Regulatory Alerts2024-04-17
Added · Updated
Thematic Review of Transaction Monitoring Systems and Use of Artificial Intelligence
The Hong Kong Monetary Authority issued this circular to share findings from a thematic review of Authorized Institutions' transaction monitoring systems and their adoption of artificial intelligence. The document outlines regulatory expectations for optimizing these systems based on size, business scope, and money laundering or terrorist financing risks, while providing guidance on governance, data quality, and detection scenarios. It emphasizes that institutions must strengthen the effectiveness of their anti-money laundering controls by implementing best industry practices and leveraging technology to improve system efficiencies.
Our Ref.: B10/1C B1/15C 17 April 2024 The Chief Executive All Authorized Institutions Dear Sir/Madam, Thematic Review of Transaction Monitoring Systems and Use of Artificial Intelligence I am writing to share a report on key observations and good practices identified in a recent thematic review of Authorized Institutions’ (AIs) transaction monitoring (TM) systems. Effective detection of suspicious transactions is an essential element of anti-money laundering and counterfinancing of terrorism (AML/CFT) controls. The thematic review examined the end-to-end processes of design, implementation and optimisation of AIs’ TM systems, including governance and oversight, data quality, detection scenario, threshold setting and periodic review with a focus on strengthening effectiveness and output into the AML/CFT eco-system. The review also included how AIs adopt artificial intelligence to optimise the performance of TM systems, and provides AML/CFT specific guidance based on best industry practices. A number of case studies are set out in the Annex, including common characteristics of AIs which demonstrated strong management oversight and governance, and how technology and data were being used to improve TM system efficiencies. AIs are expected to optimise the performance of their TM systems, having regard to their size, business scope and ML/TF risks, by making reference to the HKMA’s regulatory expectations. /… page 2
- 2 - If you have any questions regarding this circular, please contact us at aml@hkma.iclnet.hk. Yours faithfully, Carmen Chu Executive Director (Enforcement and AML) Encl.