A report notes that banks are still trying to work out just how heavy a burden the cost of complying with AML rules in Hong Kong is going to be.

Hong Kong’s banks are trying to work out how much tax expertise they must add as the jurisdiction’s regulator requires them to be responsible for tax offences of their clients, according to the South China Morning Post.

The move is part of a drive by the Hong Kong Monetary Authority to ensure customers have paid taxes. A new guidance paper from the HKMA, a signal on hard regulation to come, says banks will need to heighten the now-standard money laundering checks they run on new customers to check for irregularities in tax reporting, the SCMP report said.

Banks will also have to launch reviews into the businesses and transactions of current clients. That means they must open their books to identify possible former infringements that will help them calculate how much risk a customer poses.

The article goes on to note that around 39 per cent of regional bank respondents to a KPMG survey last year predicted a 50 per cent increase in compliance spending over the next three years. Notably, HSBC Holdings said this year it had doubled its compliance staff since 2011 to about 7,000 people.

(Editor’s note: it is worth pointing out that Hong Kong, which has had AML rules in place since the 1980s, has taken what appear to be strong steps to stamp out illicit transactions. The article in the SCMP merely reinforces an accepted point in that stopping money laundering is an expensive task for banks – but being punished for it is likely to be even more costly. Ultimately, all the systems and resources devoted to fighting AML will be worthless without banks and other financial institutions developing a culture that frowns on such activity.)