APG's Mutual Evaluation of Macao, China

1. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in Macao, China
Fourth Round Mutual Evaluation
Key findings, ratings and priority actions
December 2017
http://www.fatf-gafi.org/publications/mutualevaluations/documents/mer-Macao-2017.html

2. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Ratings – Effectiveness (1/3)
2
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which Macao
has achieved
this objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
Moderate
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Substantial
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Substantial
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Moderate

3. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017 3
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which Macao
has achieved
this objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Substantial
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Substantial
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Low
8. Proceeds and instrumentalities of crime are confiscated. Low
Ratings – Effectiveness (2/3)

4. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017 4
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which Macao
has achieved
this objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
Moderate
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
Substantial
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
Substantial
Ratings – Effectiveness (3/3)

5. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017 5
Ratings – Effectiveness
0 6
3
2
High
Substantial
Moderate
Low

6. 6
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach LargLarLarLar Largely Compliant
2. National cooperation and coordination LargLarLarLar Largely Compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence LargLarLarLar Largely Compliant
4. Confiscation and provisional measures ComCoCoCo Compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence LargLarLarLar Largely Compliant
6. Targeted financial sanctions related to terrorism & terrorist financing ComCoCoCo Compliant
7. Targeted financial sanctions related to proliferation ComCoCoCo Compliant
8. Non-profit organisations LargLarLarLar Largely Compliant

7. 7
Ratings – technical compliance
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws ComCo CoCo Compliant
Customer due diligence and record keeping
10. Customer due diligence ComCo CoCo Compliant
11. Record keeping ComCo CoCo Compliant
Additional measures for specific customers and activities
12. Politically exposed persons ComCo CoCo Compliant
13. Correspondent banking ComCo CoCo Compliant
14. Money or value transfer services ComCo CoCo Compliant
15. New technologies ComCo CoCo Compliant
16. Wire transfers LargLarLarLar Largely Compliant

8. 8
Ratings – technical compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties ComCo CoCo Compliant
18. Internal controls and foreign branches and subsidiaries ComCo CoCo Compliant
19. Higher-risk countries ComCo CoCo Compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions ComCo CoCo Compliant
21. Tipping-off and confidentiality ComCo CoCo Compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence Par Pa ParPar Partially Compliant
23. DNFBPs: Other measures Par Pa ParPar Partially Compliant

9. 9
Ratings – technical compliance
(4/5)
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS
AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons LargLarLarLar Largely Compliant
25. Transparency and beneficial ownership of legal arrangements LargLarLarLar Largely Compliant
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND
OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions ComCoCoCo Compliant
27. Powers of supervisors ComCoCoCo Compliant
28. Regulation and supervision of DNFBPs LargLarLarLar Largely Compliant
Operational and Law Enforcement
29. Financial intelligence units ComCoCoCo Compliant
30. Responsibilities of law enforcement and investigative authorities LargLarLarLar Largely Compliant
31. Powers of law enforcement and investigative authorities ComCoCoCo Compliant
32. Cash couriers NonNo NonNo Non Compliant

10. 10
Ratings – technical compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND
OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics LargLarLarLar Largely Compliant
34. Guidance and feedback ComCoCoCo Compliant
Sanctions
35. Sanctions ComCoCoCo Compliant
INTERNATIONAL COOPERATION
36. International instruments LargLarLarLar Largely Compliant
37. Mutual legal assistance ComCoCoCo Compliant
38. Mutual legal assistance: freezing and confiscation LargLarLarLar Largely Compliant
39. Extradition LargLarLarLar Largely Compliant
40. Other forms of international cooperation LargLarLarLar Largely Compliant

11. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017 11
Ratings – technical compliance
22
15
2 1
Compliant
Largely compliant
Partially compliant
Non compliant

12. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Key findings
 Macao, China has coordination mechanisms established at a multi-agency level for
AML/CFT and among agencies on specific issues or operational areas. The AML/CFT
Working Group (AML/CFT WG) comprises all relevant agencies and has proven
mainly effective in coordinating policy, annual plans and recently the National Risk
Assessment (NRA), as well as promotion and awareness activities. The 2015 NRA
provides a foundation for Macao, China’s understanding of its money
laundering/terrorist financing (ML/TF) risks and to address key vulnerabilities as the
jurisdiction’s AML/CFT strategic plan demonstrates.
 Overall, the authorities see the transfer of proceeds from overseas crime as exposing
Macao, China to greater ML risks than domestic crime, which is reasonable.
However, the authorities have a mixed understanding of major risks related to
foreign proceeds, regional organised crime, cross-border movements, and
corruption.
 The authorities access and use a large range of intelligence-rich information. The
Financial Intelligence Office (GIF) use of multi-source intelligence and sound analysis
results in a high number of disseminated Suspicious Transaction Reports (STRs)
opened for investigation. Law Enforcement Agencies’ (LEA) use of STR and other
relevant information is largely consistent with Macao, China’s regional context,
exposure to foreign risk and the intelligence value of non-STR information.
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13. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Key findings
 The lack of a cross-border disclosure or declaration system is a major
intelligence gap for a jurisdiction exposed to high-risk from vast
numbers of visitors and cash-intensive businesses, particularly casinos
and related high-value dealers, although mandatory threshold
reporting by the gaming sector helps mitigate this gap.
 There have only been five ML convictions. A shortage of prosecutorial
resources in the Public Prosecutions Office (MP), heavy evidentiary
requirements for third party ML, and the lack of an adequate policy
directive have hampered the quantity and quality of ML investigations
and prosecutions, resulting in a low conviction rate, with a
correspondingly low average sentence length ranging from three to
five years for just the ML offence. Overall, ML investigations do not
match the risk profile.
 Except for one major corruption case involving up to US$100 million,
confiscations are limited to cash/currency and casino chips, with only
one case of shares confiscated and another case of one half of a
commercial property.
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14. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Key findings
 There are minor deficiencies in Macao, China’s TF offence. Financing of
terrorism not directly linked with a specific terrorist act is not specifically
criminalised; instead it is indirectly criminalised through reliance on rules of
interpretation. The financing of foreign terrorist fighters is also not directly
criminalised but criminalisation is achieved through the broad concepts of
“preparatory acts” and “provision of material support”.
 Implementation of TF-related sanctions is sound. In practice, no assets have
been frozen in connection with targeted financial sanctions (TFS), which
does not seem unreasonable within the context of Macao, China’s risks.
 Macao, China has a good understanding of the terrorist financing risk in its
Non-Profit Organisation (NPO) sector and has conducted two risk
assessments of the NPO sector. Macao, China has assessed its risk as low. To
monitor the risks of NPOs in association with countries with a high risk of
terrorism, GIF conducts quarterly reviews of data on funds flows in and out
of Macao, China. To date, other than three STRs that were flagged for initial
review, there is no record in the MP of any NPO being suspected of TF or
any enforcement actions taken.
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15. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Key findings
 Macao, China’s framework to implement the relevant UN counter-
proliferation financing sanctions (PFS) is similar to its framework for
TF. In practice, no assets have been frozen in connection with PFS,
which does not seem unreasonable within the context of Macao,
China’s risks.
 Macao, China has controls in place to restrict the import and export
of dual-use materials which are overseen by the Macao Customs
Service (SA). Data on trade provided by the SA indicates that trade
with high risk countries such as Iran and North Korea is minimal
and limited to food stuff and petroleum for domestic use.
 There is sound implementation of preventative measures in the
financial sector and also by the six concessionaires/sub-
concessionaires (casinos). With the exception of notaries and
accountants, implementation in other FATF-designated Designated
Non-Financial Businesses and Professions (DNFBPs) is at an earlier
stage.
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16. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Key findings
 All financial institutions (FIs), DNFBPs and other sectors are subject to
AML/CFT supervision with resources devoted to higher risk and material
sectors. Sound risk-based supervision is undertaken in the two most
significant sectors – the Gaming Inspection and Coordination Bureau (DICJ)
supervised gaming sector and Monetary Authority of Macao (AMCM)
supervised financial sector. Compliance has improved because of
supervisory actions undertaken. While there is AML/CFT supervision of
other DNFBPs and other sectors (pawnshops, and high value good dealers
e.g. vehicles), supervision is not fully risk-based, regular or comprehensive.
 Macao, China has increased the transparency of local legal persons by
ensuring that basic and beneficial ownership information is publicly
available through the Commercial and Movable Property Registry (CR)
database. Notaries are required to verify documents prior to registration
with the CR and they are subject to supervision. Macao, China has
precluded bearer shares since July 2015. However, beneficial ownership
information of legal persons is not always available readily or on a timely
basis where there are foreign legal persons involved in the
ownership/control structure.
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17. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Key findings
 While trusts and similar legal arrangements cannot be created
under the present legal regime and no trust management company
has ever been registered either with AMCM or with the CR since
the enactment of Decree-Law no. 58/99/M, foreign trusts do
operate on a very limited scale in Macao, China. There is a
requirement for trustees in limited circumstances to disclose their
status to FIs. There are requirements for FIs and DNFBPs to identify
whether a customer is a trustee acting on behalf of a trust.
 Macao, China gives priority to international cooperation and
provides a range of international cooperation, including Mutual
Legal Assistance (MLA), extradition, intelligence/information, and
beneficial ownership information. The overall quality of assistance
is generally sound and timely, as confirmed by feedback received
from other jurisdictions. Overall, Macao, China authorities are
proactive in seeking international cooperation for a range of
purposes, including ML, criminal investigations and recovery of
assets.
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18. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Priority Actions for Macao to
strengthen its AML/CFT System
The prioritised recommended actions for Macao, China, based on these findings,
are:
 i. Establish a specific, consolidated operational AML/CFT strategy for all LEAs,
especially within PJ, which covers parallel investigations, use of financial
intelligence in ML, TF and predicate offence, and seizure of illegal proceeds.
This should include adopting written internal policies, procedures and
mechanisms for more effective cooperation, coordination, investigation and
seizure. The strategy should clearly emphasise the importance of investigating
identified high risks.
 ii. Pass and implement the proposed amendments to the AML and CFT laws to
(i) address the deficiencies in the TF offence (refer R.5); (ii) facilitate ML
investigations and prosecution, and (iii) establish a legal framework on asset
recovery to ensure the effective tracing, seizure and confiscation of criminal
proceeds and the subsequent management and recovery of value from the
assets confiscated, as proposed in Macao, China’s AML/CFT Strategic Plan 2016-
20.
 iii. Enact and implement the proposed cross-border cash declaration system
and regulations
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19. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Priority Actions for Macao to strengthen
its AML/CFT System
 iv. Take steps to improve the capability of its LEAs to proactively identify and
investigate ML (and confiscate proceeds of crime) and TF, particularly
complex and foreign predicate ML; organised crime, gaming related usury,
fraud and drugs; and the misuse of legal persons. LEA need to balance their
current focus on ATM/debit card risk with attention also paid to fraud,
gaming and other high risks.
 v. Focus GIF strategic intelligence more on high-risk foreign proceeds and
regional crime trends. GIF should approach neighbouring FIUs to produce
joint strategic reports on common risks of interest, with input from LEA.
 vi. DNFBP supervisory authorities such as DSAJ, IPIM, DSE, and DICJ should
continue to ensure that covered institutions have an increased level of
understanding of their ML/TF risks and AML/CFT obligations; particularly
among the higher risk entities or those not as aware of the AML/CFT
requirements e.g. real estate agents and high value goods dealers.
Competent authorities should continue working with DNFBPs to increase
compliance with STR reporting, particularly for third party junket introduced
business, agents and notaries involved in real estate transactions.
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20. Anti-money laundering and counter-terrorist financing measures in Macao, China – Mutual Evaluation Report – December 2017
Priority Actions for Macao to
strengthen its AML/CFT System
 vii. The CR and DSAJ should continue and enhance their monitoring
of compliance by companies and notaries to the Company
Registration Law and DSAJ AML/CFT Guideline and impose sanctions
for non-compliance.
 viii. The Asset Freezing Coordination Commission should continue to
coordinate and implement obligations under PF United Nations
Security Council Resolutions (UNSCRs) under the recently introduced
Freezing Law.
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