HKMA blames StanChart's NY office for anti-money laundering failures

The Hong Kong Monetary Authority put the blame for Standard Chartered's anti-money laundering failures squarely on the bank's New York operations yesterday in response to queries from the South China Morning Post.

News that US regulators had on Tuesday ordered the bank to pay a US$300 million fine and halt high-risk transactions originating in Hong Kong sparked market talk of what the decision said about compliance in Standard Chartered and the city's own regulatory regime.

"The Hong Kong Monetary Authority must point out that the [ruling] reflects SCBNY's failure in fully meeting the requirements imposed by the US authorities over transaction monitoring systems in the US," the HKMA said in a strongly worded statement sent to the Post. "It, however, does not reflect any comments on SCBHK's anti-money laundering systems and controls."

The New York Department of Financial Services said on Tuesday Standard Chartered's New York branch failed to flag high-risk transactions from clients in Hong Kong and the United Arab Emirates.

In response, the bank will temporarily suspend dollar-clearing services to "certain retail business clients" in Hong Kong and pay its second fine to the US in two years. In 2012, it was fined US$667 million.

Clients affected by the selective suspension of services in Hong Kong would number "a few hundred", representing a very small percentage of the bank's business, Standard Chartered said in a statement emailed to the Post. "The impacted clients from the order have been selected using a number of factors, including nature of business and transaction behaviour."

Without more clarity on the number of customers affected, uncertainty would hang over Standard Chartered's business in Hong Kong, analysts said.