Optimising Fraud and Financial Crime Detection and Reporting (For AIs) (PDF File, 164.0 KB)Optimising Fraud and Financial Crime Detection and Reporting (PDF File, 136.2 KB)Guidance Paper on Transaction Monitoring, Screening and Suspicious Transaction Reporting (Revised in February 2023) (PDF File, 359.2 KB)

On February 9, 2023, the Hong Kong Monetary Authority published a Circular entitled „Optimising Fraud and Financial Crime Detection and Reporting“. The circular is primarily addressed at authorized institutions (AIs), specifically their compliance departments and responsible persons for AML and CFT issues, to inform of the issuance of an updated version of its Guidance on Transaction Monitoring, Screening and Suspicious Transaction Reporting.
This Guidance Paper was originally published in 2013 and provides principle-based guidance on how AIs „should design and implement their transaction monitoring systems and processes taking into account various factors“ and applying the principle of proportionality. It also provides guidance on „the internal controls relating to filing STRs [Suspicious Transaction Reports], including how to handle internal reports and post-STR reporting measures“. Furthermore, it deals with the quality of the STRs to better suit the needs of Hong Kong law enforcement and the Joint Financial Intelligence Unit (JFIU).
The updated version includes changes to the following three Chapters to incorporate the results from a thematic review of the performance of transaction monitoring systems of supervised AIs and insights from law enforcement:
1. Chapter 2 relating to Transaction Monitoring
2. Chapter 3 relating to Screening
3. Chapter 4 relating to Suspicious Transaction Reporting
Specifically, the key changes include the following – as mainly quoted:
– the provision of additional guidance and examples regarding system design and optimization including customer segmentation, parameters and thresholds calibration and testing;
– clarification of expectations for the transaction monitoring system to support integration of information and data from external sources as necessary to enhance targeting and mitigation of ML (Money Laundering) / TF (Financing of Terrorism) risks;
– the provision of additional guidance to clarify processes supporting the review of alerts, including access to sufficient databases, solutions or tools; establishment of alert triaging, backlog handling and independent assurance programmes to address timeliness, quality and consistency of alert clearance;
– the provision of further guidance on system setting and tuning to underline the importance of striking the right balance between system effectiveness and efficiency; and
– the provision of further guidance regarding ongoing review and senior management oversight of screening systems and processes, to support greater effectiveness and efficiency.
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As these are only the key changes made to the guidance, please review the original document for more detailed, comprehensive information.