Financial Crime World

Hong Kong Banks and Police Collaborate in Fight Against Check Fraud and Money Laundering, but Gaps in Information Sharing Persist

In the digital age, financial centers around the world, including Hong Kong, have embraced digitalization to provide greater convenience and customer experience. However, this technological progress has also given rise to an increase in digital fraud, with criminals using sophisticated methods to trick individuals online. In Hong Kong, there were over 1,200 fraud-related banking complaints in 2023, more than double the number from 2022. The Hong Kong Police Force reported 33,923 cases of deception, a 52% increase, with estimated losses to victims reaching approximately HK$7.2 billion.

Fighting Financial Crime in the Digital Age

Fraudsters in Hong Kong, like elsewhere, aim to move and conceal their ill-gotten gains as quickly as possible to avoid detection. This process, known as “money laundering,” often involves routing funds through a network of mule accounts controlled by criminals, who have lured unsuspecting individuals to hand over their accounts. Fighting financial crime requires a prompt exchange of intelligence between law enforcement agencies and financial institutions.

Collaborative Initiatives against Fraud and Money Laundering

The Hong Kong Monetary Authority (HKMA) is collaborating with the Police and the banking sector through various initiatives, including:

  • Fraud and Money Laundering Intelligence Taskforce (FMLIT): This task force, comprised of the Police, the HKMA, and 28 banks, enables secure and timely information sharing among parties to facilitate swift action against financial crime.
  • 24/7 stop-payment mechanism: Banks and the Police’s Anti-Deception Coordination Centre share customer details and account information to intercept funds before they are transferred out of Hong Kong.
  • Real-time fraud monitoring systems: Retail banks have implemented these systems to strengthen suspicious payment identification and alert potential victims.
  • The Anti-Deception Alliance: Bank staff and Police officers come together under one roof to facilitate direct communication and collaboration.

These initiatives have resulted in the confiscation of approximately HK$1.1 billion in crime proceeds and the interception of around HK$12.3 billion in illicit funds.

The Need for Enhanced Information Sharing

Despite these accomplishments, there are still significant challenges in combating mule account networks and protecting against fraud. The major issue is the gap in information sharing between financial institutions. Current arrangements primarily enable information sharing in active investigations or during the time lag between victims reporting fraudulent activity and an investigation commencing; during this lag, stolen funds can move rapidly through the banking system, making their interception impossible.

Identifying Mule Accounts and Protecting Against Fraud

Banks face challenges in identifying mule accounts before they are exploited. Criminals use sophisticated methods to conceal their intentions when opening new accounts or even taking control of existing ones. Despite this, banks have employed advanced data analytics and real-time fraud monitoring systems to improve identification efforts.

The authorities and financial institutions recognize the need to enhance information sharing. A proposed solution is to allow banks to share customer information, subject to appropriate safeguards. This would help address the information gaps that criminals exploit.

The Hong Kong Monetary Authority (HKMA) is seeking public comments on permitting Authorized Institutions (AIs) to share information and giving legal protection to facilitate interception of illicit funds.

Consultation: Enabling Information Sharing between Banks and the HKMA

This consultation, launched by Eddie Yue, CEO of the Hong Kong Monetary Authority, seeks input on proposals to enable banks to share information and provides details on the scope of information that may be shared, as well as the various controls and safeguards. Interested parties can submit feedback before the consultation period closes on 29 March 2024.