In the Financial Secretary’s 2020 – 2021 budget speech, the Hong Kong government announced that it will consider extending the anti-money laundering/counter-terrorist financing requirements to cover cryptocurrency service providers. Cryptocurrencies are currently classified as virtual assets in the city and are regulated by the Securities and Futures Commission.
By including cryptocurrencies under AML regulations, the government would attempt to curb the use of platforms such as bitcoin in money laundering. This is an issue that has arisen for many global regulators, as by their nature crypto assets are often designed to obscure the identity of the user, as well as to hide the purpose of the transaction, making them extremely attractive to those with nefarious purposes. However, they also hold many attractive benefits to users including transactional security, low transfer costs and decentralisation, meaning that many regulators are facing an environment where they are already widely used. By bringing service providers into the existing AML regime Hong Kong is hoping to address some of these ongoing issues.
Read the full article from the Law Society of Hong Kong.
FTI Consulting has released a report outlining some of the dangers present in the regulation of cryptocurrencies in relation to AML. The report looks at various examples of cryptocurrencies being used for money laundering purposes, as well as looking at some of the regulatory responses that have been put in place.
The full report is available here.
The Federation of Law Societies of Canda (FLSC) has launched a series of risk advisories and risk assessment case studies, designed to help legal professionals adapt to the new anti-money laundering rules. The rule changes are based on an FLSC model rule and have been adopted by Nova Scotia, Alberta, Saskatchewan and British Columbia. The new rules particularly focus on client identification and verification.
In November 2019 the Convocation (Board of Directors) of the Law Society of Ontario approved in principle amendments to by-laws designed to combat money laundering and terrorist financing. The amendments which build on existing regulation include:
- a requirement that licensees identify and record the source of client funds for a transaction
- clarification with respect to the amount of cash that a legal professional can receive in respect of any one client matter
- changes to the requirements and processes for identifying and verifying the identity of individual and organizational clients
- new requirements to engage in ongoing monitoring of the business relationship with the client, including assessing whether there is a risk that the legal professional may be encouraging fraud or illegal conduct
- introduction of a new Trust Accounting Model Rule to explicitly prohibit the use of a trust account for a purpose unrelated to the practice of law.
The law society has issued a guidance document, available here, to assist licencees on their obligations.
For further information about the changes click here.