UN Sanctions and UN Sanctions and ATF Regimes in the ATF Regimes in the

HKSARHKSAR

HKMA Anti-Money Laundering Seminar HKMA Anti-Money Laundering Seminar 12 May 200912 May 2009

SK Lee, Deputy Principal Government SK Lee, Deputy Principal Government CounselCounsel

Department of Justice, HKSAR Department of Justice, HKSAR sklee@doj.gov.hksklee@doj.gov.hk

29 December 2008 The Chief Executive

All authorized institutions Dear Sir/Madam, United Nations Sanctions (Côte d’Ivoire) (No. 2) Regulation 2008

and List of Names for Suspicious Account Reporting I am writing to inform you of the following developments: (i)   United Nations Sanctions (Côte d’Ivoire) (No. 2) Regulation 2008 The United Nations Sanctions (Côte d’Ivoire) (No.2) Regulation 2008 was

made by the Chief Executive under the United Nations Sanctions Ordinance (Cap. 537) and was gazetted on 12 December 2008.  It gives effect to certain decisions adopted by the United Nations Security Council (Council) in Resolution 1842 (2008).  On 19 December 2008, the Chief Executive specified a list of persons as relevant persons under section 31 of this Regulation. 

The Regulation and the list of relevant persons have been published in the Gazette (L.N. 276 of 2008 and G.N. 8567) and are available on the Government's website (http://www.gld.gov.hk/egazette). 

Your attention is drawn to section 5 of the Regulation, which prohibits making funds available to relevant persons without the authority of a licence granted under section 11 of the Regulation.  AIs should establish effective controls (e.g. pre-transaction screening) to ensure compliance with the Regulation.

You are reminded to check your records and report any transactions or relationships your institution has or has had with the named persons on the list of relevant persons to the Joint Financial Intelligence Unit and the HKMA. 

The Chief Executive All authorized institutions  Dear Sir/Madam,  United Nations (Anti-Terrorism Measures) Ordinance   I am writing to inform you that an updated list of terrorists and terrorist

associates designated by the United Nations Security Council Committee (Committee) has been specified under the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575).  The list was published in the Gazette (G.N. 2153) today and is available on the Government’s website (http://www.gld.gov.hk/egazette).  The changes, compared with the last gazettal on 13 March 2009, are summarised in Annex 1 and the relevant press releases issued by the Committee are attached at Annex 2.  A copy of the list in PDF format is enclosed.

  You are reminded to check your records and report any transactions or

relationships your institution has or has had with the named persons or entities on the list of designated terrorists and terrorist associates to the Joint Financial Intelligence Unit and the HKMA.   

…… 

IntroductionIntroduction Scope

UN sanctions – sanctions against places Anti-terrorist financing

Sources of international law United Nations Security Council Resolutions Anti-terrorism treaties FATF Special Recommendations

Domestic legislative regime United Nations Sanctions Ordinance, Cap. 537 United Nations (Anti-terrorism Measures)

Ordinance, Cap. 575

United Nations SanctionsUnited Nations Sanctions United Nations Security Council Resolutions

International obligations binding on all UN members

Effective for a defined period or indefinitely Tend to be imposed against a specific place

United Nations Sanctions Ordinance, Cap. 537 and its regulations Respond to CPG’s instructions (BL13,

BL48(8), s3(1)) Effective upon gazettal

Some 40 regulations (excluding amendment reg.s) have been made under Cap. 537

Currently 11 places: Afghanistan,

Cote d’Ivoire, DR Congo, Iran, Iraq, DPR Korea, Lebanon, Liberia, Sierra Leone, Somalia, Sudan

Typical sanctions regime Typical sanctions regime under Cap. 537under Cap. 537 Trade embargo - import [and export] Technical advice, assistance and

training Entry/transit of persons Financial sanctions (HKMA’s circulars)

Important to look at actual wording of each Regulation

Trade EmbargoTrade Embargo Prohibits supply or delivery of prohibited goods -

arms and related materiel; also nuclear material, luxury goods

To place, persons in that place, or to third destination for delivery to that place

Sometimes also prohibits importation/ procurement of certain goods e.g. petroleum, timber, rough diamond

Need to consider the wording of the Regulation

Eg. Section 2 Liberia Regulation 2009 Cap. 537AM, “(2) Except under the authority of a licence granted under section 9(1)(a), a person must not supply or deliver, agree to supply or deliver, or do any act likely to promote the supply or delivery of, any prohibited goods—

(a) to Liberia;(b) to, or to the order of, a person connected with Liberia; or(c) to a destination for the purpose of delivery, directly or indirectly, to Liberia or to, or to the order of, a person connected with Liberia.”

“Do any act likely to promote” - Broad meaning Can include financial assistance e.g. loan, guarantee

Prohibition on CarriageProhibition on Carriage

Vessels, aircraft and vehicles in the HKSAR

Flag vessels and aircraft

Vessels and aircraft chartered to a person in the HKSAR, an HKSAR corporate body, an HKSAR permanent resident cum PRC national

Charterer, operator and captain of vessel / aircraft may be liable

Technical advice, assistance Technical advice, assistance and trainingand training Mostly relating to arms, related materiel

and military activities. Also nuclear material/technology (DPRK, Iran)

E.g. Section 5(2) Liberia Regulation 2009, “Except under the authority of a licence granted under section 10(1), a person must not provide to a person connected with Liberia any technical training or assistance related to the supply, delivery, manufacture, maintenance or use of any prohibited goods”

Some explicitly refers to financial assistance etc., e.g. Section 6 Iran Regulation, Cap. 537AF,

“(1) Except under the authority of a licence granted under section 10(1)(a), a person shall not provide any technical assistance or training, financial assistance, investment, brokering or other services related to the supply, sale, transfer, manufacture or use of any regulated prohibited item or conventional arms … to…”

(2) Except under the authority of a licence granted under section 10(1)(b), a person shall not transfer any financial resources or services related to the supply, sale, transfer, manufacture or use of any regulated prohibited item or conventional arms … to …”

Entry/Transit of PersonsEntry/Transit of Persons

Persons designated by sanctions committee

Published on UN website

Limited exceptions e.g. nationals, religious or humanitarian grounds

Financial sanctionsFinancial sanctions

Prohibits the making available of funds, other financial assets and economic resources

E.g. Section 6(2) Liberia Regulation 2009, “(2) Except under the authority of a licence granted under section 11(1), a person must not make available, directly or indirectly, any funds or other financial assets or economic resources to, or for the benefit of, a relevant person or a relevant entity.”

“Making available” – e.g. release of money in bank account to accountholder, or making payment to a third party on instruction of the accountholder

“Funds, other financial assets and economic resources”

Relevant person / relevant entity: UN designated persons/entities who have been gazetted in Hong Kong. (But see Iran)

Credit of interest to account

Licence to do acts otherwise Licence to do acts otherwise prohibitedprohibited Apply to [Chief Executive] for a licence.

(Enquiries with Commercial and Economic Development Bureau)

The grounds for granting a licence reflect UNSCR requirements

Licence for making funds available: e.g. necessary for basic expenses, payment of reasonable professional fees, extraordinary expenses, satisfying prior judgment or lien. Require UN notification or approval (negative or positive)

Investigative powersInvestigative powers

Obtain search warrant for evidence of suspected offence (some Regulations provide for executive power to require disclosure of information / production of documents e.g. Cap. 537E)

Additional powers relating to vessels, aircraft, vehicles

Sharing of information with UN organs for sanctions enforcement

United Nations (Anti-terrorism United Nations (Anti-terrorism Measures) Ordinance, Cap. Measures) Ordinance, Cap. 575575 UNSCR 1373 (2001), International Convention for

the Suppression of the Financing of Terrorism, FATF SR II and III [also other terrorism-related international conventions]

Prohibits certain activities (e.g. supply of weapons to terrorists, recruitment, terrorist bombings etc.)

Contains comprehensive financial measures – broader than “typical” UN sanctions regulations

Key definitions: “terrorist acts”, “terrorist”, “terrorist associate”, “terrorist property”

Financial Measures under the Financial Measures under the UNATMOUNATMO Prohibits the provision or collection of funds

to commit terrorist acts (s7)

*Prohibits making funds or financial (or related) services available, directly or indirectly, to or for the benefit of a person knowing or being reckless as to whether he is a terrorist or terrorist associate (s8).

*Administrative freezing power (s6) Secretary for Security can give notice to

prohibit dealing with suspected terrorist property, with ability to seize (s6(1), (10))

Effective for 2 years

* Not yet in operation

*Forfeiture of terrorist property (s13) Secretary for Justice can apply to the Court Proceeds of a terrorist act Used or intended to be used to finance or

otherwise assist in commission of terrorist act (can cover third person’s property)

Specification of persons / property as terrorist, terrorist associate and terrorist property by CE (s4, s5) S4 – UN designated persons *S5 – other persons (need Court endorsement)

NB: Specification creates presumption, but is NOT a prerequisite for the offence provisions to apply

* Not yet in operation* Not yet in operation

RemediesRemedies *Licence to deal with property subject to

“freezing” notice (s6(1))

*Licence to make funds etc. available under s8

*Application to Court under s17 to: revoke specification under s5 grant or vary a licence under s6(1) or s8 revoke or vary a direction under s6(10) to seize

property

*Compensation (s18, s18A) Court has power to order compensation. Common law

remedies not affected

Investigative powersInvestigative powers

Comprehensive powers: Order to answer questions, furnish

information, produce material (s12A) Order to make material available (s12B) Search and seizure (s12C, 12G-12J) Will come into operation upon enactment of

Court Rules

STRsSTRs S.12 of UNATMO

Disclose knowledge or suspicion of terrorist property (s12(1), (4))

No tipping off (s12(5)) Important to remember that operation of s12

does NOT hinge on Gazettal

UN Sanctions Ordinance / Regulations No express STR provision However, indictable offences – AML and STR

provisions in OSCO, Cap. 455 (s25, s25A)