HONG KONG: The Hong Kong Monetary Authority (HKMA) said on Tuesday it had ordered the local branch of private bank Coutts & Co Ltd to pay a fine of HK$7 million (US$900,800) for breaching anti-money laundering and counter-terrorist rules.
HKMA said the move followed a probe that found Coutts had failed between April 2012 and June 2015 to set up and maintain procedures for determining if “its customers or the beneficial owners of its customers were politically exposed persons”.
“Politically exposed persons” (PEPs) refers to people with a prominent public function, whom regulators view as presenting a higher risk for potential involvement in bribery and corruption due to their position and the influence they may hold.
The HKMA’s probe also found Coutts’s Hong Kong branch had failed to identify PEPs despite relevant information being publicly available, it said in its order.
Furthermore, the private bank failed to follow up promptly on “PEP alerts received from a commercially available database” to which Coutts subscribed, the order said, adding the firm had taken remedial measures to address the deficiencies identified.
Hong Kong authorities are under pressure from international bodies to clamp down on illegal money flows following a number of high profile cases that involved local firms, including a corruption scandal that engulfed soccer body FIFA in 2015.
The Panama Papers leak also drew attention to how wealthy individuals use offshore companies, many of them structured by intermediaries based in Hong Kong, to conceal assets.
The global anti-money laundering body, the Financial Action Task Force (FATF), is due to inspect Hong Kong’s anti-money laundering and counter-terrorist financing rules next year.
Royal Bank of Scotland sold the majority of Coutts’ international assets to Union Bancaire Privee (UBP) in March 2015 after splitting the bank, best known as banker to Britain’s Queen Elizabeth II, into a British and a Swiss-based arm.
“UBP acquired a portion of Coutts International’s client base, but not the legal entity itself – it was an asset only deal. As such, UBP has not inherited any of Coutts’ legal liabilities,” a spokeswoman for Coutts said in a statement.
In February, Coutts was ordered to pay 6.5 million Swiss francs ($6.6 million) by Swiss watchdog FINMA for breaching money laundering regulations in its relationships with scandal-tainted Malaysian sovereign wealth fund 1MDB.
Singapore’s central bank in December imposed a penalty of 2.4 million Singapore dollars ($1.7 million) on Coutts due to money laundering breaches also related to 1MDB.