Hong Kong Monetary Authority (HKMA) has fined Coutts & Co AG, Hong Kong Branch, HK$7 million (SG$1.3 million) for contravening provisions in the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance. This is a result of an investigation conducted by the HKMA between April 2012 and June 2015. In December 2016, Coutts was fined by the Monetary Authority of Singapore (MAS) for breaching anti-money laundering regulations linked to the 1MDB transactions.
HKMA Investigation Results on Coutts
The results of the investigation revealed that Coutts has failed to identify politically exposed persons (PEPs) as well as delays in procedures to obtain senior management approval to continue business relations with a customer who were identified as PEPs after onboarding. According to FATF, customers who are identified as PEPs before or during the course of the business relationship must be subjected to the approval of the Financial Institution’s (FI’s) senior management. PEPs are classified as higher risk customers as their positions in prominent public functions makes them vulnerable to corruption.
HKMA says that this enforcement action is to send out a clear and firm message on the obligations and responsibility of a FI towards anti-money laundering and countering the financing of terrorism regime. FI should be reminded that proper due diligence must be conducted in a timely and accurate manner.
The Asian business of Coutts was acquired by Switzerland-based private bank Union Bancaire Privée (UBP) last year and said that it would not be affected by the penalties. UBP said in a statement in response to the HKMA action:
“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”