Enter the Financial Twilight Zone, a black hole where legal and illegal coexist in a parallel universe. Back in the 1980s anyone could easily open an account at a local Hong Kong bank and legally use a chop with your Chinese name as evidence of the account holder. Imagine that, no need for identification.
Those were laissez-faire days of “we won’t ask any questions so you won’t have to tell any lies” banking. Hong Kong was famous for being able to incorporate a company, open a bank account and move money within a day.
Bankers around Hong Kong during the 70s and 80s might remember the shop in Wan Chai where you could buy South African Krugerrands. Never mind the apartheid sanctions. Hong Kong truly was the high plains drifter of financial services.
Back then Hong Kong’s ‘can do’ attitude had as much to do with being able to deposit a suitcase of cash at the teller as it did with being able to stitch a bespoke suit in a day.
So when the Hong Kong Monetary Authority (HKMA) said they would act upon a growing chorus of complaints from businesses and individuals who experienced difficulties opening bank accounts it represented a strange and curious end to the ‘can do’ era.
Account applicants complained that they were being scrutinised as if they were terrorist financiers or criminal masterminds. Most people don’t know that the HKMA is the local, lead regulator for enforcing global regulations on anti-money laundering and know-your-client (KYC). These rules are being standardised around the world and must be followed by local banks.
Opening an account for the wrong persons and making questionable transactions have never been more risky for financial institutions. The Monetary Authority of Singapore suspended the license of BSI Bank for “gross dereliction of duty and failure to discharge responsibilities” regarding anti-money laundering and KYC procedures.
The cost of improperly screening transactions for new and existing clients are record setting fines and closure. And some of their senior executives have come under criminal investigation.
It is no wonder that it is easier for banks to turn away clients or bury them with information requests that simply can’t be answered. Demanding to know where your great grandfather found the money to start the family business is almost impossible to prove. And Asian family-owned companies are especially thwarted by these questions because of the informal and formal sources of capital among family members.
An executive at a European bank estimated that it costs as much as €HK$20,000 and 60 days to open an account for an institution or high net worth individual. More staff time is required for due diligence. Consultants and investigators might be employed. And the costs are rising with no end in sight.
Fortunately, mainland banks are more than happy to accept new accounts these days. That’s because, as a senior executive at an international bank sarcastically remarked, “They can’t even spell AML and KYC.”
It appears that the first victim of global regulation was the nostalgia of Hong Kong’s laissez-faire banking services. There is no way to return to the past if Hong Kong wants to retain its position as an international financial centre.
3 days ago by Pathay Singh
3 days ago by Pathay Singh
4 days ago by Pathay Singh