Hong Kong Proposes New Measures for Transactions with Law Enforcement Agencies

In an effort to combat financial crime, the Hong Kong Monetary Authority (HKMA) has proposed new measures that will allow authorized institutions (AIs) to share information with law enforcement agencies (LEAs) more easily.

The proposed mechanism aims to improve the quality of information shared between AIs and LEAs, increasing the effectiveness of transactions in combating financial crime. This is achieved by giving legal protection to AIs that disclose information, ensuring they are not liable for any claimed loss arising from such disclosure.

Similar Arrangements in Other Jurisdictions

Similar arrangements have been introduced in other jurisdictions with varying levels of success. While some countries have adopted compulsory sharing, Hong Kong has chosen a voluntary approach to avoid potential defensive responses from AIs. HKMA officials believe that this approach will encourage AIs to participate in the new mechanism while striking a balance between confidentiality and cooperation.

Building on Existing Successes

The proposed measures are expected to build on the success of the Financial Intelligence Network for Efficient Suspicious Transaction Sharing (FINEST), which was launched last June and has already led to the exchange of information related to corporate accounts suspected of involvement in fraud and mule account activities. Expanding FINEST’s scope to cover individual accounts will enable banks to share information more quickly, increasing the chances of intercepting illicit funds.

Addressing Fraud and Money Laundering

HKMA officials believe that the proposed measures will make an important contribution by closing gaps between banks and making it harder for criminals to exploit vulnerabilities. The authority has identified fraud, particularly digital fraud, as the biggest challenge currently facing the financial sector, with over 70% of money-laundering investigations and convictions linked to fraudulent activities.

Collaboration and Innovation

The proposed measures are part of the HKMA’s broader efforts to improve its anti-money laundering (AML) and counter-terrorism financing (CFT) frameworks. The authority is working closely with the banking industry to innovate and focus on effectiveness, recognizing that tackling financial crime is a shared mission that requires collaboration between stakeholders.

Conclusion

Hong Kong’s measures are seen as critical in maintaining its position as a major international financial center while ensuring the integrity and stability of its financial system. With the rising trend of financial crime, these new measures will play an essential role in combating fraud and money laundering, ultimately protecting the financial sector and its customers.