IOB's Hong Kong branch penalised Rs 9.3 crore under laundering law
Apart from IOB, the authority has levied penalties of HK$4 million and HK$3.7 million on Bank of Communications (Hong Kong) and Bank of Communications Co. Hong Kong Branch.
A senior IOB executive, however, told TOI that there was no fraud or anti-money laundering and counter-terrorism financing violations. It pertains only to issues over handling alerts generated by the software, which the bank is addressing by having additional checks.
'IOBHK has no history of disciplinary record regarding AMLO. It was only a matter of putting procedures in place,' the official said.
The development follows an investigation by HKMA, in which the authority has charged that IOBHK has contravened three provisions of AMLO between May 2021 and Jan 2024 (relevant period).
The HKMA statement said there was a significant failure by IOBHK to take all reasonable measures to ensure that proper safeguards exist to prevent its contraventions of Sections 5(1) and 19(3) of Schedule 2 to AMLO and to mitigate money laundering and terrorist financing risks effectively during the relevant period.
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The sections pertain to failure to establish and maintain effective procedures for the purpose of carrying out its duties, examine the background and purposes of transactions which were complex, unusually large in amount or of an unusual pattern, and had no apparent economic or lawful purpose.
'Specifically, IOBHK's management oversight of anti-money laundering and counter-financing of terrorism (AML/CFT) controls was inadequate.
The senior management did not have a clear leadership role and responsibility over AML/CFT matters. They did not adequately discuss key AML/CFT control issues at relevant committee meetings and failed to appoint a competent person with sufficient AML/CFT knowledge as the compliance officer.
As a result, the transaction alerts generated by IOBHK's transaction monitoring system were not properly followed up,' the statement added.
HKMA has asked IOBHK to conduct a look-back review on the transaction alerts generated by its transaction monitoring system and after the review is completed, to report to HKMA.
Seeking to submit a remedial plan to address the contraventions, the authority said, it has also taken into account all relevant circumstances of the case, including the need to send a clear deterrent message to IOBHK and the industry about the importance of having effective controls and procedures to address money laundering and terrorist financing risks.
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