Financial Crime World

Financial Crimes Investigation Process in Hong Kong Needs a Boost, Experts Say

Digital Fraud Epidemic in Hong Kong Reaches Alarming Levels

A growing number of people are falling victim to digital fraud in Hong Kong, with estimated losses to victims reaching HK$7.2 billion last year alone. The problem is so severe that experts say the city’s financial crimes investigation process needs to be overhauled to prevent criminals from exploiting information gaps between banks.

According to the Hong Kong Monetary Authority (HKMA), the number of fraud-related banking complaints received by the authority rose more than double in 2023 compared to the previous year, with over 1,200 cases reported. The Police’s Anti-Deception Coordination Centre also saw a 52% increase in deception cases reported in the first ten months of last year.

Initiatives to Combat Financial Crime

The HKMA has been working closely with the Police and the banking sector through several initiatives to speed up intelligence sharing among different parties to facilitate swift action against financial crime. These include:

  • Fraud and Money Laundering Intelligence Taskforce (FMLIT): a 24/7 stop-payment mechanism
  • Real-time fraud monitoring systems
  • Anti-Deception Alliance

Insufficient Efforts to Combat Financial Crime

However, experts say that these efforts are still insufficient to prevent criminals from exploiting information gaps between banks. The Financial Intelligence Evaluation Sharing Tool (FINEST) was launched by the Hong Kong Association of Banks in June last year to enable participating banks to share information on cases involving suspicious activity. However, FINEST currently only covers corporate accounts, and experts say that expanding this type of sharing to cover more accounts, including individual accounts, will be crucial in the fight against financial crime.

Proposal to Permit Information Sharing Among Banks

To address these concerns, the HKMA has published a consultation document seeking views on proposals to permit Authorized Institutions (AIs) - banks licensed and operating in Hong Kong - to share information and give them legal protection. Sharing will be allowed where AIs observe activity that indicates that customers, accounts or transactions may be involved in crime and need to alert other AIs to facilitate interception of illicit funds.

The proposal includes strict controls on the sharing of information, including requirements for designated platforms, confidentiality, and security measures. The HKMA will also supervise AIs for compliance with these controls and issue comprehensive guidance on the circumstances in which it is appropriate to share information.

Experts Call for Public Feedback

Experts say that this move is part of a growing international consensus that banks should be allowed to share information to prevent and detect crime, subject to appropriate safeguards. They urge all stakeholders to take the time to read the consultation document and send their views before the consultation period closes on 29 March 2024.

HKMA Chief Executive Eddie Yue said: “This is a matter that concerns all of us and we endeavour to strike the right balance between two important and legitimate objectives: protecting citizens from financial crime while protecting data privacy and confidentiality.”

The consultation document can be found on the HKMA’s website.