HKMA sanctions CITIC over AML breaches

The announcement comes after the HKMA investigated CITIC’s systems and controls for compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), with the authority determining several shortages, including incorrect implementation of detection rules and core model rules in its automated transaction monitoring system. As detailed by the HKMA, these deficiencies led to the failure to generate system alerts on suspicious transactions between November 2015 and July 2018. Additionally, CITIC neglected to investigate the background and purpose of some customers’ transactions and to provide its findings in writing during the same period.

The disciplinary actions taken for CITIC come just a few months after the HKMA imposed penalties on WeChat Pay Hong Kong for violating the Payment Systems and Stored Value Facilities Ordinance. The procedures came as a result of an investigation underlining deficiencies in WeChat Pay Hong Kong’s control systems for anti-money laundering and counter-terrorist financing measures from August 2016 to October 2021. The regulator sanctioned the company after the latter reported the issues itself and the HKMA proceeded with an investigation into its operations.

HKMA’s actions against CITIC

When determining the disciplinary action, the HKMA considered all relevant circumstances and factors, including the seriousness of the investigation findings, and the need to provide a clear deterrent message to CITIC and the overall industry about the significance of having proper controls and procedures to address money laundering and terrorist financing risks. Also, the regulator factored in if CITIC took remedial actions to mitigate the identified deficiencies and if the financial institution had any previous disciplinary record related to the AMLO, as well as if it cooperated with the KHMA during the examination and enforcement procedures.

Furthermore, representatives from the HKMA commented on the announcement, mentioning that the integrity and capabilities of a transaction monitoring system represent a critical part of the ongoing fight against financial crime. The regulator highlighted the importance for banks to ensure that their transaction monitoring systems are appropriately configured and operated as effective as possible.