Hong Kong regulator sees jump in anti-money laundering rule breaches
By Michelle Price
HONG KONG (Reuters) – Hong Kong’s securities regulator reported a spike in the number of instances where the city’s financial firms are failing to comply with its anti-money laundering guidelines.
The Securities and Futures Commission (SFC), which stepped up scrutiny of laundering controls amid pressure to combat illicit fund flows, said its inspections found 223 rule-breaches during the year ended March 31, or 91 percent more than the 117 uncovered a year earlier.
The SFC inspected anti-money laundering (AML) controls at major investment banks, brokers, and asset managers, finding problems with the way some firms assessed and reported suspicious transactions.
“We also found failures to conduct enhanced customer due diligence and the appropriate level of transaction monitoring for high-risk customers,” the SFC said in its annual report published on Wednesday.
The regulator declined to provide any further information on the breaches.
The regulator increased its focus on AML controls during routine onsite inspections last year, and launched a money laundering risk assessment of the securities sector, the SFC said in its report.
Hong Kong authorities are under pressure from international bodies to clamp down on illegal money flows following a number of high profile cases that involved Hong Kong-based companies, including a corruption scandal that engulfed global soccer body FIFA last year.
Also, the leak of the Panama Papers threw substantial attention on how wealthy individuals use offshore companies, many of which were structured by intermediaries based in Hong Kong, to conceal assets.
Last month, Reuters reported that Hong Kong launched a multi-pronged customs, shipping and financial sector crackdown against so-called fake trade invoicing that allows billions of dollars of capital to leave China illegally.
“There has definitely been an increasing focus on AML,” said Philippa Allen, CEO of Hong Kong-based consultancy ComplianceAsia. “There has been a lot of bad news, so the Hong Kong regulators – like regulators globally – have to be seen to be doing something.”
During the year ended in March, SFC levied fines totalling HK$87.1 million ($11.2 million), a 58 percent increase from a year earlier, the annual report said.
In one of the largest penalties the SFC has imposed on a single firm, JP Morgan in December was fined HK$30 million for a range of control failures in its electronic trading business.
(Reporting by Michelle Price; Editing by Richard Borsuk)