Hong Kong, UK fintech deals could ‘help flag-up fraud’
28 Sep 2017

In line with efforts to step up compliance and boost opportunities for its fintech industry, Hong Kong has entered into its third cooperation agreement with British regulator the Financial Conduct Authority (FCA).

The latest agreement is between the FCA and the Hong Kong Insurance Authority, and will see the two parties share information and referrals of innovative firms seeking to enter their markets.

The deal, signed this month, follows a similar pact signed between the FCA and the Hong Kong Securities and Futures Commission (SFC) in May this year, where the authorities agreed to share information about emerging trends and developments, as well as regulatory issues pertaining to innovation in financial services.

In December last year, the Hong Kong Monetary Authority signed a similar pact with the British watchdog.

In addition to the investment prospects, the data exchange aspects of the agreements could also prove to be useful in identifying patterns and detecting fraud, an analyst indicated.

“Hong Kong can learn from London, and vice versa … the agreements could flag up potential financial crime risks,” said London-based Merlin Linehan, founder of Rising Powers, a consultancy focused on China and emerging markets.

More generally, the sector needs careful regulation “as areas like peer to peer lending in finance and cryptocurrencies have massive potential for fraud and risk generally.”

In addition, Hong Kong is looking to become leader in Asia in this sector, even taking over Shanghai, he said.

“China has just banned bitcoin trading which gives Hong Kong an advantage as much fintech is focused on bitcoin-related services.”

China this month slapped an immediate ban on virtual currency-related initial coin offerings, and also highlighted the risks associated with the fundraising practice.

SFC chief executive Ashley Alder said in May that the agreement with the FCA would assist both regulators to “stay abreast of innovation in financial services while providing innovative fintech firms seeking to develop and grow their businesses internationally with enhanced channels for communicating with regulators.”

Overall, the agreements are targeted at providing assistance to fintech innovation in the banking, securities and insurance sectors both in the UK and Hong Kong markets.

Both jurisdictions have agreed to support their respective referred businesses and ensure compliance with the law of the receiving authority’s jurisdiction.

– By Irene Madongo

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