Hong Kong Imposes HK$6M Fine on Commerzbank AG for AML Lapses

The Hong Kong Monetary Authority (HKMA) has fined the Hong Kong branch of the German universal bank, Commerzbank AG a pecuniary penalty of HK$6 million (US$764,670).

The fine is for breaking four provisions of the country’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), which is embedded in Chapter 615 of the Laws of Hong Kong.

The central banking authority on Friday said it had issued the penalty following its investigation and on-site examination of the German subsidiary bank's systems and controls.

HKMA said it found that Commerzbank AG, the Hong Kong Branch (CBHK) did not establish customer duediligence (CDD) before entering business relationships with 17 customers between April 2012 and June 2016.

In addition, the government authority noted that the bank delayed conducting the CDD on the customers for as short as two months and as long as 46 months.

Moreover, it added that the bank failed to terminate its business relationship with 12 of the customers when it discovered it could not comply with the rule but instead extended the relationship for as long as six to 46 months.

“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 mechanisms of customers’ beneficial owners during this period,” HKMA explained.

‘Clear Deterrent Message’

Meanwhile, HKMA explained that Commerzbank AG’s failure meant that the bank could not determine whether a customer’s beneficiary owner was a politically-exposed person.

However, HKMA pointed out that the German-owned universal bank has taken 'prompt remedial action' to address the lapses it discovered.

To come to the decision, the apex bank said it considered “the need to send a clear deterrent message to CBHK and the industry about the importance of effective controls and procedures to address money laundering and terrorist financing risks."

Furthermore, the monetary authority said it took into account the bank’s cooperation with its investigation and enforcement proceedings as well as having no previous record of contravening the AMLO.

“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,” said Carmen Chu, the Executive Director of Enforcement and AML at HKMA.