HKMA gets the balance right on AML

The prevention of money laundering and terrorist financing, as I’ve said before in this blog, is something we should all take very seriously, as its objective - to make it as difficult as possible for money launderers, drug dealers, corrupt politicians, people traffickers, terrorists and all manner of criminals to conduct their unwanted activities through Hong Kong – is undoubtedly to the benefit of society, to the people of Hong Kong.

However, at the same time, we want to ensure that Hong Kong remains “open for business”, that the public are not unnecessarily inconvenienced, that start-up businesses – both traditional SMEs and local and overseas-based fintechs - can thrive, and that Hong Kong can continue to play its leading role in world trade and in the internationalisation of Mainland China.

This is a difficult balancing act, and it could be said that Hong Kong’s approach has tended to be to “err on the side of caution”, by having relatively tight AML controls. It is good to see, however, that Hong Kong is adopting an increasingly pragmatic and risk-based approach. I refer here to the recently-issued revised HKMA AML guidelines, which are more customer/business friendly than previously, provide greater clarity, and increasingly advocate a risk-based approach. This does not mean a general relaxing or going soft on AML/financial crime, what it means is that ordinary people, who pose a low level of risk, should be subject to more limited AML requirements, with the “third degree” reserved for those who potentially pose a higher risk.

It will take some time for this to work through into banks’ procedures (and international banks will have to square these new requirements with their home country requirements), but the message is clear: Hong Kong is trying to make the AML requirements easier for the majority of people who are law-abiding, but harder than ever for those who potentially are an AML/financial crime risk.