HKMA tells banks to close gaps on high-end money laundering after thematic review
The HKMA has issued a circular to all Authorized Institutions setting out findings from a thematic review of controls against sophisticated money laundering. It describes two live typologies, five areas needing enhancement, and asks firms to run a gap analysis. For heads of financial crime, it signals where HKMA supervisors will probe next, particularly on retail high-net-worth customers and source-of-wealth corroboration.
- The HKMA identified two typologies: syndicates using retail accounts as a gateway to move funds across wealth management and private banking, and criminals using citizenship-by-investment nationalities to open accounts across jurisdictions for cross-border transfers.
- Reviewers found retail high-net-worth customers were subject to weaker CDD than private banking clients despite very similar ML/TF risk, and want periodic portfolio monitoring with proportionate additional measures.
- Some front-line staff overrelied on customer representations when establishing source of wealth and funds, without challenging reasonableness or seeking corroborating documentation.
- Certain transaction monitoring alerts were closed without sufficient justification, including those triggered by opaque cash or cashier's order deposits and transactions with no customer nexus.
- AIs are directed to conduct a gap analysis against the five enhancement areas and consider optimising their AML/CFT controls.