The Hong Kong Monetary Authority (HKMA) announced the conclusion of an investigation and subsequent disciplinary proceedings against WeChat Pay Hong Kong Limited (WPHK), resulting in a fine of HK$875,000 ($112,000).
The penalty is imposed for violations under the Payment Systems and Stored Value Facilities Ordinance (PSSVFO), specifically section 8Q, which cites WPHK’s failure to meet the requisite standards for internal controls set out in section 6(2)(b) of Part 2 of Schedule 3 to the PSSVFO.
The enforcement action follows WPHK’s self-report and an extensive review by the HKMA, which spanned from August 25, 2016, to October 24, 2021.
The investigation revealed significant shortcomings in WPHK’s anti-money laundering (AML) and counter-financing of terrorism (CFT) systems.
Particularly, the inquiry focused on WPHK’s non-compliance in two critical areas: undertaking customer due diligence (CDD) review upon trigger events and applying enhanced due diligence measures to address and manage high-risk situations potentially involving money laundering and terrorist financing.
In assessing the penalty, the HKMA took into account the severity of the infractions and the broader implications for the financial industry.
The regulatory body emphasized the need to send a clear deterrent message about the critical importance of establishing and maintaining effective controls and procedures to manage AML and CFT risks adequately.
Despite the findings, the HKMA noted positively that WPHK had been proactive in addressing the deficiencies identified during the investigation.
The company implemented comprehensive remedial measures to enhance its control systems and ensure compliance with regulatory requirements moving forward.
Furthermore, WPHK’s cooperative approach and its clean disciplinary record prior to this incident played a favorable role in the final decision.
Raymond Chan, Executive Director (Enforcement and AML) of the HKMA, underscored the necessity for all Stored Value Facility (SVF) licensees to implement robust enhanced due diligence practices. He said:
SVF licensees must apply enhanced due diligence measures on their customers in situations that potentially involve high risks of money laundering and terrorist financing. These measures are essential not only for compliance but to ensure that the associated risks are managed effectively.
This disciplinary action serves as a reminder of the HKMA’s strict regulatory stance and its commitment to safeguarding the integrity of Hong Kong’s financial systems against illicit activities, analysts said.
It also highlights the ongoing regulatory expectations that financial entities maintain high standards of operational compliance to prevent misuse of the financial system.