Customer due diligence in Hong Kong

Customer Due Diligence in Hong Kong

Customer due diligence (CDD) is the process of identifying and verifying a customer's identity and assessing their risk profile before entering into a business relationship. Hong Kong's anti-money laundering regime imposes CDD requirements on banks, trust and company service providers (TCSPs), and other designated non-financial businesses.

CDD Hong Kong

The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) sets out the CDD obligations that regulated entities must follow. A business must identify the customer and verify their identity using reliable, independent source documents. Complete these identification and verification steps before establishing the business relationship.

Hong Kong AML CDD

The AMLO requires customer due diligence measures when establishing a business relationship, conducting an occasional transaction above a prescribed threshold, or when there is a suspicion of money laundering or terrorist financing. These measures include identifying the beneficial owner and understanding the customer's ownership and control structure.

Beneficial Owner Verification Hong Kong

A regulated entity must identify the beneficial owner of any customer that is a legal person or legal arrangement. Beneficial owner verification Hong Kong requires the entity to take reasonable measures to understand the ownership structure and verify the identity of any individual who ultimately owns or controls the customer.

Source of Funds Check Hong Kong

When a customer is assessed as presenting a higher risk, an enhanced due diligence measure applies. A source of funds check Hong Kong examines the origin of the funds the customer will use in the transaction. This is distinct from a source of wealth check, which looks at the customer's overall wealth rather than the specific funds.

Risk Assessment

The CDD process begins with a risk assessment of the customer. The regulated entity must determine whether the customer is a politically exposed person (PEP) and whether the business relationship presents a higher risk of money laundering or terrorist financing.

Enhanced Due Diligence

If the risk assessment identifies a higher risk, enhanced due diligence measures apply. These include obtaining additional information on the customer and the beneficial owner, and conducting more frequent ongoing monitoring of the business relationship.

Ongoing Monitoring

CDD is not a one-time exercise. The regulated entity must conduct ongoing monitoring of the business relationship, scrutinising transactions to ensure they are consistent with the entity's knowledge of the customer, their business and their risk profile.

Record-Keeping

The AMLO requires records of CDD measures, including copies of identification documents and transaction records, to be kept for at least five years after the end of the business relationship or the completion of the transaction.