MONEY LAUNDERING
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Hong Kong Monetary Authority

Hong Kong and Macau regulators intensify efforts against money laundering, financial crime and terrorist funding

Authorities warn of major threats to fiscal security

PUBLISHED : Friday, 26 May, 2017, 11:56pm
UPDATED : Saturday, 27 May, 2017, 1:17am

Hong Kong and Macau have launched simultaneous shake-ups of the systems they have in place to tackle the growing menace of money laundering, financial crime and the funding of terrorist groups.

In separate yet starkly similar announcements issued late Friday, financial regulators in both cities stated their “determination” to fight serious financial crime and laundering, underlining the threat they posed to “financial security and stability”.

In a signal that Beijing – whose concerns about capital flight and the movement of corrupt cash are well documented – wants a more co-ordinated approach to tackling the problem, the opening line of the Macau Monetary Authority statement said the upholding of financial security had been “elevated to the national level”.

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The casino hub’s financial regulator stressed that the statement had been agreed by the People’s Bank of China and the Hong Kong Monetary Authority (HKMA) following a meeting in the former Portuguese enclave on Friday which agreed to create a “Financial Security Expert Alliance”.

The meeting was attended by the HKMA’s head of information technology, Tan Yong-wah, and senior officials from the People’s Bank of China. It also heard a statement from the vice-governor of the PBOC, Yi Gang.

The HKMA statement made no mention of the Macau meeting or the fact that they had a high-level representative in attendence.

Instead, the Hong Kong regulator’s statement announced the setting up of a “Fraud and Money Laundering Intelligence Taskforce (FMLIT) in a bid to enhance the detection, prevention and disruption of serious financial crime and money laundering threats”.

Last night an HKMA spokesman said: “The FMLIT, as an initiative led by the police, aims to promote a more effective partnership among the financial sector, law enforcement and regulator.

“It enhances existing mechanisms and strengthens Hong Kong’s response to the threats from serious financial crime and money laundering. HKMA fully supports this important information sharing initiative, which will help safeguard Hong Kong’s reputation as a leading world financial centre.”

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The move raises questions as to why the announcement was not made by the police as lead organisation and what it means for the existing structures in place to fight money laundering and terrorist financing in the city.

The Hong Kong Police Force, which runs the existing body that co-ordinates anti-money laundering efforts – the Joint Financial Intelligence Unit – had not responded to questions by press time last night.

A financial security insider said: “This is a clearly a co-ordinated move with Beijing pulling the strings.

HKMA fully supports this important information sharing initiative
an HKMA spokesman

“There is a clear message that getting a grip on capital flows and the outflow of illicit funds from China’s economy is a clear and present danger to stability and security and needs a co-ordinated response.”

The total amount of cash withdrawn from ATM machines in Macau recently topped HK$10 billion a month. This has fuelled concerns that money laundering and capital flight could be a significant factor in the ATM withdrawal surge.

Underlining the acuteness of the capital flight problem, earlier this month Li Gang said China was urgently seeking support from international lenders to close a yawning financing gap for projects under its “One Belt, One Road” trade strategy.

Infrastructure and other key projects in belt and road countries had “strong demand for ­financing”, and support from the global market was “desperately needed”, Yi said in an interview with People’s Daily.

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The HKMA announcement comes ahead of a key visit early next year by an audit team from the Financial Action Taskforce, the global body that oversees the international fight against money laundering and terrorist financing and of which Hong Kong and Macau are members.

Friday’s meeting in Macau – the subject of a recent FATF audit – said the “Financial Security Expert Alliance” would make good use of “Macau’s unique environment to accumulate practical experiences in regard to financial security”.

The post-meeting statement ended: “All parties of the meeting reached consensus and agreed to publish the above information.”