The Hong Kong Securities and Futures Commission (SFC) and Abu Dhabi Global Market (ADGM) have recently signed a cooperation agreement to jointly promote and support financial services innovation in Hong Kong and the United Arab Emirates.
The news came as Hong Kong’s financial institutions pleads for new FinTech solutions, including better use of know-your-client (KYC) checks, to help them combat money laundering activities that have been costing them millions of dollars.
The agreement, signed by SFC’s deputy chief executive officer and executive director of intermediaries Julia Leung and director of ADGM’s regulatory arm, the Financial Services Regulatory Authority Philippe Richard, aims to promote sharing of relevant information on innovation, offering support in the authorisation processes, and referring cross-border activities that will accelerate the growth of the financial and fintech industries in both jurisdictions.
“This agreement reflects the SFC’s continued efforts to collaborate with international regulatory counterparts to promote innovation in financial services,” said Julia Leung. “We look forward to sharing our experience with the FSRA on Fintech developments in our markets.”
Meanwhile, Philippe Richard of the ADGM said he looks forward to working with Hong Kong to support their local Fintech start-ups and innovative business.
“This cooperation further deepens the ongoing partnership and collaboration between Hong Kong and Abu Dhabi, and augments ADGM’s commitment in supporting the growth and financial developments of Abu Dhabi and the Middle East, Africa and the South Asia region.”
The cooperation is likely to be good news for banks and financial institutions in Hong Kong, as they have been urging regulators to allow more fintech solutions to help them prevent money being laundered through their accounts.
Earlier this year, Australia-listed Commonwealth Bank of Australia was fined a record US$530 million for breaching money laundering and terror financing laws. HSBC, on the other hand, spent about $3 billion last year on compliance and tripled its compliance headcount from 2013 and now employs 8,600 staffs in the department.
“Fintech solutions – facial recognition, for example – hold out great hope for the industry but haven’t been embraced as quickly as some might like by regulators around the world,” said Mark Austen, chief executive of the Asia Securities Industry & Financial Markets Association (ASIFMA).
“Whether KYC and AML (anti-money laundering) headcount will fall comes down to whether the institutions can automate – there are a lot trying to as it means they can cut costs and probably actually improve compliance,” Austen added.
While the Monetary Authority of Singapore and the Hong Kong Monetary Authority said in 2017 that they were considering whether KYC utilities should be put into place, they noted that the process would take time, as questions like who would be liable if data is inaccurate would be raised.
“It would be good if financial institutions in Asia at least all thought about the issues around KYC in a similar way,” said William Hallatt, partner at law firm Herbert Smith Freehills. “When we talk about the longer-term solution of technology, consistency is necessary.”