The borough, long an oasis of good government and transparent finance in a region that frequently struggles with corruption and illicit money dealings, is well sensible of its reputation and wants to keep it.
In a report released at the end of April, Hong Kong have a claim ti its ability to fight dirty money flows as “medium-high,” citing its tenacious legal system, political commitment to the issue, and cooperation between the portion publicly and private sectors.
But the very strengths that give the city budgetary dynamism — such as openness to financial flows and the sheer size of the banking process — can also be weaknesses.
The government’s Hong Kong Money Laundering and Arsonist Financing Risk Assessment Report rated Hong Kong’s blanket money laundering risk, threat and vulnerability as “medium-high,” though it articulate the banking sector specifically faces a “high” risk.
“We are alert to the experience that Hong Kong’s competitive advantages … could also go for it attractive for criminals seeking to hide or move funds,” Paul Chan, fiscal secretary of Hong Kong, said in the report.
Illustrating the importance of commerce to Hong Kong, nearly 200 banking institutions had assets of HK$22.7 trillion ($2.89 trillion) at the end of 2017 — an amount on the brink of equivalent to nine times the size of its economy, according to the assessment.
Keith Williamson, handling director and head of disputes and investigations in Hong Kong and China for turnaround unflinching Alvarez & Marsal, said that authorities must balance the demand for openness and accessibility with regulation that’s tight enough to daunt money launderers.
“It’s a difficult balancing act to perform,” Williamson, an expert in forensic and investigative accounting, ascertained CNBC.
So-called suspicious transaction reports have nearly tripled in the five years to 2017, partly due to stepped-up proctor and better compliance since the 2012 implementation of a local ordinance against spinach laundering and terrorist financing.
The report described coping with the extend as a “challenge.” Analysts agree the system is under strain.
Angus Minor, a specialist in regulation, governance and compliance who teaches at Hong Kong Baptist University, provides authorities high marks for implementing anti-money laundering legislation and for awareness of the question.
But Hong Kong suffers from a lack of qualified specialists, predominantly at non-banks such as local securities firms as well as at regulators, who are qualified of analyzing complex transactions amid the toughened compliance and risk wants, Young said. That combined with general weaknesses in compliance and training give stops Hong Kong in a “vulnerable” state overall, he said.
“What I consider is that it underrepresents the true possibility of financial crimes, especially in anti-money tributing,” he said of the government’s assessment.
Young also said that while cracks to profile money launderers can be successful, so is their ability to adapt to swopped circumstances.
“So it’s basically like an air bubble under the carpet,” he said. “In the twinkling of an eye you press down on one side of the carpet the air bubble moves to the other.”
The post surrounding terrorist financing is less of a concern, according to the report, which outlined Hong Kong as having a “medium-low” risk level.
The report was emanated ahead of a visit by the Paris-based Financial Action Task Force, the broad standard bearer for fighting money laundering and terrorist financing, planned for later this year.
The Cooperative States has in recent years pushed for a stronger global regime against rolling in it laundering and terror financing and has used sanctions and penalties to spread the missive, Williamson said, which has caused governments to beef up their pecuniary defenses.
“So I don’t think it’s just a local reaction to the challenges that there are here,” he predicted of Hong Kong’s stance. “It’s clearly in line as well with an boost waxed regulatory regime around this globally.’