The Hong Kong Monetary Authority (“HKMA”) launched the first Anti-Money Laundering (AML) Regtech Lab (“AMLab”) on 5 November 2021 to further promote the application of regulation technology (or Regtech) under its “Fintech 2025” strategy.
The aim of the “Fintech 2025” strategy, which was unveiled in June 2021, is to encourage the financial indsutry to utilize technology comprehensively by 2025, as well as to promote the provision of fair and efficient financial services for the benefit of Hong Kong citizens and the economy. The five focus areas of the Fintech 2025 strategy are:
- For all banks to go fintech;
- Future-proofing Hong Kong for Central Bank Digital Currencies;
- Creating the next-generation data infrastructure;
- Expanding the fintech-savvy workforce; and
- Nurturing the ecosystem with funding and policies.
The AMLab focuses on employing network analytics to address the risks of fraud-related mule accounts, enhancing data and information sharing through public-private partnership efforts in AML. The first group of five banks will:
- use synthetic data to experiment with network diagrams for identifying suspected money mule accounts;
- learn how to integrate alternative data into more traditional data sets for analysis; and
- develop skills and capabilities to apply network analytics to identify hidden money laundering risks.
With an enhanced AML gatekeeping role of the banks through the help of technology, it is hoped that banks and customers will be better protected from fraud and financial crime losses, and that the general effectiveness and efficiency of the AML ecosystem in Hong Kong will be improved.
It is evident that the use of technology in combating AML risks is a growing trend in jurisdictions that share a similar business and legal landscape as Hong Kong. For example, the Monetary Authority of Singapore recently launched a new digital platform named COSMIC, for “Collaborative Sharing of ML/TF Information & Cases”, in October 2021. This digitalised platform will allow financial institutions to securely share information on customers or transactions which cross material risk thresholds to prevent money laundering, terrorism financing and proliferation financing. COSMIC will be the first centralised platform where information is shared in a structured format, thereby allowing for seamless integration with data analytics tools.
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