A Hong Kong regulator announced last week that it is fining JP Morgan HKD 12.5 million ($1.6 million). According to the Hong Kong Monetary Authority (HKMA), the investment banking giant’s local division broke anti-money laundering laws over a two year period running from February of 2012 to April 2014.
“This case involved deficiencies across a number of key control areas including CDD, periodic reviews and wire transfers, stemming largely from ineffective procedures and resulting in multiple contraventions of specified provisions of [anti-money laundering regulation],” said Carmen Chu, Executive Director, HKMA. “A bank must have procedures that are effective for the purpose of carrying out its duties under [anti-money laundering regulations].”
This is the first time that JP Morgan’s Hong Kong division has been fined by the local regulator. That may have contributed to the severity of the fine meted out by the HKMA.
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JP Morgan – Malicious or Simple Mistake?
As Chus’s comments imply, the investment banking firm broke a number of different anti-money laundering rules. In fairness to JP Morgan, some of these rules seem to have been extremely bureaucratic in nature, meaning that it doesn’t appear that there was a huge level of ill intent, if there was any at all, on the part of the company.
For instance, the problems with wire transfers were related to forms that had to be filled out. Yes, it’s possible that these forms were deliberately left unfilled but, as in most areas of homo sapien activity, the propensity for laziness and human error to cause problems shouldn’t be underestimated.
The same was true for a set of documents and data, pertaining to high-risk customers, that had to be updated regularly. Again, there is a chance that ill-intent that played some role in this but it seems just as plausible that someone forgot to fill in a few forms and follow some bureaucratic procedures.