On 09 Sep 2024, the HKMA issued a circular urging Authorized Institutions to adopt AI for enhanced ML/TF monitoring, citing superior effectiveness over conventional systems. The HKMA will support this through industry forums, dedicated technical guidance, and innovation facilitation, requiring significant AIs to submit board-approved AI feasibility studies and implementation plans by March 2025.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Context and HKMA's Position
On 09 Sep 2024, the Hong Kong Monetary Authority (HKMA) issued a circular encouraging Authorized Institutions (AIs) to adopt artificial intelligence (AI) to enhance the effectiveness and efficiency of money laundering and terrorist financing (ML/TF) monitoring systems, in response to increasingly complex ML/TF risks including mule account networks and geopolitical challenges. The HKMA noted that AI-powered systems, which analyse contextual customer data beyond individual transactions, demonstrate superior performance to conventional rules-based monitoring, and reaffirmed its 2019 high-level AI principles while highlighting recent industry adoption.
HKMA's Support Initiatives
The HKMA will implement three key initiatives to accelerate AI adoption: (a) hosting an industry experience-sharing forum in November 2024 featuring AI deployments in suspicious activity monitoring; (b) establishing a dedicated supervisory team with external technical support to provide feedback and guidance through the Fintech Supervisory Sandbox and Chatroom; and (c) fostering a conducive environment for AML/CFT innovation by gauging industry interest and providing tailored guidance where appropriate.
Implementation Requirements for AIs
AIs with significant Hong Kong operations are required to conduct a feasibility study assessing AI's applicability to their ML/TF risk profile and future evolution, followed by a board-approved implementation plan addressing data dependencies. These studies and plans must be submitted to the HKMA by 31 March 2025, with the HKMA confirming individual timelines and submission formats through supervisory contacts in its AML and Financial Crime Risk Division.
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