Published: 11:22 AM, 26 August 2026
FATF Warns Hong Kong Not to Allow Money Laundering
The Financial Action Task Force (FATF) has continued to press Hong Kong to strengthen its defences against money laundering and terrorist financing, warning that an international financial centre must remain vigilant against criminals seeking to exploit its sophisticated banking, corporate and investment systems. While Hong Kong has made substantial progress in developing its anti-money-laundering framework, international assessments have identified areas where supervision, reporting and enforcement require continued attention.
Money laundering is the process through which criminals attempt to disguise the origins of illegally obtained money and make it appear legitimate. Such funds can originate from fraud, corruption, illegal gambling, drug trafficking, smuggling and other criminal activities. If financial institutions and professional service providers fail to detect suspicious transactions, criminal networks can move and invest illicit funds through legitimate businesses and financial markets.
For Hong Kong, the issue is especially important because the city is a major international financial centre with extensive banking, securities, insurance and corporate-service sectors. Its position as a global commercial hub means that it handles enormous volumes of legitimate international transactions, but the same connectivity can potentially be exploited by sophisticated financial criminals.
The FATF has previously recognized Hong Kong's strong legal framework for combating money laundering and terrorist financing. Its mutual evaluation found that the territory had a broad money-laundering offence, an effective Joint Financial Intelligence Unit and extensive mechanisms for international cooperation.
However, the assessment also identified weaknesses, including relatively low suspicious-transaction reporting by certain designated non-financial businesses and professions and shortcomings in supervision of some sectors.
The FATF's follow-up assessment in 2023 noted that Hong Kong had made progress in addressing technical deficiencies. In particular, its rating for the regulation and supervision of designated non-financial businesses and professions was upgraded. Nevertheless, Hong Kong remained subject to regular follow-up, demonstrating that anti-money-laundering compliance is an ongoing responsibility rather than a one-time achievement.
One area requiring particular attention is the reporting of suspicious transactions. Banks and other regulated institutions are expected to identify unusual financial activity and report reasonable suspicions to the authorities. Professional sectors such as accountants, lawyers, estate agents and dealers in precious metals can also encounter transactions that may be linked to criminal proceeds.
Recent information from the Hong Kong Institute of Certified Public Accountants illustrates the challenge. It reported that only 16 suspicious transaction reports were submitted by accounting professionals in 2025, representing less than 0.01 per cent of the territory's 190,636 suspicious transaction reports. The institute said this was consistent with concerns previously raised by the FATF about low reporting levels among designated non-financial businesses and professions.
Authorities have therefore emphasized the importance of ensuring that regulated professionals understand that they do not need to establish criminal wrongdoing before making a suspicious transaction report. Their responsibility is to report when they have a reasonable suspicion, allowing law-enforcement agencies and financial intelligence specialists to investigate further.
Hong Kong is also facing new challenges created by technological and financial innovation. Virtual assets, digital payments, online financial services and increasingly complex corporate structures can create opportunities for criminals to move money rapidly across borders. Regulators must therefore ensure that technological development does not outpace financial-crime controls.
Hong Kong's own risk-assessment process has expanded to address emerging risks. The government's 2022 Money Laundering and Terrorist Financing Risk Assessment examined areas including virtual-asset service providers, stored-value facilities, virtual banks, legal persons and arrangements, and financial activities involving international elements. A third assessment is being prepared for publication in 2026.
International cooperation is another essential part of the fight against money laundering. Criminal networks rarely respect national borders, and illicit funds can pass through several jurisdictions before reaching their final destination. Hong Kong has established mechanisms for mutual legal assistance and cooperation between financial intelligence units. According to an IMF report, Hong Kong made 49 mutual legal-assistance requests to other jurisdictions between 2019 and 2023 in connection with money-laundering investigations or prosecutions.
The FATF's message should therefore not be interpreted simply as criticism of Hong Kong. Rather, it is a reminder that even jurisdictions with strong financial systems must continually improve their safeguards. The global nature of financial crime means that weaknesses in one sector can affect confidence in the wider financial system.
The consequences of allowing money laundering to flourish could be serious. Criminal money can distort legitimate businesses, encourage corruption, finance organized crime and undermine confidence in financial institutions. It can also damage Hong Kong's reputation as a secure and well-regulated international financial centre.
To address these risks, Hong Kong needs stronger supervision of vulnerable sectors, better suspicious-transaction reporting, effective enforcement and continued investment in financial intelligence. Banks and professional firms must maintain rigorous customer due diligence and beneficial-ownership checks while regulators should respond firmly to institutions that fail to meet their obligations.
At the same time, enforcement should remain proportionate and risk-based. Excessive compliance requirements can make legitimate business unnecessarily difficult, particularly for smaller firms. The objective should be to identify genuine risks without creating barriers to lawful economic activity.
Hong Kong has already demonstrated that it can improve its anti-money-laundering system. The challenge is to maintain that progress as financial crime becomes more sophisticated. The FATF's continuing assessments provide an important international benchmark, while Hong Kong's regulators and financial institutions must translate that guidance into effective daily practice.
Ultimately, protecting Hong Kong from money laundering is not merely a regulatory obligation. It is essential to preserving the city's reputation, financial stability and role in international commerce. A strong financial centre must be one where legitimate businesses can operate freely but criminals cannot hide their money. Continued vigilance, transparency, international cooperation and effective enforcement will be crucial if Hong Kong is to meet that standard.
