Bankers arrested in police raids: time to review your controls?

Bankers arrested in police raids: time to review your controls?

Hong Kong police conducted a series of raids last week, resulting in the arrest of seven bankers allegedly involved in one of the city’s largest money laundering cases. The banks involved in the case have not yet been disclosed. Reports indicate as much as HK$6.3 billion (US $810 million), was laundered over a period of four years.

The investigation suggests bankers used their knowledge of internal processes to facilitate the opening of accounts using forged documentation. This case is a pertinent reminder of the risks posed by staff intentionally or knowingly, circumventing internal systems and controls for the illicit benefit of others.

What we can learn from recent money laundering arrests

Regulators across the globe expect firms to learn from others’ mistakes. Failing to do so may result in firms falling short of the evolving regulatory environment.

While this case will be on the radar of most credit institutions, other institutions may take less notice. However, with the Securities and Futures Commission (SFC) recent consultation hailing a greater risk-based approach for licenced corporations in Hong Kong, the securities sector should take note. Read our insights on the paper here: SFC consults on AML guidelines.

A risk-based approach, which is comprehensive, robust and understood by the firm, is the fundamental backbone to any effective financial crime framework. We frequently see firms invest a disproportionate amount of time and money into certain controls, while often neglecting others.

Addressing possible gaps in your financial crime framework

We regularly review risk assessments which fail to adequately consider how complicit staff may increase a firm’s likelihood of facilitating financial crime. With the SFC’s consultation placing limited focus on insider threat risk (outside of insider dealing risk), there is a risk this trend will continue.

This could be an expensive oversight from reputational, economic and regulatory perspectives. When it comes to reviewing your financial crime controls it’s worth challenging your firm with the following questions:

  • Does our risk assessment cover all relevant threats, such as complicit insider risk?
  • How are these risks effectively monitored and measured on an ongoing basis?
  • How do you ensure training is not just a tick box exercise?
  • How would you describe the firm’s culture?
  • If you were subject to a regulatory visit next week, what gives you comfort you would receive positive feedback?

We can help

Our highly experienced financial crime practice can help you quantify your inherent and residual risk profiles, and design and implement effective financial crime controls. Please get in touch to find out more.

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