Opening Remarks at Anti-Money Laundering (AML) Seminar 2022
Speeches
15 Dec 2022
Opening Remarks at Anti-Money Laundering (AML) Seminar 2022
Carmen Chu, Executive Director (Enforcement and AML), Hong Kong Monetary Authority
- Good afternoon, ladies and gentlemen.
- It is my great pleasure to welcome you all to our AML seminar. This is an important part of our engagement with subject matter experts at banks, sharing our in-year review and 2023 outlook.
- We continue to face a very challenging environment: a downturn in the global economy, rising fraud and financial crime, complex geopolitical developments, to name a few. These bring into sharp focus the need for banks to be agile, effective and risk-based in their essential role as gatekeepers of the AML ecosystem, helping safeguard the stability and integrity of the financial system.
- During the year, there have been a number of developments to empower banks to drive more effective AML outcomes. Let me highlight three key aspects.
- First, legislation and regulation. Changes have just been made to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance to align with the latest international standards and practices, including a new licensing regime for Virtual Asset Service Providers. On a related note, the HKMA adopts a risk-based approach to supervising banks’ interface with VA activities, based on the principle of “same risk, same regulation”.
- The technical definition of Politically Exposed Persons has also been amended in line with the international standard, while a new concept of “former PEP” has also been adopted to allow a risk-based approach when determining the extent of customer due diligence based on identified risk in individual circumstances. We are now in the process of engaging consultancy services to assist with a review of international best practices to inform a risk-based, and practical guidance for banks to meet their CDD obligations in relation to PEPs. Also, the HKMA will soon consult the banking sector on changes to the AML/CFT Guideline in preparation for the legislative amendment to take effect next June.
- The second focus concerns AML Suptech and Regtech. The latest legislative update clarifies that a recognised digital identification system such as iAM Smart can satisfy additional requirements where a customer is not physically present. This is important, as more than 90% of retail banks in Hong Kong have launched remote customer onboarding services, or are actively planning to do so.
- And over the past year, three AMLab sessions have been held, bringing together banks, technology firms and data experts to experiment with network analytics capabilities and “enabling technologies”. With the wider adoption of AML Regtech, banks have significantly increased the identification and reporting of suspicious accounts and networks, leading to more timely restraint of criminal proceeds by law enforcement agencies.
- The HKMA has also recently started its own pilot on the application of data analytics using granular financial crime data across multiple banks for the first time. The objective is to make our AML supervisory work more data-driven, and thus more timely in identifying risk displacement, and preventing serious harm from mule account networks used for fraud and financial crime.
- Thirdly, the importance of an ecosystem response is increasingly recognised globally. In Hong Kong, financial institutions, government bureaux, regulators and law enforcement agencies are all collaborating closely through public-private partnership for information sharing, as well as engagement sessions like this one. It is a joint effort by all stakeholders of the AML ecosystem to prevent, detect and disrupt the abuse of the financial system for illicit fund flows. At the same time, we will keep demonstrating the value of AML work in protecting members of the public and reducing losses from fraud and financial crime.
- We are very pleased that the Commerce and Economic Development Bureau will join today’s programme to share the latest guidance on proliferation financing risk assessment and mitigation, drawing reference to the international standards. The HKMA will elaborate the risk-based approach to source of wealth requirements, based on observations noted through its supervision and various engagement sessions with private banks. It is also our honour to have the Financial Intelligence and Investigation Bureau providing feedback on Suspicious Transaction Reports (STR). This is very relevant topic for banks which contributed over 80% of STRs in Hong Kong, similar to banks in other international financial centres.
- Last but not least, I would like to thank our speakers again for being so generous in sharing their expert views. The presentation materials will also be uploaded to our training platform to reach out to the widest audience in banks. I hope you will find today’s seminar interesting, informative and insightful. Thank you.
