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Friday, February 6, 2015, 09:19

HK must crack down on money-laundering

By Fung Keung

Iwas almost tempted to apply for a position I saw advertised in a local newspaper on Jan 31. Its main duties involved conducting the on-site examinations of anti-money laundering controls in financial institutions. This was to identify system deficiencies, suspicious activities and evolving trends.

On the same day, a Hong Kong newspaper, quoting figures from the little-known Joint Financial Intelligence Unit of the Hong Kong government, reported that money-laundering cases in Hong Kong in 2014 totaled 37,200 — up 13 percent from the 32,900 cases reported in 2013. The 2014 figure was double that of five years ago (2009).

HK must crack down on money-launderingWhat a shame! The Pearl of the Orient, as Hong Kong is sometimes known as, is no longer full of pearls but “black dots”. The government would be well-advised to clamp down on money-laundering. There is no room for leniency in combating such an evil.

Most money-laundering cases in 2014 involved banks. But money-launderers also used insurance companies, security firms and real estate brokerages to “clean” their ill-gotten gains. The number of suspected cases involving real estate brokers rose 140 percent between 2013 and 2014. Perhaps the “dirty” money was one of the reasons behind Hong Kong’s property boom in recent years.

The Hong Kong stock market rose sharply in the last several months. The Hang Seng Index jumped more than 2,000 points to close around the 24,400 level in early February 2015. Whether or not some of the large transactions were conducted by money launderers is anybody’s guess.

Other easy channels for laundering dirty money include auction houses and dealers of precious products. There have been news reports about secretive purchasers paying large sums of money for Chinese cultural relics at auctions in Hong Kong. It would perhaps be advisable from now on for auction houses operating in the city to be required, as are banks, to insist that potential customers (or bidders) identify the sources of their funds.

Basically, there are two principal factors contributing to the surge in money-laundering cases in Hong Kong. One is evidently the mainland’s crackdown on corruption. Such a crackdown has forced corrupt officials to transfer their money to Hong Kong or Macao. Casinos in Macao, however, have recently come under Beijing’s scrutiny.

The other factor in the rise in money-laundering cases in Hong Kong is less obvious, but nevertheless significant. Over the past 12 months, Indonesia, Malaysia and Australia have tightened their grip on Islamist terrorist groups since the United States and its allies began its campaign against the Islamic State in the Middle-east about a year ago.

Some terrorist groups in the region may have moved their money to Hong Kong — which remains a largely free economy, facilitating a free flow of capital.

It is time the Hong Kong government tightened up on suspicious funds flowing in from Southeast Asia and Australia. Hong Kong definitely does not want to be named as a haven for terrorist money. Hong Kong people would hate to see the city labeled a money launderers’ paradise.

People living in the special administrative region want it to remain a shoppers’ paradise.

If money-laundering is permitted to flourish in Hong Kong, the city’s image as a world financial center will be tarnished. Consequently, foreign investment might flow to Shanghai and Guangzhou but not to Hong Kong, The international image of the city could be damaged by a lack of action on this issue by our officials.

The government should recruit more experts to tackle money-laundering. It is an economic crime. Hong Kong must remain a “clean” city, in every sense of the word.

The author is a veteran journalist and an adjunct professor at Shue Yan University.

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