Insurers have complained that the anti-money laundering law introduced a year ago puts too big a burden on their shoulders.
Some of the conditions should be changed or removed because they had gone too far and made life tough for insurers, said insurance sector legislator Chan Kin-por.
He said the law required telephone salespeople to collect photocopies of clients' identity documents but the practice is too troublesome for customers.
"Telephone sales usually involve simple policies of only a few hundred dollars per month. How can people use such a small amount to conduct money laundering? I think small transactions below HK$500 per month should be exempt from the law," he said.
If a life insurance company offers group medical products, the law also requires it to collect the personal information of the company directors.
"I simply can't imagine how people can use medical insurance policies to conduct money laundering. Insurers would only pay the hospital bills for these policies," he said.
Veteran banker Ignatius Chan Tze-ching, former Citigroup country officer for Hong Kong and now a senior adviser to Bank of East Asia, said most banks and their staff have been reporting suspicious transactions even before the new law was implemented and they have stepped up their efforts since then.
"The law has already had enough tough requirements on bankers. I do not think we need to tighten the law any further," Chan said.
"We, however, would need to use technology to develop better computer or other electronic programs to help identify the suspicious transactions," he said.
Civic party lawmaker Ronny Tong Ka-wah, who is also a senior lawyer, said the regulator should heavily fine banks which fail to prevent money laundering.
"Only a painful penalty such as a heavy fine would make sure the banks improve their internal controls to crack down on money laundering," Tong said.
Some global banks have been penalised substantially for lax controls on foreign fund flows between countries and HSBC in December agreed to pay a record US$1.92 billion in fines to settle a money-laundering investigation by the United States.
A spokeswoman for the Hong Kong Monetary Authority said the regulator attached great importance to maintaining effective anti-money laundering systems and controls. The law implemented last April has added criminal and disciplinary sanctions, including a fine.
"As in the case of other major international financial centres, we adopt a risk-based approach in the supervisory process, and review relevant court cases including the recent one to identify any implications for the HKMA's supervision of banks."
The Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance requires banks, stock brokers, insurance companies and money changers to conduct more rigorous checks on suspicious cash transactions and the background of their clients.
Companies that fail to put in place measures to prevent handling of money related to criminal activities face penalties including a public reprimand, a fine of up to HK$10 million or, in the most serious cases, criminal prosecution which may result in a maximum seven years in jail.