Money laundering and terrorist financing offences
The money laundering offence is an offence of
dealing with property
known or
suspected of representing criminal proceeds (s.25(1) of the Organized and Serious Crimes Ordinance (Cap. 455) (OSCO)) or
knowing or
suspecting that any property represents criminal proceeds or any property
that was orwill be used in connection with a criminal offence, in which case a disclosure to an authorised officer (of the Joint Financial Intelligence Unit (JFIU)) of the knowledge or suspicion should be made (s. 25A of the OSCO).
In Hong Kong, criminal proceeds are typicallygenerated from various illegal activities. They can be derived from drug trafficking, smuggling, illegal gambling, bookmaking, blackmail, extortion, loan sharking, tax evasion, controlling prostitution, corruption, robbery, theft, fraud, copyright infringement, insider dealing and market manipulation.
The majority of reported cases of “money laundering” in Hong Kong are cases of dealing (or handling) known or suspected criminal proceeds. Therefore, legal practitioners should understand the money laundering risk of “dealing” with criminal proceeds when accepting legal instructions and what measures to undertake to identify, assess and manage such risk. In particular, law firms are at risk of “dealing” with criminal proceeds in the purchase and sale of property.
The terrorist financing offence is an offence of providing or collecting funds with an intention or knowledge that the funds will be used to commit terrorist acts (s.7 of the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575) (UNATMO) or knowing or suspecting that any property is terrorist property, in which case a disclosure to an authorised officer (of the JFIU) of the knowledge or suspicion should be made (s. 12 of the UNATMO).
Terrorist financing is a term used to describe the provision of financial support for terrorism purposes and certain other types of involvement in the funding of terrorist activities or dealings with funds intended or likely to be used for terrorist purposes or funds that represent the proceeds of terrorist activities. Funds may stem from both legal (e.g. profits from businesses and charitable organizations) and illicit sources. Therefore, legal practitioners should check whether a prospective client, representative or beneficial owner(s), or anyone who directly or indirectly owns / controls or act on behalf of such entities, is on the list of designated terrorists or terrorist associates and properties published by the Security Bureau and the Commerce and Economic Development Bureau (CEDB).
The Security Bureau maintains lists of designated individuals and entities under the UNATMO, while the CEDB maintains list of designated individuals and entities under the United Nations Sanctions Ordinance (Cap. 537).
Link to the Commerce and Economic Development Bureau:
https://www.cedb.gov.hk/en/policies/united-nations-security-council-sanctions.html
Link to the Law Society of Hong Kong website:
https://www.hklawsoc.org.hk/en/Support-Members/Professional-Support/AML
FAQs
Money laundering is the processing of assets from criminal activity to obscure their illegal origins. Terrorism financing raises money to support terrorist activities.
What's the difference between money laundering and terrorist financing? ›
For money laundering to occur, the funds involved must be the proceeds of criminal conduct. For terrorist financing to occur, the source of funds is irrelevant, i.e. the funds can be from a legitimate or illegitimate source.
What is the meaning of terrorist financing? ›
What is Terrorism Financing (TF)? Terrorism financing is the act of providing financial support to terrorists or terrorist organisations to enable them to carry out terrorist acts or to benefit any terrorist or terrorist organisation.
What is money laundering in simple terms? ›
Money laundering involves disguising financial assets so they can be used without detection of the illegal activity that produced them. Through money laundering, the criminal transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source.
What are the stages of money laundering and terrorist financing? ›
There are three stages of money laundering introducing laundered funds into the financial system: Placement. Layering. Integration/extraction.
What are the four stages of terrorist financing? ›
Just like for money laundering, the process of terrorist financing can be explained in different stages. Simply put, the process of stages of terrorist financing follows a four-stage approach. These four stages are Collecting, Storing, Moving, and Using.
What is the money laundering and terrorist financing Act? ›
AN ACT TO PROVIDE FOR OFFENCES OF, AND RELATED TO, MONEY LAUNDERING IN AND OUTSIDE THE STATE; TO GIVE EFFECT TO DIRECTIVE 2005/60/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 26 OCTOBER 2005 ON THE PREVENTION OF THE USE OF THE FINANCIAL SYSTEM FOR THE PURPOSE OF MONEY LAUNDERING AND TERRORIST FINANCING; TO ...
What are the three stages of money laundering? ›
It involves three distinct stages: placement, layering, and integration. Common techniques include cash smuggling, shell companies, and real estate investments. Anti Money Laundering (AML) regulations are essential for effective prevention with Know Your Customer checks being critical to comply with these rules.
What is an example of financial terrorism? ›
Sources of terrorist funding include, but are not limited to, low-level fraud, kidnapping for ransom, the misuse of non-profit organizations, the illicit trade in commodities (such as oil, charcoal, diamonds, gold and the narcotic “captagon”), and digital currencies.
What is one example of money laundering? ›
What Is an Example of Money Laundering? Cash earned illegally from selling drugs may be laundered through highly cash-intensive businesses such as a laundromat or restaurant where the illegal cash is mingled with business cash before deposit. These types of businesses are often referred to as “fronts.”
The top 10 key signs money laundering businesses should look out for include:
- Secrecy or Unwillingness to Provide Enough Information. ...
- Large Deposits. ...
- Unusual Transactions. ...
- High-Risk Third Party Relationships and Complex Business Structures. ...
- Transactions with Unregistered or High Risk Jurisdiction. ...
- Multiple Account Opening.
Some of the steps financial institutions, their employees, and others can take to detect digital laundering include: Assembling details of possible and known networks of mules. Monitoring high-volume and suspicious transactions. Ensuring that the know your client (KYC) protocols are adhered to on a regular basis.
What is terrorist financing in money laundering? ›
Terrorism financing raises money to support terrorist activities. While these two activities differ in many ways, they often exploit the same vulnerabilities in financial systems that allow for anonymity and opacity in transactions. Click to access available viewer actions.
What is the biggest money laundering case in the world? ›
Wachovia Bank Money Laundering Scandal (2010)
In 2010 Wachovia was fined $160 million for having laundered more than $380 billion on behalf of various Mexican drug cartels over the course of years.
What are some common methods used in money laundering? ›
Read on to learn more about the most common methods of money laundering.
- Bulk Cash Smuggling. ...
- Money Muling. ...
- Blending Funds/Cash-intensive Businesses. ...
- Smurfing/Structuring and Counterfeiting. ...
- Trade-Based Money Laundering. ...
- Shell Companies/Trusts. ...
- Tax Havens. ...
- Transaction Laundering.
Money laundering is not a victimless crime
The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. The inter-governmental body sets international standards that aim to prevent these illegal activities and the harm they cause to society.
What is the money laundering and terrorist financing risk assessment? ›
National ML/TF Risk Assessment
A risk assessment allows countries to identify, assess and understand its money laundering and terrorist financing risks. Once these risks are properly understood, countries can apply AML/CFT measures that correspond to the level of risk, in other words: the risk-based approach (RBA).
What is the money laundering and terrorist financing Prevention Act? ›
The Money Laundering and Terrorist Financing (Prevention) Act (the Anti-Money Laundering Act) is the administrative framework applying to firms in certain sectors. The purpose of the regulations is to prevent firms from being used for money laundering and terrorist financing.
What is the difference between financial crime and money laundering? ›
Money laundering is a key component of financial crime, and involves the “cleaning” or conversion of illegally obtained funds into legitimate assets. This can involve hiding tainted funds in an offshore bank account or routing them through a complex web of shell companies and fake invoices.
