A circular was distributed by the Hong Kong Money Service Bureau to Money Service Operators (MSO) such as Moneero Hong Kong Limited, which are registered in Hong Kong. A circular is a letter or a document that is addressed to a closed group of people such as a company or a business.
Titled, “Circular to Money Service Operators: Anti-Money Laundering/Counter-Terrorist Financing, Money Laundering and Terrorist Financing Risks Associated with Virtual Commodities,” it gives the requirements by which MSOs can work with Virtual Commodities (VCs) such as Bitcoin. It says Virtual Commodities, “which are transacted or held on the basis of anonymity by their nature pose significantly higher inherent risks.”
The requirements give more control to services that are high risk by amping up the timing and number of controls to verify terrorist financing and money laundering. In addition, approval must be given from the senior management of the MSO in order for a company to start or continue a relationship. Information concerning the source of funds, wealth, intended nature of the business, updated customer profiles, and identification must also be given.
Moneero Hong Kong Limited
Moneero Hong Kong Limited was given the following note:
“In view of the recent global attention to the money laundering and terrorist financing (“ML/TF”) risks associated with virtual commodities such as Bitcoin, this Department would like to remind you to take all reasonable measures to ensure proper safeguards exist to mitigate the ML/TF risks that you may face in this regard taking into consideration the related developments.”
It further says that the company should take precaution and assess whether or not its services are vulnerable to ML/TF. This is especially due to the fact with current technology; there is more anonymity which makes way for an increase in money laundering and terrorist financing risks. The Hong Kong Money Service Bureau sees Bitcoin and other virtual commodities linked to higher ML/TF risks, and ask the companies to be very cautious.
In order to safeguard against risks, the company was told to increase in “vigilance in assessing the ML/TF risks of customers as well as monitoring and detecting unusual or suspicious transactions.” Basically, the company has to be keen to know everything that is happening in the company, and be very certain that the transactions do not pose any inherent risk.
Additional measures of protections against ML/TF risks were explained:
“ (a) obtaining additional information on the customer and updating more regularly the customer profile including the identification data;
(b) obtaining additional information on the intended nature of the business relationship, the source of wealth and source of funds;
(c) obtaining the approval of senior management to commence or continue the relationship; and
(d) conducting enhanced monitoring of the business relationship, by increasing the number and timing of the controls applied and selecting patterns of transaction that need further examination.”
Lastly, the company was told that they are required and obligated to report to the Joint Financial Intelligence Unit if there is any “suspicious activity” in regard to ML/TF going on in a customer’s account.
What This all Means
Bitcoin companies are given the green light to conduct business, but are heavily warned against suspicious activities that might occur. This is due to the fact that Bitcoin is pretty much anonymous which causes the worry about money laundering and terrorist financing. Thus, Bitcoin companies can do business, but have to report everything to the Intelligence Unit, Bureau, and the senior management of the MSO.
Even though Bitcoin companies are allowed to do business, customer privacy is apparently no more, and it makes one wonder: are more regulations to follow?
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