HKMA Fines Commerzbank $764,000 for Anti-Money Laundering, UBO & PEP Failure, Did Not Terminate 12 Clients for 4 Years Despite Non-Compliance
1st September 2022 | Hong Kong
The Hong Kong Monetary Authority (HKMA) has reprimanded and fined Commerzbank (HK) $764,000 (HKD 6 million) for failure in Anti-Money Laundering & Counter-Terrorist Financing, including failing to establish if beneficial owner (BO) of a customer is a politically exposed person (PEP). Carmen Chu, HKMA Executive Director (Enforcement and AML): “As the first line of defence, carrying out CDD measures upon customer on-boarding is fundamental to combating money laundering and terrorist financing and thereby maintaining the integrity of the banking system of Hong Kong. Banks should make reference to the HKMA’s relevant guidelines and circulars in reviewing and optimising the performance of their anti-money laundering and counter-financing of terrorism control systems on an on-going basis, to ensure that the design and implementation of their policies and procedures remain effective.” HKMA: “The disciplinary action follows an on-site examination and further investigation by the HKMA on CBHK’s systems and controls for compliance with the AMLO. The control lapses identified in the investigation relate to conducting customer due diligence (CDD) before establishing business relationships during the period between April 2012 and June 2016. CBHK also failed to establish and maintain effective procedures for carrying out its duties under the AMLO in relation to conducting CDD and implementing name screening mechanism of customers’ beneficial owners during this period.”
” HKMA Fines Commerzbank $764,000 for Anti-Money Laundering, UBO & PEP Failure, Did Not Terminate 12 Clients for 4 Years Despite Non-Compliance “
Commerzbank Breaches Anti-Money Laundering & Counter-Terrorist Financing
Commerzbank Hong Kong (CBHK) contravened section 19(1) of Schedule 2 to the AMLO as it failed to establish and maintain effective procedures for determining whether a customer or a beneficial owner (BO) of a customer is a politically exposed person (PEP). Before August 2015, CBHK’s automated PEP name screening was conducted only on customers but not on customers’ BOs. Furthermore, the procedures of CBHK for manual PEP name screening of customers’ BOs were not implemented effectively, with some delays in name screening of, and omissions in identifying, BOs of PEP-related customers. CBHK’s failure to establish and maintain effective procedures for carrying out the CDD measures set out in section 2(1)(b) of Schedule 2 to the AMLO to identify customers’ BOs also contributed to CBHK’s failure to have effective procedures for determining whether a customer’s BO was a PEP.
During the Relevant Period, the procedures adopted by CBHK for carrying out CDD fell short of the standards in respect of the relevant requirements under the AMLO and the HKMA’s Guideline on Anti-Money Laundering and Counter- Terrorist Financing for Authorized Institutions. The procedures allowed continuity of a business relationship despite the failure to carry out CDD measures, as long as the approval from a line manager was obtained. Moreover, no requirement had been established nor maintained in any of CBHK’s procedures or manuals for checking the completeness of CDD measures or the time of completion of the CDD measures before establishing business relationships. CBHK therefore contravened section 19(3) of Schedule 2 to the AMLO.
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