The Hong Kong Monetary Authority (HKMA), the jurisdiction’s central banking institution, has published guidance that underlines the role of utilising external data to mitigate Anti-Money Laundering (AML) risks.
Resulting from a thematic review, it represents part of the HKMA’s response to COVID-19 related fraud, mule account networks, identity theft and investment scams. It looked at institutions’ end-to-end processes when it comes to how they handle and use data related to financial crime, including intelligence from the Fraud and Money Laundering Intelligence Taskforce (FMLIT), as well as that coming from public and internal sources. How the data contributes to the work of compliance and risk management streams was also considered.
Observations singled out include how AML/CFT systems should support the integration of external information and data, drawing on findings from banks that have enhanced their own frameworks through the use of such data.
One of the key factors for success highlighted is the effective use of RegTech solutions to enhance risk identification, with RegTech being noted as a tool that should be used to improve the “efficiency” of internal efforts to address the problem of financial crime as a whole. This follows a 2020 whitepaper, commissioned by KPMG, centred on the story of the state of RegTech in Hong Kong, delivering insight into current adoption and possible implementation barriers.
What the future may look like has also been considered, with detailed recommendations connected to helping to establish Hong Kong as a global leader and a location that nurtures rich talent laid out.
Within their latest guidance, HKMA also illustrate the importance of increased and targeted data awareness and training within financial institutions, as well as collaboration across the board within compliance and risk management functions, putting the spotlight on what will be important for institutions if they are to both eliminate risks and meet what is expected of them.
This HKMA guidance makes it clear that, when considering risk and compliance, the use of high-quality data and the latest innovative technology is a must for financial institutions, if they are to play an effective role in the global fight against financial crime.
Throughout the last 12 months, specifically, there has been an increase in opportunistic criminals looking to profit as a result of the current climate and change in working patterns, meaning institutions need to ensure their procedures are in order and take their compliance obligations seriously. We know that the fight against financial crime continues to be benefited by sophisticated RegTech solutions that are always on, always working and can instantly and actively flag suspicious activity.
There has been a greater push to grow the RegTech industry in Hong Kong in recent years, with financial institutions becoming increasingly digitally-focused, and it is more important than ever that they embrace the best in technology – both from a compliance perspective and for the good of their customers.
As we see daily, though working with global customers, in a space that is constantly looking to reduce risk and comply with regulations as well as increase efficiencies around key customer-centric processes, RegTech is no longer a nice-to-have, but a must have. By seamlessly automating KYC discovery, Encompass reduces costs while improving quality and dramatically reducing customer onboarding times, with the benefits evident across the board.