It's interesting to see HKMA back in action and more active post-COVID. The recent enforcement actions on various financial institutions (FIs) are clear indicators of things to come and increased scrutiny by the HKMA, which was much needed and one of the potential takeaways from the last criticisms of the FATF mutual evaluation of Hong Kong.

Commerzbank contraventions are a basket case of issues faced mainly by small branches of global FIs. It highlights the need for consistency and well-defined FCC policies and procedures, governance, and practical implementation.

In the statement of the disciplinary action on Commerzbank, HKMA noted that it:

  • failed to carry out the required CDD measures on 17 customers before establishing the relationship. Delays in carrying out such measures ranged from two to 46 months.
  • did not terminate the business relationships with 12 customers for periods ranging from six to 46 months.
  • failed to establish and maintain adequate procedures for determining whether a customer or a beneficial owner (BO) of a customer is a politically exposed person (PEP).
  • had issues with the name screening.
  • maintained inadequate policies, procedures, and related documentation.

Though these instances happened between 2012 and 2016, they are still relevant and faced by various FIs. The ever-increasing complexity of ownership structures, use of trusts, and recently the increased focus, usage, and volume of sanctions have pushed various FIs into backlogs and, in some instances, looking externally for guidance.

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