Opening Remarks at Regulator’s Dialogue: Recent Developments in Supervision of Anti-Money Laundering and Counter-Financing of Terrorism


09 May 2024

Opening Remarks at Regulator’s Dialogue: Recent Developments in Supervision of Anti-Money Laundering and Counter-Financing of Terrorism

Raymond Chan, Executive Director (Enforcement and AML), Hong Kong Monetary Authority

Good morning everyone.  Thank you for attending today’s Regulator’s Dialogue focused on Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT).

I believe you now know that I have taken over from Carmen to look after anti-money laundering (AML) and enforcement matters within the Hong Kong Monetary Authority (HKMA).  This is a new role for me but I am not new to many of you.  And in fact I am not new to AML either, although it has been over 10 years since I last worked on this subject.

Much has changed over this period, so I would like to take a few minutes to share some thoughts on the wider context of this engagement.

Tackling financial crime remains a top priority for the HKMA.  As part of our responsibility to help ensure the integrity of the Hong Kong banking system, we require all Authorized Institutions (AIs) to have effective systems and controls to mitigate the risk that they may be used to commit financial crime.  We adopt a principle and risk based supervisory approach in line with international standards.  This risk-based approach rests on three guiding principles, namely risk differentiation, proportionality and the fact that we don’t administer a zero failure regime.  We don’t expect AIs to apply our requirements mechanically.  Instead, we expect them to apply our requirements in a proportional manner, appropriate for the circumstances facing them, commensurate with the risk they are taking, and most important of all delivering effective outcomes.  We at the HKMA are prepared to assist AIs in applying the risk based approach in a balanced and proportional manner.  Today’s Regulator’s Dialogue serves exactly this purpose.

To apply the risk based approach in an effective manner, the first thing we need to do is to understand the major risk trends facing ourselves.  I would like to highlight three of them this morning.

First is Digital Fraud.  Digital Fraud has become a much more serious concern, driven by the rapid advances in financial technologies, online services and real time payments.  Every now and then, we hear news reports about people falling prey to different types of online scams.  Multiple departments within the HKMA are joining forces to counter frauds.  In my former role, I introduced 10 new measures to strengthen the security of electronic banking services last year.  With the support of the banking industry, we also successfully contained the spread of malware scams from neighbouring economies to Hong Kong.  In today’s dialogue, we will provide updates on how we are innovating the response to fraud to be more strategic and proactive.  In particular, we will highlight how we are working with the Hong Kong Police and other partners to drive a stronger eco-system response to and how intelligence and information sharing is key to this.  Industry support will be an important element to delivering legislative reforms we plan to make to support information sharing so we will go into some detail on this issue.

Another major risk trend I would like to highlight is technology advancement.  I am sure you would agree with me that technology has an important role to play in enhancing the effectiveness of our AML/CFT response, particularly in the space of aggregating and analysing the huge volume of data that financial crime models generate.  The HKMA has devoted substantial resources to assisting banks in their adoption of AML/CFT Regtech.  That said, technological developments also bring about increasing challenges to the integrity of the financial system, virtual assets being a very good example.  So while on the one hand it is important for banks to support key Government initiatives, it is equally important to make sure that the banking sector doubles its guard, and where innovative approaches powered by data and technology exist, we fully understand the risk implications and have them effectively managed.

Last but not least is the growingly complicated geopolitical landscape.  We now have two major wars going on in the world, and one-third of the global population will go to the polls this year, including a US election in November.  Changes in the geopolitical landscape have presented very significant challenges to AIs.  A recent example would be the risks associated with dual use goods.  These risks and challenges need to be safely managed to keep our banking sector on course in supporting broader economic development for Hong Kong.

Thank you.

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