Hong Kong regulator fines Coutts & Co HK$7m for AML breaches

The Hong Kong Monetary Authority said it has “reprimanded” Coutts & Co’s Hong Kong branch for lapses in its compliance with anti-money-laundering regulations between 2012 and 2015, and fined it HK$7m (£721,720, US$900,720).

The reprimand and fine of London-based Coutts’s Hong Kong branch followed similar actions by regulators in Singapore and Switzerland, in connection with the Malaysian 1MDB scandal.

In particular, the HKMA said Coutts had contravened five specific provisions of the Special Administrative Region’s Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Chapter 615 of the Laws of Hong Kong).

Coutts is one of the UK’s oldest banks, and its most famous client is the Queen. It is an arm of Scotland’s RBS Group.

Part of sold entity

The Coutts operation in Hong Kong was part of what had been Coutts’s international private banking and wealth management business, which it agreed in 2015 to Switzerland’s Union Bancaire Privée. The deal, which resulted in a £200m goodwill write-down for RBS in 2015, completed in 2016.

A UBP spokesperson noted that because that bank didn’t take ownership of the Coutts “legal entity” as part of the acquisition, and because it didn’t acquire its Hong Kong client base until after the period in question, UBP was not affected by the HKMA’s actions.

In a statement, an RBS spokesperson said: “We welcome the conclusion of the investigation by the Hong Kong Monetary Authority into the Hong Kong branch of our legacy international private bank business, and its finding that we have ‘taken positive and intensive remedial measures’ to address the failings identified.

“We regret any historic failings in our anti-money laundering processes, and are in the process of winding-down this Swiss-incorporated business, following the sale of the majority of the assets last year.

“As announced in 2014, this sale reflects the revised risk appetite of RBS and its subsidiaries.”

HKMA: investigation’s findings

In a statement announcing its action against Coutts, the HKMA  said an investigation had determined that Coutts Hong Kong had “failed to establish and maintain effective procedures for determining whether its customers, or the beneficial owners of its customers, were politically exposed persons”.

It said it had decided to take the disciplinary action that it did in order to “send a clear deterrent message about the importance of effective internal anti-money laundering and counter-terrorist financing controls and procedures”.

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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