The Hong Kong Monetary Authority has levied a fine on the local branch of the State Bank of India and ordered it to submit an independent external advisor's report to gauge its compliance with a remedial plan.

The regulator has done so under s21 Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Chapter 615 of the Laws of Hong Kong). The auditor, when he/it reports, must gauge whether the remedial plan (actions taken by SBIHK in response to a regulatory visit in 2012 to rectify the weaknesses identified in its AML/TF controls) is good enough to dispel the contraventions the HKMA found and must report on how effective the plan is generally.

The HKMA says that between April 2012 and November 2013, SBIHK contravened ss3(1), 5(1), 19(1) and 19(3) Schedule 2 AMLO. It failed to:

• perform 'know your customer' or 'customer due diligence' work according to ss2(1)(a) and (b) Schedule 2 before establishing business relationships with 28 corporate customers;
• monitor its business relationships with its customers continuously; and
• establish and maintain effective procedures for working out whether its customers (or the beneficial owners of its customers) were politically exposed persons.

SBIHK's external consultant said that neither actual problem accounts nor suspicious transactions have been identified. SBIHK has no previous disciplinary record. No money-laundering seems to have taken place, just a series of internal control failures relating to AML/TF systems.