Hong Kong regulator fines bank over poor anti-money laundering, due diligence checks
21 Aug 2018

The Hong Kong Monetary Authority (HKMA) has penalised Shanghai Commercial Bank (SCOM) HK$5 million ($636,967) for breaching anti-money laundering rules, including failing to monitor transactions and conduct vital due diligence checks.

HKMA found SCOM did not continuously monitor its business relationship with 33 customers by examining the background and purposes of their transactions.

The bank failed to conduct customer due diligence (CDD) measures in respect of certain pre-existing customers, such as when a transaction took place that was unusual or suspicious, or inconsistent with SCOM’s knowledge of the customer or with its knowledge of the source of the customer’s funds, HKMA said.

Ms Carmen Chu, Executive Director (Enforcement and AML) of the HKMA, said, “This is a case concerning deficiencies in AML/CFT systems and controls in relation to transaction monitoring. While banks are expected to adopt a risk-based approach (RBA) in their AML/CFT efforts and it is unrealistic to expect a “zero failure” outcome, a RBA can only be effective if risk is adequately understood and managed.

“Risk assessments are not static; monitoring of customer transactions and ongoing reviews are fundamental components of a reasonably designed RBA, and banks should have robust systems and controls in place.”

SCOM, quoted in Reuters said it had “comprehensively enhanced its internal anti-money laundering/counter-terrorist financing mechanism”, including expanding manpower.

“The incident has had no impact on the services that the Bank provides to its customers, and all the business operations continue to be conducted as usual,” it said in a statement,” it reportedly said.

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