HKMA to Enhance AML/CFT Supervision Through Data & Tech

The HKMA intends to increase its engagement and data collection, make better use of data, and utilise suptech tools to enhance its AML/CFT supervision.

The HKMA (Hong Kong Monetary Authority) has initiated a series of steps aimed at strengthening its use of data and suptech in its risk-based AML/CFT supervision.

The so-called ‘AML/CFT Surveillance Capability Enhancement Project’ (AMLS Project) is one of the HKMA’s Digitalisation Programme initiatives to respond to the risks and opportunities resulting from new and emerging technologies.

The AMLS Project builds on Hong Kong’s mutual evaluation, which positively assessed the HKMA’s risk-based AML/CFT supervision, and aligns with international trends to leverage technology and data to identify and assess ML/TF risk.

In a new report, the HKMA outlines insights and recommendations identified by Deloitte Advisory, the project consultant, in a study which will inform the next three years of work to implement changes to make AML/CFT supervision “more proactive, targeted and collaborative”.

Key observations

The study found significant potential for AML/CFT supervision to become more proactive and targeted through the use of data analytics that leverages richer data environments, often on secure cloud platforms.

The use of analytics techniques involving web-scraping, natural language processing, clustering and automated content categorisation were also identified as ways to improve the HKMA’s awareness of emerging sector-level threats.

The HKMA can also enhance their risk-based supervision by leveraging advances in data collection, storage and processing to become more adept at anticipating and prioritising emerging threats, thereby making supervisory activities more proactive, targeted and relevant, the report said.

The study also found that talent and culture must evolve alongside the technology, data, analytics tools and infrastructure. “This means those embarking on digital transformation journeys are actively engaging and consulting their team members throughout the journey, not just at the end,” the report said.

“It means equipping individuals with knowledge and skills specifically tailored to themselves and their roles, encouraging them through appropriate motivators and incentives, and providing meaningful opportunities to put their newfound skills to use.”

Finally, the study found that deeper collaboration across the AML/CFT ecosystem – particularly through public-private partnerships – is more likely to generate good examples that can lead to the right outcomes.

“Such efforts emphasise establishing common objectives, prioritising threats, facilitating close engagement and dialogue, encouraging responsible innovation, and working together to establish clear and consistent regulatory expectations and guidelines that are technology neutral, and balance risk management with innovation,” the report says.

A review of the HKMA’s peer agencies found that many are using digital tools, such as APIs and cloud-based analytics platforms, to build upon existing partnerships, focus collective efforts and operate as a network to “move the needle on AML/CFT”.

New capabilities

Building on these findings, the HKMA is implementing a series of changes which it says will increasingly apply technology solutions to its risk-based AML/CFT supervision, while also allowing it to sustainably monitor for opportunities to adopt future technologies and techniques, and promote regtech adoption in the financial sector.

The HKMA has outlined four key priorities over the coming years:

1) To enhance its capability to proactively identify and manage emerging risks through the adoption of techniques such as horizon scanning as a core feature of the AML/CFT supervisory process, alongside existing collaboration with public and private sector partners on threat mitigation

2) To pursue data-driven AML/CFT supervision by enhancing the HKMA’s ability to source, capture, store and process data across the full spectrum of its AML/CFT supervisory activities, bolstered by analytics tools, technologies, enhanced data governance and structured data storage.

“These upgrades will lead to changes in the interface between the HKMA and supervised entities, improve the flow and quality of data, and further develop the HKMA’s ability to apply more dynamic and targeted AML/CFT supervisory activities,” the report says.

Additionally, the HKMA’s AML/CFT specialists will become more efficient and effective in their supervisory activities by gaining access to cloud-based applications, automation tools, analytics tools that will facilitate real-time collaboration and case management, reduce the risk of human error, increase resource capacity, and make better use of AML/CFT data.

3) To stay engaged with local and international members of the AML/CFT ecosystem through consultations, information sharing, joint learning and partnerships, namely to help AIs and SVF licensees accelerate their adoption of AML/CFT regtech, enable responsible innovation, and foster meaningful, outcomes-oriented collaboration on AML/CFT efforts.

4) To invest in people to help them develop the required competence, encourage them through the right culture, and empower them with relevant opportunities.

The full report is available here.

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