UnionPay ATM withdrawals to come under closer scrutiny in Hong Kong, as they are in Macau

HKMA quizzes banks on ATM cash withdrawals by UnionPay cards in the first six months, according to notice cited by Apple Daily.

PUBLISHED : Monday, 07 August, 2017, 1:28pm
UPDATED : Friday, 26 January, 2018, 4:14pm

The Hong Kong Monetary Authority (HKMA) has instructed local banks to submit data on cash withdrawals by UnionPay cards throughout the city’s automated teller machine (ATM) network, as the regulator cracks down on unauthorised capital outflow from the mainland.

Commercial banks must submit data and documentation regarding the volume and timing of the withdrawals by UnionPay cards for the first six months of 2017 to the regulator by this week, according to a notice cited by the Apple Daily newspaper. An HKMA spokesperson declined to comment.

The move, follows a similar step up in enforcement in May by Macau’s monetary authorities, and closes a loophole in China’s capital remittance regulations, that has thus far focused on the ability by companies to transfer money out of the country, said ING Bank NV’s economist Iris Pang.

“This is obviously to deter capital outflow from individuals using ATMs,” Pang said in Hong Kong. “This signals that the State Administration of Foreign Exchanges (SAFE) is still wary of capital outflow, even though it has slowed in terms of banks selling renminbi on their clients’ behalf.”

China’s authorities had been stepping up regulations since last year, when a deterioration in the renminbi’s value led to widespread capital outflow.

Chinese individuals are allowed to withdraw up to 100,000 yuan (US$15,737) in renminbi from overseas, and remit up to US$50,000 worth of foreign currency offshore annually, according to the country’s 2016 foreign exchange regulations. Users of UnionPay cards can withdraw up to 10,000 yuan per day, per card.

To skirt around the foreign exchange controls, some individuals had been using separate ATM cards to make cash withdrawals, prompting the regulators to crack down on the practice.

Last week, Chinese regulators instructed mainland banks to report on a daily basis any offshore bank card withdrawals, and bank transactions exceeding 1,000 yuan (US$148) starting from August 20.

The Macau government announced in May it would instruct all banks to tighten their compliance measures, known as “Know Your Customer (KYC)” procedures and systems, into all ATMs in the city to deter cash withdrawals that exceeded China’s capital controls.

In July, Macau instructed mainland Chinese holders of UnionPay cards to have their identity cards and faces scanned by facial recognition systems before they can withdraw money from ATMs.

The HKMA “is constantly enhancing the overall level of security of the financial system, including studying the feasibility, stability and cost efficiency of biometric accreditation technology including facial recognition,” an HKMA spokesperson said, adding the authority did not have any plans to instruct ATMs in Hong Kong to be equipped with facial recognition capabilities.

“The data and materials are easily available to Hong Kong banks,” said Pang. “In terms of feasibility, I do not think it hard for them to shift to a Macau style scrutinising model.