Hong Kong regulator fines Coutts for breaching anti-money laundering rules

(Adds UBP spokeswoman statement)

HONG KONG, April 11 (Reuters) - The Hong Kong Monetary

Authority (HKMA) said on Tuesday it had ordered the local branch

of private bank Coutts & Co Ltd to pay a fine of HK$7 million

($900,800) for breaching anti-money laundering and

counter-terrorist rules.

HKMA said the move followed a probe that found Coutts had

failed between April 2012 and June 2015 to set up and maintain

procedures for determining if "its customers or the beneficial

owners of its customers were politically exposed persons".

"Politically exposed persons" (PEPs) refers to people with a

prominent public function, whom regulators view as presenting a

higher risk for potential involvement in bribery and corruption

due to their position and the influence they may hold.

The HKMA's probe also found Coutts's Hong Kong branch had

failed to identify PEPs despite relevant information being

publicly available, it said in its order.

Furthermore, the private bank failed to follow up promptly

on "PEP alerts received from a commercially available database"

to which Coutts subscribed, the order said, adding the firm had

taken remedial measures to address the deficiencies identified.

Hong Kong authorities are under pressure from international

bodies to clamp down on illegal money flows following a number

of high profile cases that involved local firms, including a

corruption scandal that engulfed soccer body FIFA in 2015.

The Panama Papers leak also drew attention to how wealthy

individuals use offshore companies, many of them structured by

intermediaries based in Hong Kong, to conceal assets.

The global anti-money laundering body, the Financial Action

Task Force (FATF), is due to inspect Hong Kong's anti-money

laundering and counter-terrorist financing rules next year.

Royal Bank of Scotland sold the majority of Coutts'

international assets to Union Bancaire Privee (UBP) in March

2015 after splitting the bank, best known as banker to Britain's

Queen Elizabeth II, into a British and a Swiss-based arm.

"UBP acquired a portion of Coutts International's client

base, but not the legal entity itself - it was an asset only

deal. As such, UBP has not inherited any of Coutts' legal

liabilities," a spokeswoman for Coutts said in a statement.

In February, Coutts was ordered to pay 6.5 million Swiss

francs ($6.6 million) by Swiss watchdog FINMA for breaching

money laundering regulations in its relationships with

scandal-tainted Malaysian sovereign wealth fund 1MDB.

Singapore's central bank in December imposed a penalty of

2.4 million Singapore dollars ($1.7 million) on Coutts due to

money laundering breaches also related to 1MDB.

($1 = 7.7708 Hong Kong dollars)

(Reporting by Sumeet Chatterjee and Michelle Price; Editing by

Mark Potter and Louise Heavens)