Home buyers, sellers must let estate agents verify their ID documents to comply with anti-money-laundering, counterterrorism laws

2022-03-29

• Hong Kong estate agents are legally bound to identify and verify the identity of their customer when handling the sale of a property
• Consumers should be willing to provide the necessary information to their estate agents contribute to the combat of money-laundering

In order to comply with the requirements of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), estate agents must conduct “customer due diligence” (CDD) to identify and verify the identity of their customer when handling the sale and purchase of a property. The Estate Agents Authority (EAA) issued a relevant practice circular on this for the estate agency sector back in 2018.

However, some consumers might still be unaware of the requirements imposed on estate agents under the AMLO and hence unwilling to provide their personal information and/or allow estate agents to retain copies of their identity documents for record.

Here I would like to appeal to property vendors and purchasers to contribute to the combat of money-laundering by providing the necessary information to their estate agents, so that the relevant CDD measures can be completed. Consumers can also rest assured that there are guidelines for estate agents on the collection and protection of their clients’ personal information so that the information collected will be well protected.

As required by the AMLO, estate agents must identify and verify the identity of their customer (regardless of whether he or she is a purchaser or vendor) before establishing any business relationship with them. For this, customers should provide estate agents with the following documents according to their different situations as set out below:

– If the customer carries out a transaction as an individual, estate agents must obtain the customer’s Hong Kong Identity Card or travel document.

– If a representative purports to act on behalf of a customer or there is a beneficial owner in relation to the customer, estate agents must obtain the representative’s or the beneficial owner’s Hong Kong Identity Card or travel document.

– If the customer has never been physically present for identification, estate agents must carry out additional measures to mitigate the risk such as further verifying the customer’s identity on the basis of documents not previously used.

– If the customer is a company/corporation, whether the company/corporation is incorporated in/outside Hong Kong, estate agents must obtain the customer’s company information such as the certificate of incorporation and its latest company search report.

– If the shareholder of a corporate customer is another company/corporation, estate agents must obtain a director’s declaration and an ownership chart describing the structure of the company/corporation in order to ascertain its beneficial owner(s).

Here I would like to share a non-compliant case in which the relevant estate agent was sanctioned by the EAA.

During an inspection by the EAA, an estate agency company was requested to provide the relevant documents and records of property transactions they had completed.

After reviewing the documents, the EAA staff discovered that the estate agency company had failed to complete the verification of the corporate vendor’s identity in two transactions of a first-hand residential development before establishing the business relationship with the corporate vendor.

The EAA Disciplinary Committee was of the view that the estate agency company failed to comply with the CDD guidelines in the EAA’s practice circular (No. 18-01(CR)).

Hence, the estate agency company was in breach of paragraph 3.2.1 of the Code of Ethics, which states that “Estate agents and salespersons should be fully conversant with the Estate Agents Ordinance, its subsidiary legislation, this Code of Ethics, and other guidelines issued by the EAA from time to time and shall observe and comply with them in the course of their practice.”

Having considered the nature and gravity of the case and the disciplinary record of that estate agency company, the EAA Disciplinary Committee decided to reprimand the company and impose a fine of HK$10,000 (US$1,278).

I would like to point out as an international financial centre, it is essential for Hong Kong to establish an effective system to combat money laundering and terrorist financing. Since property transactions involve the risk of money laundering or terrorist financing, estate agents, property purchasers and vendors all have their respective responsibilities in combating such crime. In fact, Hong Kong was the first jurisdiction in the Asia-Pacific region to have achieved an overall compliant result of the evaluation by the Financial Action Task Force (an inter-governmental body that sets international standards on combating money laundering and terrorist financing) in 2019.

By explaining to vendor/purchaser clients why the CDD measures must be conducted and by providing them with the assurance that their personal information would be protected, I hope consumers will be willing to provide the necessary information for their estate agents to conduct the CDD and contribute to the combat of money-laundering.