Banking Giant Committed Violations for 7 Years, Now Faces Punishment

Monday, 08/07/2024 | 12:36 GMT by Damian Chmiel
  • Hong Kong's monetary authority fined DBS Bank for anti-money laundering compliance failures.
  • The bank's lapses included inadequate monitoring of high-risk customers.
Fined

The Hong Kong Monetary Authority (HKMA) has imposed a HK$10 million ($1.28 million) fine on DBS Bank (Hong Kong) Limited (DBS HK) for breaching anti-money laundering and counter-terrorist financing regulations. The penalty follows an investigation that uncovered significant control deficiencies at the bank between April 2012 and April 2019.

Hong Kong Regulator Fines DBS Bank HK$10 Million for AML Lapses

The HKMA's investigation revealed that DBSHK failed to adequately monitor business relationships and conduct enhanced due diligence in high-risk situations. The bank also neglected to maintain proper records for some customers and lacked effective procedures to fulfill its duties under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).

Raymond Chan, Executive Director of Enforcement and Anti-Money Laundering at the HKMA
Raymond Chan, Executive Director of Enforcement and Anti-Money Laundering at the HKMA

"The HKMA requires banks to implement effective customer due diligence measures to combat money laundering and terrorist financing," Raymond Chan, Executive Director of Enforcement and Anti-Money Laundering at the HKMA, emphasized the importance of robust compliance practices. "These measures should undergo regular review to ensure their continued effectiveness."

Among the specific lapses identified, DBS HK failed to obtain identity documents for 609 authorizers of its corporate internet banking service, IDEAL, affecting 477 corporate customers. The bank also neglected to establish the source of wealth for 15 high-risk customers, potentially exposing itself to money laundering and terrorist financing risks.

Rory Doyle, Head of Financial Crime Policy at Fenergo
Rory Doyle, Head of Financial Crime Policy at Fenergo

“The region’s crackdown on banks’ money laundering activities marks a significant shift, with regulators intensifying their efforts,” commented Rory Doyle, Head of Financial Crime Policy at Fenergo.

In determining the penalty, the HKMA considered several factors, including the seriousness of the findings and the need to send a strong deterrent message to the banking industry. The regulator also acknowledged that DBSHK has taken remedial actions to address the identified deficiencies and has no previous disciplinary record related to the AMLO.

$2.2 Billion Case

A spokesperson for DBSHK responded to Bloomberg, stating that the institution takes its AML (Anti-Money Laundering) and CTF (Counter-Terrorism Financing) procedures "seriously" and accepts the regulator's decision. However, they noted that the issues for which the fine was imposed were "sporadic and historical in nature."

Last year, DBS was fined for similar violations, along with Citibank, Oversea-Chinese Banking Corp. (OCBC), and Swiss Life, for allegedly breaching Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) requirements. The total fines amounted to $2.83 million.

“Banks will need to enhance their due diligence efforts significantly. Many will need to perform comprehensive reviews of their compliance systems and quickly implement necessary upgrades,” added Doyle.

While the fine is relatively modest, it does not change the fact that one of Singapore's largest banks has been involved in several major controversies in the past, including a billion-dollar money laundering scheme, where the police secured $2.2 billion.

The Hong Kong Monetary Authority (HKMA) has imposed a HK$10 million ($1.28 million) fine on DBS Bank (Hong Kong) Limited (DBS HK) for breaching anti-money laundering and counter-terrorist financing regulations. The penalty follows an investigation that uncovered significant control deficiencies at the bank between April 2012 and April 2019.

Hong Kong Regulator Fines DBS Bank HK$10 Million for AML Lapses

The HKMA's investigation revealed that DBSHK failed to adequately monitor business relationships and conduct enhanced due diligence in high-risk situations. The bank also neglected to maintain proper records for some customers and lacked effective procedures to fulfill its duties under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).

Raymond Chan, Executive Director of Enforcement and Anti-Money Laundering at the HKMA
Raymond Chan, Executive Director of Enforcement and Anti-Money Laundering at the HKMA

"The HKMA requires banks to implement effective customer due diligence measures to combat money laundering and terrorist financing," Raymond Chan, Executive Director of Enforcement and Anti-Money Laundering at the HKMA, emphasized the importance of robust compliance practices. "These measures should undergo regular review to ensure their continued effectiveness."

Among the specific lapses identified, DBS HK failed to obtain identity documents for 609 authorizers of its corporate internet banking service, IDEAL, affecting 477 corporate customers. The bank also neglected to establish the source of wealth for 15 high-risk customers, potentially exposing itself to money laundering and terrorist financing risks.

Rory Doyle, Head of Financial Crime Policy at Fenergo
Rory Doyle, Head of Financial Crime Policy at Fenergo

“The region’s crackdown on banks’ money laundering activities marks a significant shift, with regulators intensifying their efforts,” commented Rory Doyle, Head of Financial Crime Policy at Fenergo.

In determining the penalty, the HKMA considered several factors, including the seriousness of the findings and the need to send a strong deterrent message to the banking industry. The regulator also acknowledged that DBSHK has taken remedial actions to address the identified deficiencies and has no previous disciplinary record related to the AMLO.

$2.2 Billion Case

A spokesperson for DBSHK responded to Bloomberg, stating that the institution takes its AML (Anti-Money Laundering) and CTF (Counter-Terrorism Financing) procedures "seriously" and accepts the regulator's decision. However, they noted that the issues for which the fine was imposed were "sporadic and historical in nature."

Last year, DBS was fined for similar violations, along with Citibank, Oversea-Chinese Banking Corp. (OCBC), and Swiss Life, for allegedly breaching Anti-Money Laundering/Counter-Terrorism Financing (AML/CFT) requirements. The total fines amounted to $2.83 million.

“Banks will need to enhance their due diligence efforts significantly. Many will need to perform comprehensive reviews of their compliance systems and quickly implement necessary upgrades,” added Doyle.

While the fine is relatively modest, it does not change the fact that one of Singapore's largest banks has been involved in several major controversies in the past, including a billion-dollar money laundering scheme, where the police secured $2.2 billion.

About the Author: Damian Chmiel
Damian Chmiel
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About the Author: Damian Chmiel
Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.
  • 1588 Articles
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