At the end of September 2021, the Hong Kong authorities issued an updated Anti-Money Laundering (AML) Guidelines addressing the areas of concern identified in the September 2019 FATF Mutual Evaluation Report. The adopted amendments were aimed at bringing the anti-money laundering measures in Hong Kong in line with the FATF standards and provide financial institutions with practical recommendations for their implementation.
In accordance with these guidelines, a streamlined approach to verifying the identity of certain individuals has been reestablished. Where business relationships involve a low risk of money laundering and terrorist financing, it is acceptable to rely on a confirmation letter from a department that is independent of persons who intend to act on behalf of clients, such as compliance, audit, or HR departments. Licensed firms will still need to revise their institutional risk assessment at least every two years, but there is an opportunity to use simpler approaches when the range of products and services offered by the firm is very limited or its clients have a uniform risk profile.
Despite the fact that Hong Kong is the first jurisdiction in the Asia-Pacific region to successfully pass the FATF assessment, on October 5, the EU announced the inclusion of Hong Kong on its gray list for observing tax cooperation, as it considered that the non-taxation of certain passive income from foreign sources in Hong Kong may lead to situations of "double non-taxation".
Hong Kong has committed to amend the Internal Revenue Ordinance by the end of 2022 and implement appropriate measures in 2023.
