin.html. Yours faithfully, Carmen Chu Executive Director (Enforcement and AML)