On 12 Dec 2025, the HKMA issued guidance highlighting areas for enhancement in AIs' AML/CFT controls to address 'high-end money laundering' typologies, including improved risk assessment frameworks, proportionate CDD implementation across customer segments, robust SoW/SoF corroboration, and rigorous transaction monitoring. The HKMA requires AIs to conduct gap analyses of their controls and consider optimising them based on the identified enhancements.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction
On 12 Dec 2025, the Hong Kong Monetary Authority (HKMA) issued guidance addressing evolving money laundering and terrorist financing (ML/TF) typologies involving sophisticated methods to circumvent financial institutions' anti-money laundering and counter-financing of terrorism (AML/CFT) controls, referred to as 'high-end money laundering'. The guidance follows a thematic review assessing Authorized Institutions' (AIs) AML/CFT controls and identifies areas for enhancement to mitigate associated risks.
Risk Assessment Frameworks
The HKMA observed that while AIs' customer risk assessment frameworks generally identify higher-risk relationships, implementation requires improvement to address evolving criminal tactics. AIs must ensure adequate understanding and assessment of customer characteristics (e.g., multiple nationalities) and material profile changes (e.g., employment, wealth sources), applying proportionate additional controls where multiple risk indicators are present. Staff training and guidance to enhance ML/TF risk awareness across both first and second lines of defence are critical.
Customer Due Diligence (CDD) Implementation
Although AIs' CDD policies met regulatory requirements, implementation gaps were identified. Specifically, CDD measures for retail high-net-worth customers in wealth management segments were often less robust than for private banking customers despite comparable ML/TF risk exposures. AIs should periodically monitor retail high-net-worth portfolios and apply proportionate additional CDD measures based on updated risk profiles.
Source of Wealth and Funds (SoW/SoF) Corroboration
Effective SoW/SoF establishment is a key preventive control requiring enhanced implementation. The review noted overreliance on customer representations without sufficient challenge of information reasonableness or corroboration of ambiguities. Compliance functions must provide front-line staff with operational guidance referencing HKMA and Hong Kong Association of Banks' existing guidance (e.g., Smart Tips for Private Banking, 7 March 2023) to address higher-risk scenarios.
Transaction Monitoring (TM) and Information Sharing
While TM systems generated adequate alerts for unusual transactions, some alerts were closed without sufficient justification, particularly for large deposits from opaque sources, transactions with unclear third-party relationships, or jurisdictions with no customer nexus. AIs must assess transaction reasonableness against customer risk profiles and historical data. Additionally, AIs should review mechanisms for sharing high-risk customer information across banking group affiliates to enable a holistic risk view.
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