The HKMA said the bank failed to "continuously monitor business relationships and conduct enhanced due diligence in high risk situations" over a seven-year period.
The "control deficiencies" found during a HKMA investigation also included failure to keep records for some of its customers stipulated by the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the regulator said in a statement.
Parent group DBS, Southeast Asia's largest bank, was among lenders caught up in a billion-dollar money-laundering scandal in Singapore last year.
Banks are required to "put in place effective customer due diligence measures to combat money laundering and terrorist fiancing" and those measures should be regularly reviewed, said Raymond Chan, an executive director at HKMA.
DBS Hong Kong said in a statement that it accepted the HKMA's decision and takes anti-money laundering obligations seriously.
"The issues at hand were sporadic and historical in nature, having occurred between April 2012 and April 2019," it said.
DBS Hong Kong has been working with regulators to improve anti-money laundering controls and has implemented policies that "materially improved our capabilities to detect and mitigate money laundering risks", the bank said.
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