Fubon Bank Fined: Hong Kong Monetary Authority Issues HK$4 Million Penalty

The Hong Kong Monetary Authority (HKMA) recently issued a HK$4 million (~$514.4k) fine against Fubon Bank after accusing it of violating the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).

Fubon Bank Violated AMLO For Over Three Years

The penalty came after Fubon Bank reached out to self-report transaction monitoring failures. Responding to the report, the Hong Kong financial regulator launched an investigation into the bank’s systems and controls for compliance.

The investigation uncovered that the bank failed to establish and maintain effective procedures for continuously monitoring business relationships with customers. The data suggested that the failure covered a rather long period of over three years, starting in April 2019 and ending in July 2022.

Commenting on the matter, the regulator noted that it was specifically a failure to have effective procedures for managing system changes in place. The bank saw a substantial decrease in transaction alerts, but it failed to investigate the change. 

The issue could have also been detected earlier if the bank conducted regular reviews of the scope of transactions covered by its monitoring system, but given that this did not happen, it is likely that such reviews and checks were not conducted.

Furthermore, HKMA said that Fubon Bank failed to conduct appropriate scrutiny of transactions that were carried out for customers. It did not update customer due diligence reviews after experiencing certain trigger events, which suggests the lack of counter-terrorist measures.

The Bank Failed To Conduct Reviews And Notice Security Deficiencies

The regulator’s executive director for enforcement and AML, Raymond Chan, commented on the situation, stating that the AMLO is a set of rules that requires banks to put in place effective procedures for continuous monitoring of their business relationships with customers. These rules exist to prevent potential money laundering and terrorist financing activities by detecting them early.

After that, the authorities can put a stop to them before bad actors could cause significant harm. However, when changes are introduced to existing monitoring systems, the banks — or rather, their management — have a responsibility to ensure that the scope of surveillance covers the relevant transactions. That way, any deficiencies that may have slipped through can be identified early, and a follow-up can take place promptly, fixing the issues.

If the banks fail to conduct their reviews, such deficiencies can remain in place for weeks, months, or even years, as was the case with Fubon Bank.