Coutts fined for violating terrorist rules

The Hong Kong Monetary Authority said on Tuesday it had ordered the local branch of private bank Coutts to pay a fine of HK$7m ($900,800) for breaching anti-money-laundering and counterterrorism rules.

The authority said the move followed an investigation that found Coutts had failed to set up and maintain procedures for determining between April 2012 and June 2015 if “its customers or the beneficial owners of its customers were politically exposed persons”.

“Politically exposed persons” (PEPs) refers to people with a prominent public function whom regulators view as presenting a higher risk for potential involvement in bribery and corruption due to their position and the influence hold.

The authority’s probe also found Coutts’s Hong Kong branch had failed to identify politically exposed persons despite relevant information being publicly available, it said in its order.

Furthermore, the private bank failed to follow up promptly on “PEP alerts received from a commercially available database” to which Coutts subscribed, the order said, adding that the firm had taken remedial measures to tackle the deficiencies identified.

Hong Kong authorities are under pressure from international bodies to clamp down on illegal money flows following a number of high-profile cases involving local firms including a corruption scandal that engulfed world soccer body Fifa in 2015.

The Panama Papers leak also drew attention to how wealthy individuals use offshore companies, many of them structured by intermediaries based in Hong Kong, to conceal assets.

The global anti-money laundering body, the Financial Action Task Force, is due to inspect Hong Kong’s antimoney laundering and counterterrorist rules next year.

Royal Bank of Scotland sold the majority of Coutts’ international assets to Union Bancaire Privee in March 2015 after splitting the bank, best known as banker to Britain’s Queen Elizabeth II, into a British and a Swiss-based arm.

In February, Coutts was ordered to pay Sf6.5-million ($6.6m) by Swiss watchdog Finma for breaching moneylaundering regulations in its relationships with scandaltainted Malaysian sovereign wealth fund 1MDB.

Singapore’s central bank in December imposed a penalty of 2.4-million Singapore dollars ($1.7m) on Coutts due to moneylaundering breaches also related to 1MDB.

THE PRIVATE BANK FAILED TO FOLLOW UP PROMPTLY ON ALERTS FROM A COMMERCIALLY AVAILABLE DATABASE