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The Hong Kong Monetary Authority (HKMA) has imposed a total of HK$16.2 million ($1.09 million) in fines on three banks following investigations into significant breaches of Hong Kong’s anti-money laundering regulations. 

The banks are 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).

On 22 July, the regulatory body said it had wrapped up investigations and disciplinary proceedings under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), Chapter 615 of the Laws of Hong Kong, against the institutions. 

IOBHK was reprimanded, ordered to undertake a “look-back” review of past transactions, required to develop and implement a remedial action plan, and fined HK$8.5 million. BCOM(HK) and BCOM Hong Kong Branch were fined HK$4 million and HK$3.7 million, respectively.

HKMA said its checks had uncovered serious deficiencies in the banks’ internal systems and controls for complying with the AMLO.

The issues primarily related to inadequate procedures for continuously monitoring customer relationships and financial transactions, it said in a statement earlier this week. 

IOBHK was found to have major failings in both its transaction monitoring mechanisms and in the overall management oversight of its anti-money laundering and counter-financing of terrorism (AML/CFT) controls.

The contraventions by BCOM(HK) and its Hong Kong Branch stemmed from operational oversights, specifically their failure to load certain transaction types into a shared transaction monitoring system. This significantly weakened the system’s ability to detect suspicious activities, a core function in effective AML/CFT protocols, the statement from HKMA said. 

The HKMA said its actions were driven by the severity of the identified breaches; the need to deter further lapses in the sector, and the extent to which the banks had taken remedial steps, and the lack of previously disciplinary actions by the banks under the AMLO.

“Effective transaction monitoring enables timely identification and reporting of suspicious transactions and thus is an essential component of banks’ AML/CFT controls,” Raymond Chan, executive director (Enforcement and AML) at the HKMA, said.

“Bank management should ensure that proper transaction monitoring systems and processes are in place and any identified deficiencies are addressed promptly,” Chan said. 

The regulator added: “With global scrutiny on financial crime rising, institutions must continually assess and improve their AML/CFT frameworks.

“The HKMA’s action underscores a growing trend across jurisdictions to hold banks accountable not only for wilful misconduct but also for lapses in operational vigilance. Financial institutions are expected to proactively monitor transactions, adapt to emerging risks, and maintain robust oversight from senior management.

“As regulatory expectations tighten, industry participants are likely to face increasing scrutiny over their compliance culture and internal safeguards,” it said. 

(Editor’s note: As part of an attempt to understand the tasks facing banks and wealth managers in onboarding clients in a compliant manner, we are keen to hear from the sector about experiences, the task of validating sources of wealth, and how technology might assist in this. To comment, email tom.burroughes@wealthbriefing.com)