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Hong Kong Monetary Authority reported that the Hong Kong Monetary Authority has imposed a HK$4 Million penalty on China CITIC Bank International Limited for violations of Anti-Money Laundering and Counter-Terrorist Financing Ordinance. This disciplinary measure concludes a thorough investigation into CITIC’s compliance with AMLO.

Investigation Findings

The HKMA's investigation revealed that CITIC had significant weaknesses in its systems and controls to ensure compliance with AMLO. The bank, in particular, failed to implement core model rules and effective detection rules into its automated transaction monitoring software, resulting in a lack system alerts on suspicious transactions between July 2018 and November 2015. CITIC also failed to adequately investigate the background or purpose of some customer transactions, nor did it document its findings.

Discipline Measures

In deciding to impose a monetary penalty, the HKMA considered several factors. These included the severity of the findings as well as the need to send a strong message to the industry regarding the importance of effective controls to prevent money laundering and terrorist funding risks. CITIC implemented remedial measures to address the identified concerns and does not have a prior disciplinary history related to AMLO. The bank was cooperative with the HKMA during the entire investigation and enforcement process.

Official Commentary

Raymond Chan, Executive director (Enforcement & AML) at the HKMA, stressed the importance of maintaining a robust system of transaction monitoring in the fight against financial crime. "The integrity and robustness" of a system for monitoring transactions is crucial in the fight against financial crimes. Banks must ensure that their system of transaction monitoring is configured correctly and is working effectively.

Impact on Industry

The AMLO is a stringent law that requires financial institutions to adhere to strict requirements. This disciplinary measure serves as a warning for Hong Kong's financial institutions. The ordinance imposes strict record-keeping and due diligence obligations on financial institutions. This includes authorized institutions as well as non-financial business and professions. The HKMA, as the relevant authority continues to enforce the regulations in order to maintain the integrity of financial system.