Is the Hong Kong Monetary Authority being two-faced on bank accounts?

Tough on money laundering and tough to get basic services

PUBLISHED : Saturday, 10 September, 2016, 5:22pm
UPDATED : Sunday, 11 September, 2016, 12:42am

If we discover that they are unfair to customers and in breach of the basic requirements for providing banking services, we will exercise our statutory powers to demand them [sic] to rectify their practices.

Arthur Yuen, deputy chief executive,

HK Monetary Authority,

SCMP, September 9


You can just hear that fist pounding that desk. When we told banks to get tough on money laundering, we wanted them to get tough, not tough. There is a difference, you know. Anyone can see that.

Pardon me if I cannot. What we have here is a discriminatory, self-serving piece of theatre by an HKMA official trying to dodge blame for the difficulty people increasingly have in opening new bank accounts.

It is discriminatory because the HKMA has distributed a list of more than 20 banks that it professes are willing to serve start-up companies and foreign small and medium-sized enterprises. The list, however, specifically excludes HSBC and Standard Chartered.

A regulator has no business directing buyers in a market it regulates to specific sellers. If it believes some sellers are breaching the rules of the market, then it must take formal regulatory measures against them. Mr Yuen could actually be leaving himself and the HKMA open to legal action here.

More than that, he knows exactly why HSBC has to be strict about opening corporate accounts for foreign entities. It ran into serious trouble in the United States when such accounts were suspected of being held by drug traffickers. The bank is still in effect on probation for doing any business in the US.

If it believes some sellers are breaching the rules of the market, then it must take formal regulatory measures

But going after “banksters” is a recognised stepping stone to high political office in the US and HSBC is especially vulnerable to such attacks. It has no big national government to protect it. Even its home regulator in Hong Kong won’t stand up for it.

The question here is whether Mr Yuen has been two-faced. Does he believe that American regulators are too strict on HSBC and we should adopt lower standards than they do? This might explain his referrals to local banks that don’t ask questions.

If so, however, would he care to say so to American regulators? Please, sir, catch a flight to New York and tell them that you won’t put up with it any longer. Go ahead. I dare you.

He will not, of course, and one reason is that Hong Kong is also subject to the pronouncements of the Financial Action Task Force, a Paris-based watchdog of money laundering. It is sponsored by the European Union and can make life difficult for any financial system to which it gives a low rating.

We passed our last FATF rating in 2007 but with a few so-so comments. Our next formal rating is due in just over a year.

We cannot risk a low score. We must not draw attention to the fact we launder trillions of dollars a year in mainland capital flows. You didn’t know this, did you? Well, now you do.

It is why our courts jail low-level cash couriers for up to 10 years. FATF likes stiff penalties and this keeps FATF looking the wrong way. Our Court of Final Appeal recently had a chance to restore justice in the Carson Yeung case, but it failed us. Why?

Let’s look at it from the viewpoint of an HSBC clerk who has been told in one compliance lecture after another that she must not allow money launderers to open bank accounts. How do I know who is a money launderer, she asks?

Well, comes the answer, sometimes they look like this and sometimes they look like that and sometimes like something else entirely and now that you know exactly what they look like, you no longer need to ask such questions.

So the HSBC clerk refuses the account as she naturally remains confused, while the clerk for the smaller Robemblind Bank takes the account as the lectures she attended have rather laid emphasis on making money for the bank.

If you have nothing worthwhile to say, Mr Yuen, then say nothing.