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Banks learn about the difference in US and HK money-laundering rules

On 25th August 2014, following the latest US fine on Standard Chartered, South China Morning Post published an article pointing out the differences between US and HK anti-money laundering approaches.

Whilst the US authorities have imposed numerous and significant fines against banks, the Hong Kong Monetary Authority has never fined any banks for such breaches. Is there any difference in standards between these jurisdictions? The HKMA has stressed that the standards in Hong Kong are as high as in the US.

… “Different jurisdictions face different money laundering and terrorist-financing threats, therefore in practice, different regulators have different measures tailor made to their local market operations,” an HKMA spokeswoman said.

“Hong Kong, as a major commercial and trading hub in Asia, naturally has a very large volume of cross-border transactions,” the spokeswoman said. “Using different supervisory tools doesn’t mean we have a weaker regime. We have a wide range of powers under the banking ordinance which allow us to ensure continuing enhancement on banks’ anti-money-laundering and counter-terrorism controls.”

“HKMA is empowered to restrict banks’ business and remove their management teams in extreme scenarios.”

She said the HKMA had doubled the resources to ensure banks comply with the anti-money laundering rules and report suspicious transactions to the Joint Financial Intelligence Unit, which is run by the police and customs. Local banks reported 12,931 suspicious transfers in the first five months of this year.

Hong Kong introduced an anti-money laundering law in 2012 after the FATF in 2008 pointed out the city did not meet global standards without such a law. The law adds requirements for banks to step up due diligence on customers, with the provision of fines of up to HK$10 million for each breach found against a bank of its anti-money-laundering responsibilities.

…A specialist involved in cross-border bank transactions said that when a bank conducted a transaction between Hong Kong and New York, a gap in compliance spending existed between the two jurisdictions.

Financial centres such as New York exacted increasingly high compliance spending from banks, said the specialist, who asked not be named. The cost is lower in Hong Kong and banks here are unlikely to spend in order to meet foreign regulations.

Patrick Rozario, a director and head of risk advisory services at accounting firm BDO, said Hong Kong would be hard pressed to match the US on combating money laundering and terrorist financing. “The legal systems between Hong Kong and the US are very different. The businesses conducted by the lenders in the two markets are also different. Hence, the regulators also adopt different approaches,” he said.

Christopher Cheung Wah-fung, the legislator for the financial services sector, said: “The US regulator does not understand Asian business practices and culture. I do not see why we should follow the US way of regulation.”

Source: http://www.scmp.com/business/banking-finance/article/1580466/banks-learn-about-difference-us-and-hk-money-laundering


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