Client Due Diligence Process

Victoria International Asset Management Limited shall establish policies and procedures aimed at preventing and impeding money laundering and terrorist financing. It covers the following areas and employee should develop a sense of awareness and vigilance to guard against money laundering and terrorist financing.

Customer acceptance;
Customer due diligence;
Record keeping;
Retention of records; and
Recognition of suspicious transactions;

1. Customer Acceptance

Victoria International Asset Management Limited have developed customer acceptance policies and procedures that aim to identify the types of customers that are likely to pose a higher-than-average risk of money laundering and terrorist financing. A more extensive customer due diligence process should be adopted for higher risk customers.

In determining the risk profile of a particular client or type of clients, staff and AEs should take into account factors such as the following:

Background or profile of the client, such as being, or linked to PEPs;
For individual client, his/her occupation, especially if the client is engaged in cash business (such as casino)
Source of income of client
Nature of the client’s business, which may be particularly susceptible to money laundering risk, such as money changers or casinos that handle large amounts of cash;
Origin of the client (e.g. place of birth, residence), the place of establishment of the client’s business and location of the counterparties with which the client conducts business, such as non-cooperative countries and territories (“NCCTs”) designated by FATF or those known to Victoria International Asset Management Limited to lack proper standards in the prevention of money laundering or customer due diligence process;
For a corporate client, unduly complex structure of ownership for no good reason;
Means of payment as well as type of payment (cash or third party cheque the drawer of which has no apparent connection with the prospective client may be a cause for increased scrutiny);
Risks associated with non face-to-face business relationships; and
Any other information that may suggest that the client is of higher risk (e.g. knowledge that the client has been refused a business relationship by another financial institution).

Victoria International Asset Management Limited will adopt a balanced and common sense approach with regard to customers of higher than average risk of money laundering and terrorist financing; e.g. those from or closely linked with NCCTs or from other jurisdictions which do not meet FATF standards. While extra care should be exercised in such cases, it is not a requirement that licensed corporations and associated entities should refuse to do any business with such customers or automatically classify them as high risk and subject them to an enhanced customer due diligence process under the risk-based approach discussed in subsection 4.2.2 of this Guidance Note. Rather, Staff and AEs should weigh all the circumstances of the particular situation and assess whether there is a higher than normal risk of money laundering.

Victoria International Asset Management Limited would consider reclassifying a customer as higher risk if, following initial acceptance of the customer, the pattern of account activity of the customer does not fit in with your knowledge of the customer. A suspicious transaction report should also be considered.

2. Customer Due Diligence (“CDD”)

2.1 General

Staff and AEs should take all reasonable steps to enable them to establish to their satisfaction the true and full identity of each client, and of each client’s financial situation and investment objectives.
The CDD process should comprise the following:
- identify the client, i.e. know who the individual or legal entity is;
- identify clients’ financial situation, investment experience and investment objectives where appropriate;
- know the occupation and source of income of the client;
- verify the client’s identity using reliable source documents, data or information;
- identify and verify beneficial ownership and control, i.e. determine which individual(s) ultimately own(s) or control(s) the client; and / or the person on whose behalf a transaction is being conducted; and
- conduct ongoing due diligence and scrutiny, i.e. perform ongoing scrutiny of the transactions and account throughout the course of the business relationship to ensure that the transactions being conducted are consistent with Victoria International Asset Management Limited’s knowledge of the client, its business and risk profile, taking into account, where necessary, the client’s source of funds.
Specific CDD requirements applicable to different types of customers are outlined in subsections for individual customers, corporate customers, listed companies and investment vehicles, financial or professional intermediaries, unincorporated business, trust and nominee accounts, PEP, non fact-to-face customers, reliance on introducers for customer due diligence. For the purpose of compliance with these requirements, the guiding principle is that staff and AEs should be able to justify that they have taken objectively reasonable steps to satisfy themselves as to the true identity of their customers, including beneficial owners.
The CDD measures set out in this Guidance Note should, except provided otherwise, be applied to both the customer itself and its beneficial owner.
Staff and AEs should verify their customers’ identity using documents issued by reliable sources. If there is doubt or difficulty in determining whether the identification document is genuine, staff and AEs should obtain such document from a source independent from the customer.
Depending on the type of customer, business relationship or transaction, staff and AEs would need to obtain appropriate information on the purpose and intended nature of the business relationship on a risk sensitive basis such that ongoing due diligence on the customer may be conducted at a level commensurate with the customer’s risk profile.
Victoria International Asset Management Limited will not keep anonymous accounts or accounts using fictitious names.
When establishing a business relationship, staff and AEs should ask whether the clients are acting for their own accounts or for the account of another party or parties for the purpose of identifying the beneficial owner of the account opened by the client.
In general, staff and AEs should verify the identity of the client and beneficial owner before establishing a business relationship. When staff and AEs are unable to perform the CDD process satisfactorily at the account opening stage, they should not commence the business relationship or perform the transaction and should consider whether a suspicious transaction report should be made.
Victoria International Asset Management Limited would take reasonable steps to ensure that the records of existing clients remain up-to-date and relevant.
To achieve this, Victoria International Asset Management Limited will perform periodic and / or ad hoc reviews of existing client records to consider re-classifying a client as high or low risk. The frequency for conducting these reviews should be on the basis of knowing and understanding of the client and the type of relationship and transaction. Criteria to perform an ad hoc review include but not limited to transaction that is unusual or not in line with the client’s normal trading pattern; a material change in the way that the account is operated; when staff and AEs are not satisfied that they have sufficient information about the client; or when there are doubts about the veracity or adequacy of previously obtained identification data.
Even in the absence of any of the circumstances mentioned in subsection (k) above, staff and AEs are encouraged to consider whether to require additional information in line with their current standards from those existing customers.

Trading patterns and methods of payment and receipt may have some indication of the illegal activities. Thus if staff and AEs have any queries about abnormal trading patterns or suspicious trades, they should report to the Senior Management or the Compliance Department. The Compliance Department shall report the case to JFIU if it is justified.

Indicators of unusual trading patterns and suspicious transactions or activities include:

Insufficient details of clients – the client refuses or is reluctant to provide explanation of financial activity or provide general information when opening an account; providing minimal or fictitious information; proving information that is difficult or expensive to verify or providing an untrue explanation;

Unrealistic wealth compared to client profile – Clients with little or no wealth and no apparent employment had received a large amount of transfer deposits and been engaged in a substantial amount of transactions;

Unusual pattern of transactions – Clients had only traded heavily in one or two shares within a short period of time, causing the price and trading volume of the shares to soar during that period. After that, the accounts became dormant.

Unusual settlement – Clients requested the brokers to issue third-party cheques and pay their sale proceeds to another person (which may be an offshore company) with no apparent reasons.

Unusual dealing patterns – Period of significantly increased activity amid relatively dormant periods; accounts are used as a temporary repository for funds; buying and selling of investment at client’s request for no apparent economic or visible lawful purpose or in unusual circumstances;

Defensive stance to questioning – Inexperienced launders may not have prepared a reasonable story concerning the origin of their illicit funds or unlawful activities in their accounts. They may tend to be defensive when questions are asked and are reluctant, without legitimate reasons, to provide any information in response to the brokers’ questions;

2.2 Risk-based approach

The general rule is that customers are subject to the full range of CDD measures. Staff and AEs should however determine the extent to which they apply each of the CDD measures on a risk sensitive basis. The basic principle of a risk-based approach is that Staff and AEs adopt an enhanced CDD process for higher risk categories of customers, business relationships or transactions. Similarly, simplified CDD process is adopted for lower risk categories of customers, business relationships or transactions. The relevant enhanced or simplified CDD process may vary from case to case depending on customers’ background, transaction types and specific circumstances, etc. Staff and AEs should exercise their own judgment and adopt a flexible approach when applying the specific enhanced or simplified CDD measures to customers of particular high or low risk categories.
Victoria International Asset Management Limited would establish clearly in their customer acceptance policies the risk factors for determining what types of customers and activities are to be considered as low or high risk, while recognising that no policy can be exhaustive in setting out all risk factors that should be considered in every possible situation. In addition, use of simplified customer due diligence is considered reasonable in the circumstances, it should be approved by senior management. The opening of a high risk account whereby enhanced CDD would be required should be subject to approval by senior management.
Simplified CDD procedures may be used for identifying and verifying the identity of the customer and the beneficial owner where there is no suspicion of money laundering or terrorist financing, and:
- the inherent risk of money laundering or terrorist financing relating to a type of customer is assessed to be low; or
- there is adequate public disclosure or other checks and controls elsewhere in national systems in relation to the customers.
Some examples of lower risk categories of customers are:
- financial institutions that are authorised and supervised by the Commission, Hong Kong Monetary Authority or Office of the Commissioner of Insurance or by an equivalent authority in a jurisdiction that is a FATF member or in an equivalent jurisdiction;
- public companies that are subject to regulatory disclosure requirements. This includes companies that are listed on a stock exchange in a FATF member jurisdiction or on a specified stock exchange as defined under the SFO and their subsidiaries;
- government or government related organizations in a non-NCCT jurisdiction where the risk of money laundering is assessed by the staff or AEs to be low and where the staff or AEs has no doubt as regards the ownership of the organization; and
- pension, superannuation or similar schemes that provide retirement benefits to employees, where contributions are made by way of deduction from wages and the scheme rules do not permit the assignment of a member’s interest under the scheme.
There might be instances where the circumstances may lead to suspicions even though the inherent risk of the customer is considered to be low. Should there be any doubt, the full range of CDD measures should be adopted.
Victoria International Asset Management Limited would note that jurisdictions which are not designated as NCCTs do not necessarily mean that they could be taken as equivalent jurisdictions that apply standards of prevention of money laundering and terrorist financing equivalent to those of the FATF.
In assessing whether or not a country (other than FATF members or the list of equivalent jurisdictions listed in the Glossary of this Guidance Note) sufficiently applies FATF standards in combating money laundering and terrorist financing and meets the criteria for an equivalent jurisdiction, Victoria International Asset Management Limited would:
- carry out their own country assessment of the standards of prevention of money laundering and terrorist financing. This could be based on the firm’s knowledge and experience of the country concerned or from market intelligence. The higher the risk, the greater the due diligence measures that should be applied when undertaking business with a customer from the country concerned;
- pay particular attention to assessments that have been undertaken by standard setting bodies such as the FATF and by international financial institutions such as the International Monetary Fund (IMF). In addition to the mutual evaluations carried out by the FATF and FATF-style regional bodies, as part of their financial stability assessments of countries and territories, the IMF and the World Bank have carried out country assessments in relation to compliance with prevention of money laundering and terrorist financing standards based on the FATF Recommendations; and
- maintain an appropriate degree of ongoing vigilance concerning money laundering risks and to take into account information that is reasonably available to them about the standards of anti-money laundering systems and controls that operate in the country with which any of their customers are associated.
Apart from the risk factors set out in subsection 5.2 for determining a customer’s risk profile, the following are some examples of high risk categories of customers:
- complex legal arrangements such as unregistered or unregulated investment vehicles;
- companies that have nominee shareholders or a significant portion of capital in the form of bearer shares;
- persons (including corporations and other financial institutions) from or in countries which do not or insufficiently apply the FATF’s Recommendations (such as jurisdictions designated as the NCCTs by the FATF or those known to the Staff and AEs to lack proper standards in the prevention of money laundering and terrorist financing); and
- PEPs as well as persons or companies clearly related to them.
Victoria International Asset Management Limited would pay special attention to all complex, unusual large transactions and all unusual patterns of transactions which have no apparent economic or visible lawful purpose, in particular with customers from countries which do not or insufficiently apply the FATF’s Recommendations. The background and purpose of such transactions should, as far as possible, be examined, the findings established in writing, and be available to help competent authorities.

2.3 Individual clients

Information such as the following would normally be needed for verification of the identity of individual clients:

name;
number of Hong Kong Identity Card for a local client and passport or an unexpired government-issued identification evidencing nationality or residence for non-local clients;
date of birth; and
residential address (and permanent address if different).

Use of recent utility or rates bill or a recent bank statement, would be the usual method for Victoria International Asset Management Limited to verify the residential addresses of their clients.

Hong Kong Identity Cards or unexpired government-issued identification such as passports are the types of documents that should be produced as proof of identity. Copies of the identity documents will be retained on file.

Victoria International Asset Management Limited would check the address of the customer by the best available means such as sighting of a recent utility bill or bank statement.

Victoria International Asset Management Limited would use a common sense approach to handle cases where customers and/or beneficial owners fall into categories of persons who may not pay utility bills or have a bank account.

However, some clients, e.g. students and people new to Hong Kong, may not be able to provide the address proof. If the clients can provide a reasonable explanation, staff and AEs may use other appropriate means to verify their addresses, such as sending a letter to the client at the address provided and asking for an acknowledgement of receipt to be returned duly signed by the client.

Victoria International Asset Management Limited would also obtain information on the client’s occupation / business to facilitate ongoing due diligence and scrutiny, but this piece of information does not form part of the client’s identity requiring verification.

No form of identification can be fully guaranteed as genuine or representing correct identity. If there is doubt or difficulty with distinguishing whether an identification document is genuine, Victoria International Asset Management Limited may contact the Immigration Department for guidance on recognizing the special features borne with a genuine identity card.

Whenever possible, it is recommended that the prospective customer be interviewed personally. Where the risk of money laundering or terrorist financing relating to the customer is assessed to be high, it is advisable that staff and AEs should request the customer to make himself available for a face-to-face interview.

2.4 Corporate clients

For a corporate customer which is not listed on a stock exchange in a FATF member jurisdiction or on a specified stock exchange as defined under the SFO, or is not a subsidiary of such a listed company, or is not a government-related corporation in a non-NCCT jurisdiction, or is not a financial institution, documents and information such as those mentioned below would be relevant for the purpose of conducting CDD:

Information such as the following would normally be needed for verification of the identity of corporate clients:

Certificate of Incorporation and, where applicable, Business Registration Certificate or any other documents proving the incorporation or similar evidence of the legal status of the corporation;
board resolution evidencing the approval of the opening of the account and conferring authority on those who will operate it;
information about the nature of the business of the corporate client and its ownership and control structure for identifying which individual(s) ultimately own(s) or control(s) the client;
specimen signatures of account signatories;
copies of identification documents of at least 2 authorized persons to act on behalf of the corporate client;
copies of identification documents of at least 2 directors (including the managing director); and
copies of identification documents of substantial shareholders and, where applicable, ultimate principal beneficial owners.

The relevant documents or information would be obtained from a public register, from the client or from other reliable sources, provided that the Victoria International Asset Management Limited are satisfied that the information supplied is reliable.

For a corporate customer which is a listed company or investment vehicle, please refer to subsection 4.2.6 for further guidelines.

If the customer, which is a non-listed company, has a number of layers of companies in its ownership structure, the staff or AE would normally need to follow the chain of ownership to identify the individuals who are the ultimate principal beneficial owners of the customer and to verify the identity of those individuals. However, it is not required to check the details of each of the intermediate companies (including their directors) in the ownership chain. Where a company in the ownership chain is a company listed on a stock exchange in a FATF member jurisdiction or on a specified stock exchange as defined under the SFO or is a subsidiary of such a listed company, or is a financial institution authorised and supervised by the Commission, Hong Kong Monetary Authority or Office of the Commissioner of Insurance or an equivalent authority in a jurisdiction that is a FATF member or an equivalent jurisdiction or is a subsidiary of such a financial institution, it should generally be sufficient to stop at that point and to verify the identity of that customer in line with the suggested CDD measures mentioned in subsection 4.2.6 below.

For higher risk categories of customers or where there is any doubt as to the identity of the beneficial owners, shareholders, directors or account signatories of the corporate customer, it is also advisable that staff and AEs perform additional CDD measures on a risk sensitive basis. Examples of relevant additional measures that could be applied by Victoria International Asset Management Limited include:

making a company search or credit reference agency search;
obtaining the memorandum and articles of association; and
verifying the identity of all persons who are authorized to operate the account.

In the case of an offshore investment vehicle owned by individuals (i.e. the ultimate beneficial owners) who use such vehicle as the contractual party to establish a business relationship with Victoria International Asset Management Limited and the investment vehicle is incorporated in a jurisdiction where company searches or certificates of incumbency (or equivalent) are not available or cannot provide meaningful information about its directors and substantial shareholders, staff and AEs should adopt an enhanced CDD process in relation to the client. Besides satisfying itself that they know the identity of the ultimate beneficial owners and there is no suspicion of money laundering, staff and AEs should perform additional CDD measures on a risk sensitive basis as follows:

Obtaining self-declarations in writing about the identity of, and the relationship with, the directors and substantial shareholders from the ultimate beneficial owners;
Obtaining comprehensive client profile information; e.g. purpose and reasons for opening the account, business or employment background, source of funds and anticipated account activity;
Conducting face-to-face meeting with the client before acceptance of such client;
Obtaining approval of senior management for acceptance of such client;
Assigning a designated staff to serve the client and that staff should bear the responsibility for CDD and ongoing monitoring to identify any unusual or suspicious transactions on a timely basis; and
Conducting face-to-face meetings with the client as far as possible on a regular basis throughout the business relationship.

If the corporate client is incorporated in a jurisdiction where a company search is not available, or if the search does not provide up-to-date and meaningful information about the corporate directors and substantial shareholders, staff and AEs should classify the company as a high risk client and adopt enhanced CDD process.

Apart from the risk factors set out in paragraph 3 above for determining a client’s risk profile, the following are some examples of high risk categories of clients:

complex legal arrangements such as unregistered or unregulated investment vehicles;
companies that have nominee shareholders or a significant portion of capital in the form of bearer shares;
persons (including corporations and other financial institutions) from or in countries which do not or insufficiently apply the FATF’s Recommendations (such as jurisdictions designated as the NCCTs by the FATF or those known to the Staff and AEs to lack proper standards in the prevention of money laundering and terrorist financing).

Staff and AEs should pay special attention to all complex, unusual large transactions and all unusual patterns of transactions which have no apparent economic or visible lawful purpose, in particular with clients from countries which do not or insufficiently apply the FATF’s recommendations.

2.5 Politically exposed persons (“PEP”)

Business relationships with individuals holding important public positions as well as persons or companies clearly related to them (i.e. families, close associates etc) expose Victoria International Asset Management Limited, staff and AEs to particularly significant reputation or legal risks. There should be enhanced due diligence in respect of such politically exposed persons or PEPs.

The concern is that there is a possibility, especially in countries where corruption is widespread, that such PEPs may abuse their public powers for their own illicit enrichment through the receipt of bribes, etc.

PEPs are individuals who are or have in the past been entrusted with prominent public functions, such as senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, and important political party officials. PEPs are considered to be an increased risk for money laundering as some PEPs have in the past abused their public powers for illicit enrichment at the expense of the country or state owned corporation (e.g. through misappropriation of public funds or receipt of bribes for their own use or benefit).

Victoria International Asset Management Limited will adopt appropriate risk management systems to determine whether the client is a PEP. A risk-based approach will be adopted for identifying PEPs and especially on persons from countries that are generally considered to be of higher risk from a corruption point of view.

Staff and AEs should ascertain the sources of wealth and source of funds of clients and beneficial owners identified as PEPs before opening the account.

Approval from senior management level should be obtained before opening an account for a PEP. If a client has been accepted and the client or beneficial owner is subsequently found to be or become a PEP, staff and AEs should obtain approval of senior management to continue the business relationship.

Enhanced CDD is required when conducting business with PEP. Stringent requirement will be imposed on procedures, particulars of clients, verification of transactions, frequency of review, etc.

Victoria International Asset Management Limited will re-classify the risk profile of the high risk clients, if appropriate, and will adopt the requirement, rules and guidelines as prescribed by the regulator from time to time. If a transaction is concluded suspicious, Victoria International Asset Management Limited will report it to Joint Financial Intelligence Unit (“JFIU”).

Risk factors that staff and AEs should consider in handling a business relationship (or potential relationship) with a PEP include:

any particular concern over the country where the PEP is from, taking into account his position;
any unexplained sources of wealth or income (i.e. value of assets owned not in line with the PEP’s income level);
unexpected receipts of large sums from governmental bodies or government-related organizations;
source of wealth described as commission earned on government contracts;
request by the PEP to associate any form of secrecy with a transaction; and
use of accounts at a government-related bank or government accounts as the source of funds in a transaction.

2.6 Listed companies and investment vehicles

Where a corporation is a company which is listed on a stock exchange in a FATF member jurisdiction or on a specified stock exchange as defined under the SFO, or is a subsidiary of such a listed company, or is a government-related corporation in a non- NCCT jurisdiction, the corporation itself can be regarded as the person whose identity is to be verified.

For customers mentioned in subsection above, it will therefore be generally sufficient for staff or AEs to obtain copies of relevant identification documents such as certificate of incorporation, business registration certificate and board resolution to open an account, without the need to make further enquiries about the identity of the substantial shareholders, individual directors or authorized signatories of the account. However, evidence that whoever operating the account has the necessary authority to do so should be sought and retained.

Where a listed corporation is effectively controlled by an individual or a small group of individuals, it is suggested staff and AEs consider whether it is necessary to verify the identity of such individual(s).

Staff and AEs should be satisfied that the risk of money laundering in the non-NCCT jurisdiction is low and there is no doubt as regards the ownership of the enterprise.

Where the customer is a regulated or registered investment vehicle, such as a collective investment scheme or mutual fund that is subject to adequate regulatory disclosure requirements, it is not necessary to seek to identify and verify the identity of any unit holder of that entity.

Where the customer is an unregulated or unregistered investment vehicle, Staff and AEs should adhere to the requirements for identification and verification set out in Guidance Note whichever is applicable.

If the staff or AEs is able to ascertain that:

the unregulated or unregistered investment vehicle has in place an anti-money laundering and terrorist financing program; and
the person(s) (e.g. an administrator, a manager, etc) who is responsible for performing CDD procedures in relation to the investors in the investment vehicle has proper measures in place that are in compliance with FATF standards.

The staff or AEs is not required to identify and verify the identity of the investors provided that the person(s) responsible for the CDD procedures is regulated and supervised by the Commission, Hong Kong Monetary Authority or Office of the Commissioner of Insurance or an equivalent authority in a jurisdiction that is a FATF member or an equivalent jurisdiction.

2.7 Financial or professional intermediaries

Where the account established in the name of a financial or professional intermediary is an omnibus account in order for that financial or professional intermediary to engage in securities, futures or leveraged foreign exchange transactions on behalf of its customers, a staff or an AE should conduct identification and verification of the omnibus account holder, i.e. the financial or professional intermediary that is the licensed corporation’s or associated entity’s customer in accordance with the provisions below, and is not required to “drill down” through the financial or professional intermediary to identify and verify the underlying customers for whom the financial or professional intermediary performs financial transactions.
However, enhanced CDD procedures should be performed, subject to the exception in subsections (g), (h) below. The enhanced procedures to be undertaken may include measures such as gathering sufficient information about the financial or professional intermediary to understand the nature of its business and to assess the regulatory and oversight regime of the country in relation to CDD standards in which the financial or professional intermediary is located.
Staff and AEs may also refer to publicly available information to assess the professional reputation of the financial or professional intermediary.
Staff and AEs should pay particular attention when maintaining an omnibus account with a financial or professional intermediary
- incorporated in NCCTs;
- in a jurisdiction in which it neither has a physical presence nor is affiliated with a regulated financial group that has such presence; or
- where it has not been established that the financial or professional intermediary has put in place reliable systems to verify customer identity, and enhanced due diligence will generally be required in such cases to detect and prevent money laundering and terrorist financing. Staff and AEs are encouraged to make reasonable enquiries about transactions passing through omnibus accounts that pose cause for concern or to report these transactions if any suspicion is aroused. If necessary, Staff and AEs should not permit the financial or professional intermediary to open or continue to maintain an omnibus account.
In particular, licensed corporations and associated entities should not establish or maintain an omnibus account for a financial intermediary incorporated in a jurisdiction in which it neither has a physical presence nor is affiliated with a regulated financial group that has such presence unless after having undertaken the above enhanced procedures, they are satisfied that the financial or professional intermediary is subject to adequate regulatory supervision in relation to CDD standards under the regulation of the jurisdiction in which it is located.
Approval of senior management should be obtained before establishing a new omnibus account relationship. It is not necessary that the staff or AEs and the financial or professional intermediary always have to set out their respective responsibilities in written form, provided there is a clear understanding as to which party will perform the required measures.
When the omnibus account is established by:
- a financial intermediary that applies standards of anti-money laundering and terrorist financing based on the FATF Recommendations and is:
i) authorized and supervised by the Commission, Hong Kong Monetary Authority or Office of the Commissioner of Insurance or an equivalent authority in a jurisdiction that is a FATF member or an equivalent jurisdiction; or
ii) a trust company which is a subsidiary of a banking institution authorised and supervised by the Hong Kong Monetary Authority or an equivalent authority in a jurisdiction that is a FATF member or an equivalent jurisdiction; o
- a professional intermediary which is subject to a regulatory and supervisory regime that ensures the necessary anti-money laundering and terrorist financing measures have been effectively implemented and monitored in accordance with FATF standards,
the risk of money laundering and terrorist financing activity is considered lower and the application of simplified identification and verification procedures in relation to such accounts is appropriate.
For the categories of financial or professional intermediaries described above, it will generally be sufficient for a staff or AE to verify that the financial or professional intermediary or the parent banking institution (in the case of a trust company) is on the list of authorised and supervised institutions in the jurisdiction concerned or make enquiries of the relevant law society or accountancy body to establish whether the professional intermediary is registered with the relevant professional organisation and subject to a regulatory regime that ensures effective anti-money laundering and terrorist financing measures. Evidence that whoever representing the intermediary has the necessary authority to do so should be sought and retained.
However, for financial or professional intermediaries other than those mentioned in subsection (g) licensed corporations and associated entities shall follow the requirements for identification and verification set out in subsections (d) and (g) of policy 4.2.7, whichever is applicable.
Where the account established by a financial or professional intermediary is for its own trading, a licensed corporation or associated entity should conduct identification and verification procedures consistent with those set out in subsections (h) and (i), whichever is applicable.

2.8 Unincorporated businesses

In the case of partnerships and other unincorporated businesses whose partners are not known to the staff or AEs, Staff and AEs would need to obtain satisfactory evidence for the purpose of conducting CDD such as the identity of at least 2 partners, the identity of at least 2 authorized signatories and a mandate from the partnership authorizing the opening of an account and conferring authority on those who will operate it in the case of a formal partnership arrangement.

Where the risk of money laundering or terrorist financing relating to the customer is assessed to be high, enhanced CDD should be performed; e.g. by verifying the identity of all partners and authorized signatories.

2.9 Trust and nominee accounts

Staff and AEs should understand the relationship among the relevant parties in handling a trust or nominee account. There should be satisfactory evidence of the identity of the trustees or nominees and the persons on whose behalf they are acting.

For a trust account customer, Staff and AEs should take reasonable measures to understand the nature of the trust. Documents and information such as the following would be relevant for the purpose of conducting CDD:

identity of trustees or person exercising effective control over the trust, protectors, settlors / grantors;
identity of beneficiaries (as far as possible), though a broad description of the beneficiaries such as family members of an individual or employees of a pension scheme, where the scheme rules do not permit the assignment of a member ‘s interest under the scheme, may be accepted;
copy of the trust deed or legal documents that evidence the existence and good standing of the legal arrangement.

Where the identity of beneficiaries has not previously been verified, staff and AEs should make every effort, wherever possible, to identify and verify such beneficiaries on a risk-sensitive basis before effecting any transactions (such as making payment out of the trust account to the beneficiaries or on their behalf). Approval of senior management should preferably be obtained for a decision not to undertake such verification.

2.10Non-face-to-face clients

Account opening using non face-to-face approach refers to a situation where the client is not interviewed and the signing of account opening documentation and sighting of identity documents of the client is not conducted in the presence of an employee of Victoria International Asset Management Limited; e.g. where the account is opened via internet. If the account is opened using a non face-to-face approach, the account opening procedures should be one that satisfactorily ensures the identity of the client.

Reference should be made to the relevant provisions in the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “Code”) concerning account opening procedures using a non face-to-face approach. The signing of the client agreement and the sighting of the identity documents of the customer should be certified in such manner as provided in the Code (presently paragraph 5.1(a)). Alternatively, the identity of the customer (other than corporate entities), may be verified in accordance with such procedural steps as provided in the Code (presently, paragraph 5.1(b)).

Where a certifier is used to certify the signing of the client agreement and sighting of related identity documents, the staff or AE should ascertain whether the certifier is regulated and / or incorporated in, or operating from, a jurisdiction that is a FATF member or an equivalent jurisdiction.

Particular care should be taken when the signing of the client agreement and sighting of related identity documents is witnessed by certifiers who are in a jurisdiction that is not a FATF member or an equivalent jurisdiction. In such circumstances, staff and AEs should assess the reliability of the documents, data or information certified by these professional persons and consider taking additional measures to mitigate the risk posed by such non face-to-face clients, including:

independent contact with the client by Victoria International Asset Management Limited;
request additional documents to complement those required for face-to-face clients;
more frequent information updates on non face-to-face clients; or
in extreme cases, refusal of business relationship without face-to-face contact for high risk clients.

2.11 Reliance on introducers for customer due diligence

This subsection refers to a third party which introduces customers to Victoria International Asset Management Limited. In practice, this often occurs through introduction made by another member of the same financial services group, or sometimes from another financial institution. This subsection does not apply to relationships, accounts or transactions between Victoria International Asset Management Limited and a financial or professional intermediary for its customers, i.e. omnibus accounts. Those relationships are addressed in subsection 4.2.7 of this Guidance Note.

The staff or AEs may rely on the third party to perform elements (a) to (c) of the CDD measures in subsection 4.2.1 (b) provided that criteria set out below are met. However, the ultimate responsibility for knowing the customer always remains with the Staff and AEs.

Prior to reliance, Staff and AEs must satisfy themselves that it is reasonable to rely on an introducer to apply a CDD process and that the CDD measures are as rigorous as those which the staff or AEs would have conducted itself for the customer. For these purposes, it is advisable for Staff and AEs to establish clear policies in order to determine whether the introducer in question possesses an acceptable level of reliability.

Staff and AEs relying upon an introducer should:

as soon as reasonably practicable obtain the necessary information concerning elements (a) to (c) of the CDD measures in subsection 6.1.2 and the purpose and intended nature of the business relationship;
as soon as reasonably practicable obtain copies of documentation pertaining to the customer’s identity, as required under paragraph 6.2(a) of the Code (Staff and AEs may choose not to obtain copies of other relevant documentation provided that (a) has been satisfied and copies of the documentation will be provided by the introducer upon request without delay);
take adequate steps to satisfy themselves that copies of other relevant documentation relating to the CDD requirements will be made available from the introducer upon request without delay, e.g. by establishing their respective responsibilities in writing, including reaching an agreement with the introducer that copies of identification data and other relevant documentation relating to the CDD requirements will be made available from the introducer upon request without delay and that the staff or AEs will be permitted to verify the due diligence undertaken by the third party at any stage; and
ensure the introducer is regulated and supervised for, and has measures in place to comply with CDD and record keeping requirements in line with FATF standards.

To provide additional assurance that these criteria can be met, it is advisable for a licensed corporation or an associated entity to rely, to the extent possible, on third parties which are incorporated in, or operating from, a jurisdiction that is a member of the FATF or an equivalent jurisdiction and:

regulated by the Commission, Hong Kong Monetary Authority or Office of the Commissioner of Insurance or by an authority that performs similar functions; or
if not so regulated, are able to demonstrate that they have adequate procedures to prevent money laundering and terrorist financing.

Staff and AEs should consider conducting periodic reviews to ensure that an introducer upon which it relies continues to conform to the criteria set out above.

This may involve review of the relevant policies and procedures of the introducer and sample checks of the due diligence conducted.

Staff and AEs should generally not rely on introducers based in jurisdictions considered as high risk, e.g. NCCTs or jurisdictions that are inadequately-regulated with respect to CDD unless the introducers are able to demonstrate that they have adequate procedures to prevent money laundering and terrorist financing.

3. Record Keeping

Victoria International Asset Management Limited will comply with the record keeping requirements contained in the relevant legislation, rules or regulations of the SFC and relevant exchanges.

Victoria International Asset Management Limited will maintain such records which are sufficient to permit reconstruction of individual transactions (including the amounts and types of currencies involved, if any) so as to provide, if necessary, evidence for prosecution of criminal behavior.

The investigating authorities require a satisfactory audit trail for investigating and tracing suspected drug related or other laundered money or terrorist property, and need to be able to reconstruct a financial profile of the suspect account. For these purposes, Victoria International Asset Management Limited shall retain, where necessary, the following information for the accounts of their clients so as to provide evidence of criminal activity to the investigating authorities:

the beneficial owner of the account;
the volume of the funds flowing through the account; and
for individual transactions:

the origin of the funds;
the form in which the funds were offered or withdrawn, e.g. cash, cheques, etc.;
the identity of the person undertaking the transaction;
the destination of the funds;
the form of instruction and authority.

Victoria International Asset Management Limited will ensure that all client and transaction records and information are available on a timely basis to the competent investigating authorities. Where appropriate, Victoria International Asset Management Limited will retain the above records for longer periods beyond the requirements of other relevant legislation, rules and regulations of the SFC or of the relevant exchanges.

4. Retention of Records

Victoria International Asset Management Limited will retain:

all necessary records on transactions, both domestic and international, should be maintained for at least seven years;
records on client identification (e.g. copies or records of official identification documents like passports, identity cards, driving licenses or similar documents), account files and business correspondence, wherever practicable, for at least five years after the account is closed.

In situations where the records relate to on-going investigations or transactions which have been the subject of a suspicious transaction reporting, they should be retained until it is confirmed that the case has been closed.

5. Recognition of Suspicious Transactions

Money laundering using investment related transactions:

Large or unusual settlements of transactions in cash or bearer form.
Buying and selling of securities/futures with no discernible purpose or in circumstances which appear unusual.
A number of transactions by the same counterparty in small amounts relating to the same security, each purchased for cash and then sold in one transaction, the proceeds being credited to an account different from the original account.
Any transaction in which the counterparty to the transaction is unknown or where the nature, size or frequency appears unusual.
Investor introduced by an overseas bank, affiliate or other investor both of which are based in countries where production of drugs or drug trafficking may be prevalent.
The use by a client of a licensed corporation or an associated entity to hold funds that are not being used to trade in securities, futures contracts or leveraged foreign exchange contracts.
A client who deals with a licensed corporation or an associated entity only in cash or cash equivalents rather than through banking channels.
The entry of matching buys and sells in particular securities or futures or leveraged foreign exchange contracts (“wash trading”), creating the illusion of trading. Such wash trading does not result in a bona fide market position, and might provide “cover” for a money launderer.
Wash trading through multiple accounts might be used to transfer funds between accounts by generating offsetting losses and profits in different accounts. Transfers of positions between accounts that do not appear to be commonly controlled also could be a warning sign. (It should be noted that wash trading is also an indication of market manipulation and licensed corporations or registered persons are expected to take appropriate steps to ensure that proper safeguards exist to prevent the firm from acting in a way which would result in the firm perpetrating any conduct which constitutes market misconduct under section 279 of the SFO).
Frequent funds transfers or cheque payments to or from unverified or difficult to verify third parties.
The involvement of offshore companies on whose accounts multiple transfers are made, especially when they are destined for a tax haven, and to accounts in the name of companies incorporated under foreign law of which the client may be a shareholder.
Non-resident account with very large movement with subsequent fund transfers to offshore financial centers.

Money laundering involving employees of Staff and AEs

Changes in employee characteristics, e.g. lavish life styles or avoiding taking holidays.
Changes in employee or agent performance, e.g. the salesman selling products for cash have remarkable or unexpected increase in performance.
Any dealing with an agent where the identity of the ultimate beneficiary or counterparty is undisclosed, contrary to normal procedures for the type of business concerned.
The use of an address which is not the client's permanent address, e.g. utilization of the representative's office or home address for the dispatch of client documentation. Requests by clients for investment management services (either foreign currency, securities or futures) where the source of the funds is unclear or not consistent with the clients’ apparent standing.

6. Reporting of Suspicious Transactions

Compliance department is appointed to act as a central reference point within the organization to facilitate onward reporting to the JFIU. The role of the compliance department is not simply that of a passive recipient of ad hoc reports of suspicious transactions, but rather, plays an active role in the identification and reporting of suspicious transactions, which may involve regular review of exception reports of large or irregular transactions generated by Victoria International Asset Management Limited’s internal system as well as ad hoc reports made by front-line staff.

In circumstances where a staff or AE brings a transaction to the attention of the compliance department, the circumstances of each case can then be reviewed at that level to determine whether the suspicion is justified. If a decision is made not to report an apparently suspicious transaction to the JFIU, the reasons for this should be fully documented by the compliance department.

Suspicious transactions should be reported regardless of whether they are also thought to involve tax matters. The fact that a report may have already been filed with the JFIU in relation to previous transactions of the customer in question should not necessarily preclude the making of a fresh report if new suspicions are aroused. If the suspicion remains, the transaction should be reported to the JFIU without delay.

Where it is known or suspected that a report has already been disclosed to the JFIU and it becomes necessary to make further enquiries of the customer, great care should be taken to ensure that the customer does not become aware that his name has been brought to the attention of the law enforcement agencies.