HKMA fines 33 Financial Services due to AML abuses

abdelaziz Fathi

Hong Kong’s banking regulator has fined 33 Financial Services Limited (33FS) HK$875,000 ($113,000) for breaches of anti-money laundering rules.

The disciplinary came after the monetary authority (HKMA) concluded its investigation under the Payment Systems and Stored Value Facilities Ordinance (PSSVFO). The probe showed that 33FS had failed to carry out appropriate checks relating to anti-money laundering and counter-terrorist financing measures.

The identified deficiencies occurred between November 2016 and June 2019 and showed that the company lacked the minimum criterion of customer due diligence. A series of on-site examinations carried out by the HKMA also found that 33FS failed to have in place adequate systems of control to comply with the relevant laws.

The lapses in 33FS’ systems related to ”continuously monitoring business relationships in respect of transaction monitoring; and implementing an effective name screening mechanism,” the Hong Kong Monetary Authority said in a statement.

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Hong Kong stepping up compliance efforts

In deciding the disciplinary action, the authority considered it needed to send a clear deterrent message about the importance of effective internal anti-money laundering controls.

Carmen Chu, executive director of enforcement and AML at HKMA, said, “While the majority of the SVF sector is characterised by lower ML/TF risks in view of the business nature, higher risk situations may emerge as business scale and scope develop, such as prepaid cards being misused for cash withdrawals funded by third-party’s (non-cardholders’) deposits. All SVF licensees are expected to make reference to the lessons learnt from this case as well as the guidance provided by the HKMA in the Guideline and circulars in their ongoing efforts to have in place effective AML/CFT systems of control for identifying, assessing and managing ML/TF risks, especially when encountering higher ML/TF risk situations.”

In reaching its decision, the HKMA said 33FS had been cooperative during its investigation, and there is no evidence that failures were deliberate.‎ Furthermore, the company had taken positive and extensive remediation work. It has also conducted a forward-looking review of its internal controls to ‎ensure compliance with the relevant regulatory requirements.

Hong Kong financial institutions have been stepping up their compliance to follow anti-money laundering rules. In November, the HKMA reprimanded four banks, including local units of Industrial and Commercial Bank of China and UBS, and fined them a combined HK$44.2 million for AML lapses.

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