Financial Institutions Crack Down on Fraud as HKMA Launches New Taskforce and SFC Sounds Alarm on Corporate Governance
Strengthening the Fight Against Financial Crime
In an effort to enhance the detection, prevention, and disruption of serious financial crime and money laundering threats, the Hong Kong Monetary Authority (HKMA) has launched a dedicated taskforce. The move comes as the Securities and Futures Commission (SFC) issues a stern warning to company directors and senior executives to exercise greater vigilance over risk factors.
HKMA’s Fraud and Money Laundering Intelligence Taskforce
The HKMA’s new Fraud and Money Laundering Intelligence Taskforce (FMLIT) is a public-private partnership between the authority, the Hong Kong Association of Banks, 10 major banking brands, and the police force. The unit aims to:
- Enhance the detection, prevention, and disruption of serious financial crime and money laundering threats
- Extend the existing anti-money laundering and terrorist financing regime with a focus on targeting current and future financial crime threats
SFC’s Warning to Company Directors and Senior Executives
The SFC has issued a formal reminder to directors and senior executives at listed companies in Hong Kong, urging them to exercise greater vigilance over fraud and money laundering risks. The regulator noted that it is currently conducting a large number of investigations into fraud cases, many of which involve serious allegations and dereliction of duty on the part of directors and senior executives.
Key Themes from SFC’s Busy Caseload
- Outright fraud by powerful directors or senior executives
- Company controllers putting their own interests before those of the company
- Non-executive directors failing to act as checks and balances on executive directors
Importance of Good Corporate Governance
The SFC reminds company directors and officers that they must:
- Act in good faith and in the best interests of the company and its shareholders
- Exercise due and reasonable care, skill, and diligence
- Refrain from making undisclosed profit
Directors and senior executives are expected to use their powers to implement proper internal controls and foster a culture of good corporate governance to reduce the incidence of fraud and misconduct.
Commitment to Protecting the Integrity of Hong Kong’s Financial System
The Hong Kong government has committed to protecting the integrity of its financial system and citizens from harm caused by financial crime, and the launch of FMLIT is seen as a significant step in this direction. The SFC’s warning to company directors and senior executives serves as a reminder that corporate governance is crucial in preventing fraud and maintaining investor confidence in Hong Kong’s markets.