The Hong Kong Monetary Authority (HKMA) announced that it had concluded investigations and disciplinary proceedings under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) concerning three banks: Indian Overseas Bank, Hong Kong Branch (IOBHK); Bank of Communications (Hong Kong) Limited (BCOM(HK)); and Bank of Communications Hong Kong Branch (BCOM Hong Kong Branch).

The Monetary Authority (MA) has issued a public reprimand against IOBHK, ordered the bank to carry out a look-back review of historical transactions, and required it to formulate and implement a remedial plan to address the identified contraventions.

A pecuniary penalty of HK$8.5 million has also been imposed on the bank.

Separately, BCOM(HK) and BCOM Hong Kong Branch have been fined HK$4 million and HK$3.7 million respectively.

Further details are provided in the Statements of Disciplinary Action issued for each institution.

The disciplinary measures follow HKMA investigations into the banks’ systems and controls related to compliance with the AMLO.

The investigations identified shortcomings in the procedures for ongoing monitoring of customer business relationships.

IOBHK was found to have significant deficiencies in its transaction monitoring processes and in management oversight of its anti-money laundering and counter-financing of terrorism (AML/CFT) controls.

In the case of BCOM(HK) and BCOM Hong Kong Branch, the breaches stemmed from failures to include certain transaction types in the transaction monitoring system shared by both banks, thereby compromising the system’s ability to detect potentially suspicious activity.

In determining the appropriate disciplinary actions, the MA considered the seriousness of the findings, the need to convey a strong deterrent message to the banks and the wider industry, the remedial measures taken by the institutions, and the fact that all three banks have no prior disciplinary history under the AMLO and cooperated with the HKMA throughout the investigations.

Raymond Chan, Executive Director (Enforcement and AML) at the HKMA, stated:

“Effective transaction monitoring enables timely identification and reporting of suspicious transactions and thus is an essential component of banks’ AML/CFT controls. Bank management should ensure that proper transaction monitoring systems and processes are in place and any identified deficiencies are addressed promptly.”

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