The Hong Kong Monetary Authority (HKMA) has concluded investigations and subsequent disciplinary measures against three banks for violations of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).

The banks involved are Indian Overseas Bank, Hong Kong Branch (IOBHK), Bank of Communications (Hong Kong) Limited (BCOM(HK)), and Bank of Communications Co., Ltd., Hong Kong Branch (BCOM Hong Kong Branch).

The disciplinary actions include a reprimand for IOBHK, which has also been instructed to conduct a retrospective review of its past transactions and to implement a remedial plan to rectify the identified contraventions.

Additionally, IOBHK has been fined HK$8.5m ($1.08m). BCOM(HK) and BCOM Hong Kong Branch have received fines of HK$4m and HK$3.7m, respectively.

The disciplinary actions stem from the HKMA’s investigations into the banks’ compliance systems and controls concerning the AMLO.

The investigations revealed significant deficiencies in IOBHK’s transaction monitoring processes and a lack of adequate management oversight regarding its anti-money laundering and counter-financing of terrorism (AML/CFT) measures, stated HKMA.

In the case of BCOM(HK) and BCOM Hong Kong Branch, the issues arose from failures to input certain transaction types into their shared monitoring system, which compromised its ability to detect potentially suspicious activities.

The regulator assessed various factors when deciding on disciplinary measures, such as the severity of investigation findings and the need to send a strong deterrent message to the banking sector about the importance of anti-money laundering and terrorist financing controls.

Additionally, it considered the remedial actions taken by the banks to rectify deficiencies and noted that none had previous disciplinary records related to the Anti-Money Laundering Ordinance (AMLO).

The HKMA noted that all three banks cooperated with it throughout the investigation and enforcement processes.

HKMA executive director (Enforcement and AML) Raymond Chan said: “Effective transaction monitoring enables timely identification and reporting of suspicious transactions and thus is an essential component of banks’ AML/CFT controls.

“Bank management should ensure that proper transaction monitoring systems and processes are in place and any identified deficiencies are addressed promptly.”