Hong Kong Monetary Authority Penalizes China CITIC Bank for AML Violations

The Hong Kong Monetary Authority (HKMA) has imposed a HK$4 million penalty on China CITIC Bank International Limited (CITIC) for violations of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), as reported by the Hong Kong Monetary Authority. This disciplinary action concludes a comprehensive investigation into CITIC's compliance with the AMLO.

Investigation Findings

The investigation by the HKMA revealed significant deficiencies in CITIC's systems and controls for compliance with the AMLO. Specifically, the bank failed to implement effective detection rules and core model rules in its automated transaction monitoring system, leading to a lack of system alerts for suspicious transactions between November 2015 and July 2018. Additionally, CITIC did not adequately examine the background and purpose of certain customer transactions or document its findings during this period.

Disciplinary Measures

The HKMA's decision to impose a pecuniary penalty considered several factors, including the seriousness of the findings and the necessity of sending a deterrent message to the financial industry about the importance of robust controls against money laundering and terrorist financing risks. CITIC has since implemented remedial actions to address the identified issues and has no prior disciplinary record related to the AMLO. The bank cooperated with the HKMA throughout the investigation and enforcement proceedings.

Official Commentary

Raymond Chan, Executive Director (Enforcement and AML) of the HKMA, emphasized the critical nature of maintaining a robust transaction monitoring system in combating financial crime. He stated, "The integrity and robustness of a transaction monitoring system is vital in the ongoing fight against financial crime. It is important for banks to ensure that their transaction monitoring system is properly configured and operates effectively."

Industry Implications

This disciplinary action serves as a reminder to financial institutions in Hong Kong of the stringent requirements under the AMLO. The ordinance mandates customer due diligence and record-keeping obligations for specified financial institutions, including authorized institutions and designated non-financial businesses and professions. As the relevant authority, the HKMA continues to enforce these regulations to uphold the integrity of the financial system.