1. Common Deficiencies Identified in Tier 2 AML Examinations
HONG KONG MONETARY AUTHORITY
Common Deficiencies Identified in Tier 2 AML Examinations
12 May 2009

2. General CDD
Failure to verify nationality of non-permanent HKID holders
Acceptance of expired passports
Failure to record the identity of 3rd parties making large cash deposits
Address proof : failure to obtain or acceptance of out of date documents
Inadequate follow-up on outstanding CDD documentation
3rd party payments from accounts with outstanding CDD

3. General CDD
No periodic review of CDD of lower risk accounts in absence of trigger event
Incoming cross border remittance transactions containing incomplete originator information – inadequate monitoring
No periodic re-screening of client list against SFC Alert List
Intermediaries - no assessment of the ‘fit and proper’ standing

4. Corporate Customers Failure to identify beneficial owner
Failure to obtain up to date company search documents (incorporated in jurisdiction with public registries) & COI (from regulated parties in non-public registry jurisdictions)
Bearer shares - failure to immobilize or obtain annual declarations from shareholders

5. Corporate Customers
Failure to properly identify and screen connected parties (i.e. directors, principal shareholders, signatories)
Details of connected parties are not included in AI’s core banking system - resulting in no periodic re-screening against Terrorist/Sanction/PEP lists

6. PEPs
Excluding known close associates & family members from PEP definition
No regular review of identified PEP accounts
No periodic re-screening of client lists to identify clients whose status may have changed
Failure to screen connected parties to corporate customer

7. Suspicious Transaction Reporting
No review of the risks associated with reported accounts
Undue reliance on “consent” and the former “Low Risk Classification”
STR provides statutory defense to ML – does not address the legal, reputational, regulatory risks associated with accounts’ continued operation

8. Correspondent Banking
Exchange of Swift Keys ‘deemed’ establishment of correspondent activity
Failure to obtain sufficient information to assess the adequacy and effectiveness of the respondent's AML controls and risk.
AI must satisfy itself respondent
subject to appropriate regulatory oversight
does not maintain relations with shell banks
payable through accounts (special measures required).

9. Private Banking
Account booked offshore but managed in HK – ‘deemed’ shared relationship
CDD conducted to standard required by HKMA (minimum)
HKMA access to CDD/transaction information upon request

10. Questions