HKMA imposes USD 1.28 million fine on DBS Hong Kong following money laundering investigation

The penalty was imposed after an investigation by the city’s de facto central bank found that DBS had failed to “continuously monitor business relationships and exercise enhanced due diligence in high-risk situations during various periods between April 2012 and April 2019” and to keep records of some of its clients, the HKMA said in a statement on Friday.

“The HKMA requires banks to implement effective customer due diligence measures to combat money laundering and terrorist financing,” said Raymond Chan, executive director of the HKMA’s Enforcement and Anti-Money Laundering Unit. “These measures should be reviewed regularly to ensure they remain effective.”

DBS Hong Kong failed to take appropriate measures to determine the source of assets and funds of high-risk clients between December 1, 2018 and February 28, 2019. The company also failed to take additional measures to mitigate the risk of money laundering or terrorist financing in connection with its business relationships with 15 clients during this period, the HKMA said in a statement on the disciplinary measures released on Friday.

Between April 1, 2012 and April 30, 2019, the bank also failed to establish and maintain effective procedures to provide sufficiently detailed guidance to assist analysts in reviewing transaction alerts and documenting their findings, the HKMA said.

Between March 1 and September 30, 2017, DBS Hong Kong also failed to identify transactions that had no identifiable commercial or legitimate purpose when reviewing alerts generated by its transaction monitoring system. DBS Hong Kong also failed to investigate the background and purpose of suspicious transactions and to provide written details of its findings for 15 customers, the HKMA said.

The HKMA’s decision on disciplinary action took into account the “seriousness of the investigation findings” and the need to “send a clear deterrent message to the industry about the importance of effective controls and procedures to combat the risks of money laundering and terrorist financing,” the statement said.

“DBSHK takes our AML (anti-money laundering) obligations seriously and accepts the HKMA’s decision,” a bank spokesman said in a statement.

“The issues at hand were sporadic and historical in nature and occurred between April 2012 and April 2019. DBSHK has worked closely with the HKMA to improve the execution quality of the bank’s AML controls.”

The bank said it has introduced new policies over the years to continue to detect and combat new methods of money laundering, which have “significantly improved our ability to detect and mitigate money laundering risks.”

The penalty takes into account that DBS has taken remedial action to address the deficiencies identified and improve its controls, the HKMA said. The bank has not yet taken any disciplinary action against the bank in this area and has cooperated with the HKMA during the investigation and enforcement process, the statement said.