HKMA fines Coutts HK$7m for breaching money laundering rules

Hong Kong Monetary Authority has imposed a HK$7 million (US$900,000) fine on Coutts & Co AG’s Hong Kong branch and reprimanded it for failing to follow anti-money laundering rules between 2012 to 2015.

An HKMA investigation found Coutts has breached five provisions of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance.

They include failure to establish and maintain effective procedures for determining whether its customers were politically exposed persons who are individuals vulnerable to corruption and pose a higher risk of money laundering

And the bank failed to obtain senior management approval to continue a business relationship with a customer after it had known the client was a politically exposed person, the authority said.

The bank also did not do sufficient due diligence before establishing a business relationship with customers.

In deciding the disciplinary action, the authority considered “it needed to send a clear deterrent message about the importance of effective internal anti-money laundering controls”.

Coutts Hong Kong has appointed external consultant to review its procedures and bring in measures to address the problems identified by the HKMA, the authority said.

“This is a case about deficiencies in the anti-money laundering and counter-terrorist financing systems and controls which led in some cases to a failure to identify politically exposed persons,” said Meena Datwani, executive director of enforcement and anti-money laundering of the HKMA.

“Banks are expected to have in place anti-money laundering and counter terrorist financing systems and controls that are commensurate with the risks presented and the HKMA will take enforcement action where appropriate to reinforce this message.”

Switzerland based private bank Union Bancaire Privée (UBP), which acquired the Asian business of Coutts last year, said it would not be affected by the penalties.

“UBP acquired a portion of Coutts International’s client base, but not the legal entity itself - it was an asset only deal. As such, UBP has not inherited any of Coutts’ legal liabilities,” UBP said in a statement in response to the HKMA action.

Coutts was also fined in December by the Monetary Authority of Singapore S$2.4 million (US$1.7 million) for breaching anti-money laundering regulations in 1MDB-linked transactions.

Hong Kong lenders have been stepping up their compliance to follow anti-money laundering rules, with HSBC announcing it would contact all retail and corporate clients to update their contract and funding source information while HSBC, Hang Seng Bank and Bank of East Asia all said if clients refuse to co-operate, their account may be suspended.