Hong Kong, as an international financial centre with a highly externally-oriented economy, does face high ML/TF risks. Our competitive advantages here – namely, free flows of capital, people, goods and information; well-established legal system; sophisticated market infrastructure; and advanced professional services – also make our market attractive for criminals seeking to hide or move funds or evade financial sanctions. With such a risk profile, Hong Kong has a key role in that fight against attempts to abuse our systems, along with our regional partners who share many of these characteristics and fund flows. So this Conference – focusing on the regional response - is timely and very relevant. 11. Over the years, the regulatory landscape has changed. Since we started this line of work in the 90’s, we have seen a steady increase in the regulatory requirements and expectations we place on our financial institutions to combat ML/TF. More recently, the number of sectors and institutions which come within the regulatory remit also continues to grow. These are far from simple requirements however you look at them, particularly given the risk-based approach, a view which is supported by the experience of many financial institutions who have struggled getting it right. 12. The world of banking and finance has also changed significantly in the same period we have been applying these requirements. For example, technology has created new and significant opportunities for the development of the global economy, which has been good news for financial centres such as Hong Kong.
Easier access to financial services benefits us all, but there is a risk that it may also create more opportunities for criminals - if it’s convenient for us to move money in real time using our smart phones, it would also be convenient for money launderers as well. And there is no shortage of smart people looking for ways to exploit such new developments. 18. But technology, especially the fast-growing field of data analytics, has the potential to offer more effective and efficient ways to undertake our AML work. In particular, recent developments in artificial intelligence and data analytics, while still at an early stage, appear promising. For example, AI is already being used to – apologies for the jargon – “triage” alerts generated by monitoring systems to make subsequent case investigations by oldfashioned human beings more focused and efficient. And data analytics is being used to identify what normal behaviour looks like for particular segments or types of customer, thereby making it easier to spot behaviour that departs from the norm and which may therefore need to be scrutinised further. This has the potential to make monitoring less “expost” and allow potential problems to be spotted in real time to a greater extent. And I would once again stress the word “efficient” here: the HKMA is a banking regulator and we have an interest in seeing the banking sector’s cost-to-income ratios kept down, while without compromising effective controls. 19.