On 21 Nov 2025, the HKMA issued guidance to clarify risk-based AML/CFT controls for politically exposed persons (PEPs), addressing inconsistent implementation by Authorized Institutions and SVF licensees. The guidance provides practical 'Smart Tips' on PEP definitions, identification, enhanced due diligence, and former PEPs to ensure proportionate controls aligned with FATF standards and the amended AMLO. AIs and SVF licensees must integrate these practices into their AML/CFT frameworks, with the HKMA monitoring compliance through supervisory reviews.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction and Context
On 21 Nov 2025, the Hong Kong Monetary Authority (HKMA) issued guidance clarifying expectations for Authorized Institutions (AIs) and Stored Value Facility (SVF) licensees regarding anti-money laundering and counter-financing of terrorism (AML/CFT) controls for politically exposed persons (PEPs), following the 2023 amendment to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) to align with Financial Action Task Force (FATF) standards.
Key Observations and Guidance Focus
The HKMA noted that while most AIs and SVF licensees effectively implement PEP-related controls, some apply overly cautious or non-proportionate measures, including requesting excessive source-of-wealth information and broadly interpreting the PEP definition. To address this, the guidance provides 'Smart Tips' clarifying four critical areas: (i) definitions of PEPs, family members, and close associates; (ii) identification procedures; (iii) application of enhanced due diligence; and (iv) treatment of former PEPs, ensuring controls remain risk-based and proportionate to ML/TF risks.
Implementation and Supervisory Expectations
AIs and SVF licensees are required to adopt the guidance in conjunction with the AMLO, the HKMA’s AML/CFT Guideline, and other relevant frameworks to refine their risk-based policies and controls. The HKMA will monitor compliance as part of its AML/CFT supervision, referencing specific cases involving PEP treatment that come to its attention.
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