Monetary Authority takes disciplinary actions against three banks for contraventions of Anti-Money Laundering and Counter-Terrorist Financing Ordinance

The Hong Kong Monetary Authority (HKMA) announced today (22 July) that it had completed investigations and disciplinary proceedings under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615 of the Laws of Hong Kong) (AMLO) in relation to three banks: Indian Overseas Bank, Hong Kong Branch (IOBHK), Bank of Communications (Hong Kong) Limited (BCOM(HK)) and Bank of Communications Co., Ltd., Hong Kong Branch (BCOM Hong Kong Branch).

The Monetary Authority (MA) has: (i) reprimanded IOBHK; (ii) ordered IOBHK to conduct a look-back review of past transactions, and develop and implement a remedial plan to address the contraventions; and (iii) imposed a pecuniary penalty of HK$8,500,000 on IOBHK.  Separately, the MA has imposed pecuniary penalties of HK$4,000,000 on BCOM(HK) and HK$3,700,000 on BCOM Hong Kong Branch.  Details of the disciplinary actions against each of the three banks are set out in the respective Statements of Disciplinary Action attached.

The disciplinary actions (Note) follow investigations by the HKMA into the banks’ systems and controls for compliance with the AMLO.  The control deficiencies identified related to failures to establish and maintain effective procedures for continuously monitoring business relationships with customers. 

There were significant deficiencies in IOBHK’s transaction monitoring mechanism and management oversight of the bank’s anti-money laundering and counter-financing of terrorism (AML/CFT) controls.

The contraventions of BCOM(HK) and BCOM Hong Kong Branch arose from omissions to load certain types of transactions into the transaction monitoring system shared by the two banks, undermining the system’s effectiveness in identifying potentially suspicious activities.

In deciding the disciplinary actions, the MA has taken into account the relevant circumstances and factors, including:

(a)	the seriousness of the investigation findings;
(b)	the need to send a clear deterrent message to the three banks and the industry about the importance of having effective controls and procedures to address money laundering and terrorist financing risks;
(c)	where applicable, the remedial measures taken by the banks to address the deficiencies identified; and
(d)	the three banks have no previous disciplinary record in relation to the AMLO and cooperated with the HKMA during the investigations and enforcement proceedings.

Mr Raymond Chan, Executive Director (Enforcement and AML) of the HKMA, said, “Effective transaction monitoring enables timely identification and reporting of suspicious transactions and thus is an essential component of banks’ AML/CFT controls.  Bank management should ensure that proper transaction monitoring systems and processes are in place and any identified deficiencies are addressed promptly.”

Relevant link:

Statement of Disciplinary Action (IOBHK)

Statement of Disciplinary Action (BCOM(HK))

Statement of Disciplinary Action (BCOM Hong Kong Branch)

End