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Best practices for KYC/AML

How to
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How to comply with KYC/AML-related regulatory developments in Hong Kong [Updated February 2022]

Earlier this year the Hong Kong Monetary Authority (HKMA) revised its regulatory expectation in respect of remote on-boarding. On February 1st, HKMA issued recommendations and indicated reasonable steps for intermediaries to establish the true and full identity of their clients, including their financial situation, investment experience, and investment objectives.

Although the HKMA utterly supports technology and innovation, it also acknowledges that remote on-boarding may present greater risks to authorized institutions, particularly for impersonation risks. That being said, the updated regulation states that remote on-boarding should be no less effective than the current operating model which is performed when the customer is in front of the staff.

Two main aspects include:

  1. Identity authentication. Authority institutions should act correspondingly and ensure the reliability of the document and data that was received to verify the customer’s identity. Companies should consider using technologies that confirm the genuineness of the identity documents by using holograms detection or detection of security features of identity documents.
  2. Identity matching. Institutions should use appropriate technologies to link the customers to the identities they have provided. Such technologies may include biometric solutions like facial or voice recognition and liveness detection.

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It’s also worth noticing that formerly HKMA has removed the address verification requirements from the AML Guideline. Consequently, institutions are only obliged to obtain address information without collecting particular evidence.

However, before initiating remote on-boarding procedures, authority institutions should conduct ML/TF risk assessments in accordance with the nature, size, and complexity of their businesses and monitor the effectiveness of the technology on an ongoing basis. It is especially essential during the early stages of implementation and operation. HKMA advises institutions to comply with all applicable legal and regulatory requirements in their conduct of business and make sure they apply a risk-based approach when conducting CDD measures.

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