| Last month we reported on the establishment of a consortium of 11 Hong Kong law firms to develop and launch an on-line anti-money laundering training as originally developed in London. Now, more details have emerged from the participants as to the components of the training, and the challenges faced in bringing firms up to speed on the new requirements.
Partner Noeleen Farrell, and regional general counsel and registered foreign lawyer Carolin Rost from JSM, along with Jonathan Green, Will Barber and Kylie Chaplin of Richards Butler in association with Reed Smith took the lead in putting together the Hong Kong version of the training, based on their experiences with AML legislation and interpretation of Practice Direction P. All 11 firms were given the opportunity to provide input along the way in an effort to develop a solid ‘industry standard’ as to AML compliance in Hong Kong, particularly where the Practice Direction was vague or failed to address a particular issue, such as the lack of a clear definition of a ‘beneficial owner’ and what ‘simplified due diligence’ entailed. Key components of the training are said to include: an overview of money laundering; a review of legislation regarding AML in Hong Kong; familiarisation with Practice Direction P; training on suspicious matters and how to report them; generic and firm specific procedures for compliance; and interactive training exercises throughout on the various modules to test the knowledge of newly trained users. The Practice Direction, Farrell notes, “although undoubtedly good practice, has placed a great burden on law firms and has invariably added to the cost of taking on new clients and matters. Given that it applies not just to new clients, but also to clients and matters in existence on 1 July when the Practice Direction came into effect, law firms are now faced with the daunting task of undertaking KYC (know your client) and CDD (client due diligence) on hundreds or, in some cases, thousands of matters before the end of June 2009.” JSM’s central business intake team has been strengthened to take some of the burden off individual lawyers and clients in this regard, sourcing reliable publicly available materials wherever possible to satisfy KYC requirements. The challenges for smaller firms and sole practitioners appear to be larger. As Farrell is quick to observe, “smaller practitioners do not have the resources like larger firms to gather KYC information and satisfy the new requirements under the new Practice Direction, and as such many may be struggling to comply with it.” She also points to other practical problems such as the “inability to start work until all KYC and CDD checks have been completed…creat(ing) difficulties in application to some practice areas, which are time sensitive, particularly certain conveyancing matters.” A number of issues still need to be ironed out on the interpretation and application of Practice Direction P. There are ongoing discussions between a number of law firms in Hong Kong as well as with the Law Society as to how best to address these issues, and any substantive decisions will be fed back into the online course to further capture and promote industry standards. With the added time now required to complete administrative work to open matters and accept new clients, the consortium is a timely and welcome development and makes training one less thing to worry about. |
