•   

Frequently Asked Questions

Suspicious Transactions

   
Under section 25(A) of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405, section 25(A) of Organized and Serious Crimes Ordinance, Cap 455, and section 12 of the United Nations (Anti-Terrorism Measures) Ordinance, Cap. 575, state that when a person knows or suspects that any property is proceeds of drug trafficking or a crime, or terrorist property, or was used in connection with drug trafficking, a crime or terrorist act, or is intended to be used in drug trafficking, a crime or terrorist act, he or she should report his or her knowledge or suspicion to an authorized officer (i.e. Joint Financial Intelligence Unit (JFIU) officers) as soon as practicable. Although JFIU has stopped processing the registration of remittance agents and money changers, you are obliged to report to us any suspicious transactions that you encountered during your business.

How to identify a Suspicion?
An effective systemic approach to identify suspicious financial activity may safeguard you and your institution, business or profession from the risk of being involved with terrorist financing and money laundering crimes. Consider the "SAFE" approach mentioned in Section 7.12 of the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (For Money Service Operators) (July 2012) which may assist you in legal compliance and staff training.

Examination of the Suspicious Transaction Reports received by JFIU reveals that many reporting institutions do not use the system outlined above. Commonly, institutions make a Suspicious Transaction Report merely because a suspicious activity indicator has been recognized, i.e. only step (1) of the systemic approach is followed, steps (2), (3) and (4) are not followed. This failure to use the systemic approach leads to a lower quality of Suspicious Transaction Reports.
   
Q1: When to submit a Suspicious Transaction Reports (STR)?
A1: The laws state that when a person knows or suspects that any property is proceeds of drug trafficking or a crime, or terrorist property, or was used in connection with drug trafficking, a crime or terrorist act, or is intended to be used in drug trafficking, a crime or terrorist act, he or she should report his or her knowledge or suspicion to an authorized officer (i.e. JFIU) as soon as practicable.
   
Q2: What is the "SAFE" Approach?
A2: The "SAFE" Approach recommended by the Joint Financial Intelligence Unit is an effective systemic approach to identify suspicious financial activity which involves the following four steps:
Step one: Screen the account for suspicious indicators: Recognition of a suspicious activity indicator or indicators
Step two: Ask the customer appropriate questions
Step three: Find out from the customer's records: Review information already known when deciding if the apparently suspicious activity is to be expected
Step four: Evaluate all the above information: Is the transaction suspicious
   
Q3: During remittance and money changing transactions, what are some of the red flags of suspicious transactions?
A3: Below are some of the common red-flag indicators:
1. Unusual large cash transactions made by an individual or company whose ostensible business activities would normally be conducted through cheques and other financial instruments;
2. Substantial increases in transactions of an individual or business without apparent cause, especially if such transactions involve transfers within a short period out of the account and / or to a destination not normally associated with the customer;
3. Customers who exchange or remit cash by means of numerous smaller transactions so that each transaction is unremarkable, but the total of all the transactions will exceed the threshold;
4. Customers who seek to exchange large quantities of low denomination notes for those of higher denominations;
5. Reluctant to provide normal information when conducting transactions, or just provides minimal or apparently fictitious information;
6. Customers seem to be transacting for various operations in the same location;
7. Large number of customers transferring funds to the same beneficiary without an adequate explanation;
8. Structured transfers – transfers broken up into a series of smaller transfers to avoid record keeping and customer identification requirements;
9. Transactions in the name of an offshore company with structured movement of funds.
10. Transactions inconsistent with the customer's usual business or apparent means without good explanation;
11. Customers who make regular and / or large payments that cannot be clearly identified as bona fide transactions to, or receive regular and/or large payments from, countries which are commonly associated with the production, processing or marketing of drugs; or where the risk of terrorist financing activities is high;
12. Frequent exchange of travellers’ cheques, foreign currency drafts by the same customer;
13. Customers receipt of numerous transfers but each transfer is below the reporting / identification requirement in the remitting country; and
14. Customers sending and receiving transfers to/from tax havens, particularly if there are no apparent business reasons for such transfers or such transfers are not consistent with the customers' business or apparent background.
   
Q4: How to report suspicious transaction to JFIU?
A4: By e-reporting system, STREAMS
By email to jfiu@police.gov.hk
By fax to: (852) 2529 4013
By mail, addressed to Joint Financial Intelligence Unit, GPO Box 6555 Hong Kong
By telephone (852) 2866 3366 or (852) 2860 3413 (for urgent reports during office hours)
   
Q5: What should be reported in a Suspicious Transaction Report?
A5: A suspicious transaction report should include the following details:
1. personal particulars (name, identity card or passport number, date of birth, address, telephone number, bank account number) of the person(s) or company involved in the suspicious transaction;
2. details of the suspicious financial activity;
3. the reason why the transaction is suspicious - which suspicious activity indicators are present?; and
4. the explanation, if any, given by the person about the transaction.
In order to ensure that all relevant information is included in the STR, proformas have been designed by various regulatory bodies and institutions to assist STR makers. Click here to download a copy of these proformas.
   
Please note: (1) Please proceed to our Forum of more discussions in relation to Suspicious Transactions; (2) The above information is for reference only.