On 11 April 2017, the Hong Kong Monetary Authority (HKMA) issued a press release concerning a disciplinary action against a bank involving a public reprimand and a fine of HK$7 million for AML / CDD breaches. The HKMA’s investigation found that the bank, between April 2012 and June 2015, contravened five specified provisions of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO).
The HKMA’s investigation found that the bank had failed to establish and maintain effective procedures for:
- determining whether the customers or their beneficial owners (BOs) were politically exposed persons (PEPs);
- obtaining senior management approval to continue business relationship with PEPs after it had come to know that the customer or a BO of the customer was a PEP; and
- identifying PEPs despite the relevant information being publicly available and to follow up promptly on confirmed PEP alerts received from a commercially available database to which it subscribed.
The HKMA also found that the bank had failed to establish an effective reporting system to ensure the timeliness of the process to seek senior management approval to continue a business relationship with a PEP, despite an internal report which concluded that its periodic reviews and event driven reviews were ineffective to ensure PEP alerts were being followed up and senior management approval be obtained promptly. The bank’s name screening policy was only required at account opening but not on an ongoing basis in connection with existing customers, and periodic reviews was only conducted on high risk customers.
As a result, there was delay not only in identifying PEPs but also in obtaining senior management approval to continue business relationship with PEPs.
The HKMA found other contraventions of the AMLO including failures to carry out sufficient customer due diligence measures before establishing a business relationship.