With that in mind I’d like to take the opportunity today to look ahead, at the challenges and opportunities of what is waiting for us on the other side of the bridge –different, perhaps very different from the world we used to live in. Because we face a lot of uncertainty. Not only about the speed of recovery from recession. But about the extent and depth of permanent structural changes to the functioning of our economy brought about by adaptation to Covid-19 – and as I say, with a crucial role for the insurance industry to play in our economic recovery. I want to focus today not on the specific risks that this brings to the insurance sector – though those are real and large – but on the role of the insurance sector and its regulatory framework in supporting broader economic rebuilding in a changed landscape. Not on what the economy might do to insurers, but on what insurers can do for the economy. Of course managing your own risks and supporting the wider economy is not an either/or choice. A virtuous circle operates between the provision of financial services, and the strength of the economy, and hence the strength of the balance sheets of the providers of financial services themselves. In the case of insurance it seems likely that continued provision of new risk pooling and investment by insurers strengthens the economy and hence existing exposures on insurers’ own balance sheets.
But we will try wherever possible to be sympathetic to AIs’ concerns on compliance costs. Terrorist financing The most obvious thing we need to do is to incorporate into our guideline specific recommendations relating to terrorist financing. In particular, we need to make AIs aware of their responsibilities under the United Nations (Anti-Terrorism Measures) Ordinance that was enacted in July of this year and will begin to come into operation in the near future. The New Ordinance is intended to meet Hong Kong’s commitments under the FATF’s eight Special Recommendations on Terrorist Financing. To that end, it criminalises the financing of terrorism and associated money laundering and provides for the freezing of terrorist-related funds. It also imposes an obligation on AIs and other persons to report knowledge or suspicion that funds are linked to terrorism. We have already asked AIs to report to the JFIU suspicious transactions that may be related to terrorism. But the legal obligation to do so is now clear and unambiguous, as is the criminal offence of dealing in terrorist funds. AIs therefore need to ensure that they have the necessary measures in place to comply with the law. This is not an easy task. It is accepted that terrorist financing is difficult to detect even when AIs are provided with lists of terrorist suspects. The FATF published in April of this year a document called Guidance for Financial Institutions in Detecting Terrorist Financing that I would recommend you to look at.