Corporate AIs Must Verify Customer Identity and Authorization

Strengthening Corporate Due Diligence in Hong Kong

The Hong Kong Monetary Authority (HKMA) has issued new guidelines requiring artificial intelligence (AI) systems used by financial institutions in Hong Kong to verify the identity of individuals seeking to establish business relationships with them. This move aims to strengthen corporate due diligence and anti-money laundering measures.

Key Requirements for AIs

• Verify the identity of individuals acting on behalf of corporate customers
• Obtain written authority from customers to confirm their authorization to conduct business
• Collect and verify identification documents, including proof of address and government-issued identification
• Consider alternative measures for verifying customer identity, such as technology solutions or translation tools

Understanding Customer Intentions

• AIs must understand the purpose and intended nature of the banking relationship being established
• Emphasis on understanding the rationale behind an overseas company seeking to establish a business relationship in Hong Kong

Risk Assessment and Controls

• AIs should not reject applications solely because the customer is incorporated offshore or has non-resident directors or beneficial owners
• Instead, they should consider operational risk and fraud controls are in place

Guidance for Frontline Staff

• Provide guidance or training to frontline staff on handling uncommon identification documents provided by customers
• Seek advice rather than rejecting applications upfront

Benefits of Implementing the Guidelines

By implementing these guidelines, financial institutions in Hong Kong can ensure that they meet their anti-money laundering and counter-terrorist financing obligations while providing a secure and efficient banking experience for their customers.