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The IA has imposed a HK$23 million pecuniary penalty on insurer AIA International for its lapses and deficiencies in anti-money laundering (AML) and counter-terrorist financing (CFT) oversight, highlighting the need for strict and controlled AML and CFT measures in response to evolving risks in the dynamic insurance market in Hong Kong.
The on-site inspection conducted by the IA on AIA International’s Hong Kong branch was related to processes and controls in effect for business carried out during the period from March 2016 to October 2022. During the inspection, the IA identified technical issues with the implementation of AML systems, including the identification of politically exposed persons (PEPs) and the timely execution of enhanced due diligence.
The IA’s inspection reveals that AIA International’s AML system failed to flag certain PEPs during its screening process, leading to delays in establishing customers’ source of funds and obtaining the necessary senior management approvals as required by the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). Additionally, some high-risk customers were not subjected to enhanced due diligence in a timely manner and the monitoring processes for suspicious transactions were found lacking.
AIA International has acknowledged the deficiencies and implemented various measures to strengthen governance and controls in its AML system. An independent external adviser will also validate the ongoing effectiveness of these remediation measures to comply with the AMLO.
What AML regulatory expectations should you be aware of?
The IA’s disciplinary action highlights the critical need for effective AML and CFT controls and procedures, indicating that it has escalated inspections over AML systems in the insurance industry in Hong Kong. The IA emphasises the significance of sound governance, internal controls and compliance awareness of AML systems, and stresses the need for adopting appropriate AML and CFT measures as well as enhancing internal controls to effectively manage AML-related risks. The penalty also serves as a reminder of the consequence of contravening regulations. It’s therefore important for authorised insurers and licensed insurance intermediaries to keep up with compliance regulations and to implement appropriate updates to existing AML systems.
How can Bovill Newgate help ensure your AML measures are fit for purpose?
Our team of dedicated and experienced consultants are well-equipped to help navigate the regulatory expectations in Hong Kong by providing tailored solutions to strengthen your AML and CFT systems.
We regularly conduct thematic reviews on existing AML and CFT controls and procedures, make recommendations on enhancements, and assist with closing any gaps. We can also review your compliance framework, policies, and procedures to ensure that they’re compliant with the latest regulatory requirements.
We also conduct independent reviews on remediation actions as required by the regulator.
Get in touch for more information on how we can assist you in aligning with the latest regulatory requirements.
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