Hong Kong Insurance Authority Fines Insurer AIA $2.9 Million for Money Laundering Failures from 2016 to 2022, Non-Detection & Delayed Flagging of Some Politically Exposed Persons Including Establishing Source of Funds & Wealth, Some High Risk Clients Were Not Subjected to Enhanced Due Diligence on Time
6th August 2024 | Hong Kong
The Hong Kong Insurance Authority (IA) has fined insurer AIA $2.9 million (HKD 23 million) for money laundering failures from 2016 to 2022, including non-detection & delayed flagging of some Politically Exposed Persons (PEPs), establishing source of funds & wealth, and some high risk clients were not subjected to enhanced due diligence on time. Hong Kong IA (2/8/24): “Following an on-site inspection carried out by the Insurance Authority (IA) under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO), on the business carried on by AIA International Limited (the Company) through its Hong Kong branch, the Company has been ordered:-. (a) to submit to the IA by a date and in a manner to be specified by the IA, a report prepared by an independent external advisor to validate the ongoing effectiveness of the remediation measures implemented by the Company to comply with AMLO; and. (b) to pay a pecuniary penalty of HK$23 million. The inspection related to processes and controls in effect for both new and in-force business for the period from March 2016 to October 2022. During the inspection, the IA found technical issues with the manner in which the Company’s Hong Kong branch had implemented and was using its anti-money laundering system (AML System) and associated algorithm. As a result, not all customers (or the beneficial owners of its customers) who were politically exposed persons (PEPs) had been picked up in the screening “alert” processes. Whilst ultimately there were no policy holders onboarded who should not have been, the system issues identified resulted in delays in the Company’s Hong Kong branch establishing their source of funds/wealth and obtaining the requisite senior management approval as required by AMLO. Certain customers assessed by the AML system as being “high risk” had also not been subjected to enhanced due diligence in a timely manner and it was identified that improvements were needed in the monitoring processes for suspicious transactions in the Company’s Hong Kong branch. The Inspection also found scope for the Company to enhance its AML compliance and management oversight processes in its Hong Kong branch. Demonstrating a cooperative approach throughout and following the Inspection, the Company has implemented a range of measures to remediate all matters identified and to strengthen and reinforce its governance, controls and oversight. These include further investments to enhance and upgrade its AML System and associated processes and generally using the Inspection findings made by the IA as a catalyst to reinforce, drive and strengthen AML compliance controls across its business. The actions taken by the Company demonstrate the value of the regulatory inspection regime, both in subjecting insurers’ governance, processes and systems to scrutiny and in driving remediation and constant improvement through direct engagement between the regulator and those it regulates. The IA acknowledges the Company’s co-operation during the Inspection, its early acceptance of the findings and its response and commitment to remediating all matters and implementing improvements. This has included substantial investments in the relevant systems already made by the Company and a commitment by the group to which the Company belongs voluntarily to engage an independent expert advisor to validate the ongoing effectiveness of the anti-money laundering controls and processes across the group’s businesses. All authorized insurers and licensed insurance intermediaries carrying on long term business must have in place effective anti-money laundering and counter-terrorist financing controls and procedures. This disciplinary action demonstrates that they will be held to account for this, no matter the size of their operation. The insurance industry must be founded on trust and integrity. The establishment of effective systems and controls to combat money laundering and terrorist financing is imperative to reinforce that trust. It is also vital to maintaining Hong Kong’s position as an international finance centre.”
“ Hong Kong Insurance Authority Fines Insurer AIA $2.9 Million for Money Laundering Failures from 2016 to 2022, Non-Detection & Delayed Flagging of Some Politically Exposed Persons Including Establishing Source of Funds & Wealth, Some High Risk Clients Were Not Subjected to Enhanced Due Diligence on Time “
Notes:
- The disciplinary action is taken under section 21 to AMLO. AMLO imposes customer due diligence and record-keeping requirements on financial institutions, including authorized insurers carrying on long term insurance business. The IA is the relevant authority under the AMLO in relation to authorized insurers and licensed insurance intermediaries carrying on long term insurance business.
- The Company contravened sections 5(1), 10(1), 10(2), 15, 19(1), 19(3) and 23 of Schedule 2 to AMLO.
Hong Kong Insurance Authority Fines Insurer AIA $2.9 Million for Money Laundering Failures from 2016 to 2022, Non-Detection & Delayed Flagging of Some Politically Exposed Persons Including Establishing Source of Funds & Wealth, Some High Risk Clients Were Not Subjected to Enhanced Due Diligence on Time
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