Briefing: an internal sanctions and AML policy for an Asia group

Banking access is not guaranteed. For Asia groups with cross-border flows through Hong Kong, the question is no longer whether a counterparty screening failure will be caught – it is whether the group's own internal policy is sufficient to survive the scrutiny that follows.

An internal sanctions and AML policy for an Asia group must align with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and the United Nations Sanctions Ordinance, address the group's specific cross-border payment corridors, and assign clear ownership of screening, escalation and record-keeping obligations. A policy that was adequate three years ago may not reflect the current regulatory expectations of Hong Kong-licensed banks and counterparties.

This briefing sets out what has changed, who it affects, and the steps a cross-border group should take now.

What Has Changed and Why It Matters for Asia Groups

The immediate trigger is not a single new rule. It is a sustained shift in how Hong Kong-regulated financial institutions – banks, payment service providers, and virtual-asset trading platforms – apply their own AML and sanctions compliance programmes at the point of onboarding and transaction monitoring.

Two developments have sharpened the environment. The VATP licensing regime that commenced 1 June 2023 brought a new category of regulated counterparty into the Hong Kong payment channel. Groups that interact with virtual-asset platforms, whether for treasury or for settlement, now face a second layer of customer due diligence requirements at those platforms – requirements that mirror, and in some respects exceed, what banks already apply.

Separately, the Foreign States Immunity Law (the PRC law restricting state-immunity claims in Chinese courts, in force since 1 January 2024) has altered the risk calculus for groups whose counterparties include state-linked entities in Greater China. It has not changed the Hong Kong sanctions posture – Hong Kong implements United Nations sanctions and does not give domestic effect to unilateral measures of other states – but it has made the counterparty-risk analysis more layered for cross-border groups operating across the Mainland–Hong Kong corridor.

In our cross-border practice, we see a consistent pattern: a group's correspondent banking relationship comes under pressure not because the group is on a sanctions list, but because its internal policy cannot demonstrate adequate controls. The bank's own compliance team cannot clear the file.

Who Is Affected Across the Cross-Border Corridor

Any group with a Hong Kong entity in its structure – whether as a holding company, a treasury centre, a trading hub, or a regional headquarters – is exposed if that entity is the point through which cross-border payments, loans, dividends or intercompany settlements flow.

The exposure is highest where the group has counterparties, investors, or operating entities in jurisdictions that carry elevated correspondent-banking scrutiny: Mainland China, the CIS region, the Middle East, and certain African markets. The Hong Kong entity sits at the interface. Its internal policy is the document that a bank's compliance team, a deal counterparty's counsel, or a regulator will read first.

Groups with a BVI or Cayman holding entity above a Hong Kong opco are not insulated. The Hong Kong-level entity's own AML and sanctions policy governs what the bank sees. An offshore holding structure does not substitute for a functioning group-level compliance document at the operating layer.

For general counsel and compliance officers at these groups, the practical risk is loss of banking access or a delay in account opening that stalls a transaction. That is the enforcement_risk this briefing addresses.

Counsel on our desk regularly review internal policies for cross-border Asia groups and see the same gaps: no designated compliance owner at the Hong Kong level; screening lists that do not include the UN consolidated list; no escalation path for politically exposed persons; and no documented procedure for the FATF travel rule where virtual-asset transfers are in scope.

To discuss how the current regulatory expectations apply to your group's cross-border position, contact info@lockhartyip.com.

The Immediate Action

Three steps are required for most Asia groups at this juncture.

First, audit the existing policy document against the Anti-Money Laundering and Counter-Terrorist Financing Ordinance and the relevant regulatory guidelines issued by the Hong Kong Monetary Authority and the Securities and Futures Commission. Where the group's Hong Kong entity is not itself a regulated institution, the policy still needs to reflect the standards those institutions will apply when reviewing the entity as a client.

Second, map the payment corridors. An internal policy that does not identify the group's actual cross-border flows – remittances to Mainland China, settlements with CIS or Middle Eastern counterparties, intercompany transfers through offshore centres – cannot be evaluated or defended. The mapping exercise identifies which flows carry elevated scrutiny and which screening procedures need to be applied at each step.

Third, assign ownership. The policy needs a named compliance function or officer at the Hong Kong level with documented authority to escalate, to refuse a transaction, and to file a suspicious-transaction report if required. A group-level policy sitting offshore does not satisfy this requirement for the Hong Kong entity.

These steps are not a guarantee of banking access. They are the minimum that a well-managed Asia group should be able to demonstrate. Our desk can review the existing policy, identify the gaps against current regulatory expectations, and prepare a revised document and implementation plan. For a structured assessment of your group's sanctions and AML position across the relevant jurisdictions, write to us at info@lockhartyip.com.

Related practices

• Sanctions & AML – cross-border compliance, counterparty screening and AML programme design for Asia groups
• Corporate Counsel – governance, compliance ownership and group-level policy implementation

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.