Hong Kong authorities develop new solution for suspicious transaction reports

The Hong Kong authorities are seeking to improve the process of filing suspicious transaction reports via the introduction of a new solution – “e-STR”. In an announcement on its website, the Securities and Futures Commission (SFC) explains that, in an effort to bolster the capacity in suspicious transaction report (STR) processing and reduce the time required for STR reporting entities to receive feedback from Joint Financial Intelligence Unit (JFIU) after submitting an STR, the JFIU has recently developed a new solution, “e-STR Submission” (“e-STR”).

The new solution which is set to replace the existing STR submission channel, “S-box”, in the first quarter of 2019. The e-STR unlike the existing S-box, does not require any installation and/or subsequent maintenance of software but it requires users to have the followings in place when they decided to use the e-STR channel for STR submission: web browser (Chrome and Firefox are recommended), latest version of Adobe Acrobat Reader and e-certificate from Hong Kong Post.

To be more precise, let’s note that the JFIU in fact rolled out the e-STR in August this year. The purpose of e-STR is to allow users to make disclosure via an electronic means in a faster and more secure manner. The e-STR also provides additional supporting functions such as retrieval of previous STRs as well as a real-time check of the feedback given by the JFIU.

To accelerate the process of submitting STRs, the Securities and Futures Commission encourages the licensed corporations and associated entities to use e-STR in future STR submission.

Speaking of anti-money laundering efforts, let’s note that, in a recent circular dedicated to plans about regulating businesses whose activities involve virtual assets, the SFC highlighted the risk of money laundering and terrorist financing associated with such assets.

Virtual assets are generally transacted or held on an anonymous basis. In particular, platforms which allow conversions between fiat currencies and virtual assets are inherently susceptible to higher risks of money laundering and terrorist financing, the SFC warned. Where criminal activities are involved, investors may not be able to get back their investments as a result of law enforcement action.

The SFC may decide that platform operators should not be regulated by it. For instance, the SFC is not certain at this stage whether platform operators would satisfy the expected AML standards, given that anonymity is the core feature of blockchain, which is the underlying technology for virtual assets.