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Financial institutions operating on the island have been fined for failing to comply with anti-money laundering (AML) regulations, the Hong Kong Monetary Authority (HKMA) has announced.
China Construction Bank Asia, Taiwan’s Hong Kong subsidiary of CTBC Bank, the Industrial and Commercial Bank of China (ICBC) and Switzerland’s UBS have been fined a total sum of HK$44.2m (US$5,674,997) for failure to adhere to the island state’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) regulations.
Having originally come into effect in 2012, HKMA had assessed adherence through on-site inspections of the financial institutions.
“Banks have an important ‘gatekeeper’ role in the ecosystem for anti-money laundering and counter-financing of terrorism (AML/CFT), with legal and regulatory obligations as set out in the AMLO and the Guideline on AML/CFT, and also in line with international standards,” said Carmen Chu, AML director at the HKMA.
According to the financial watchdog, the four banks concerned have failed to carry out their duties to continuously monitor business relationships through ongoing customer due diligence.
CBTC Hong Kong failed to take appropriate review steps to ensure documents, data and information relating to customers that it possessed were up to date. The other three banks failed to conduct “timely periodic reviews for certain customers”, according to the HKMA.
The regulator also found that both ICBC and China Construction Bank Asia had not been in compliance with the HKMA’s requirement to take either reasonable measures to establish relevant customers’ or beneficial owners’ sources of wealth and sources of funds involved in the business relationships and/or additional measures to mitigate the risk of money laundering and terrorist financing involved in respect of certain customers.
All four banks were also found to have contravened the requirement of establishing and maintaining effective procedures for carrying out their duties in relation to ongoing customer due diligence under the AMLO. This included China Construction Bank Asia using restrictive criteria in flagging up alerts for examination, while UBS was reported for a system error in extracting customer risk profiles due for periodic review.
“Banks should make reference to these case examples to review data quality and respective transaction monitoring system effectiveness, and take appropriate risk-mitigating measures on an ongoing basis,” said Chu.
Looking forward, she continued, the HKMA expects this improving trend to continue, and that the risk-based approach in banks’ AML/CTF efforts should remain to be built on up-to-date understanding of evolving risks, use of better quality data, responsible innovation such as investment in regtech products and through close collaboration in the ecosystem.
