Hong Kong’s sophisticated banking system, so-called shell company formation agents and absence of currency controls make it vulnerable to money laundering, according to the U.S. State Department.

This year’s convictions of the school dropout and of a 61- year-old woman who lives in public housing and who the judge said wasn’t the mastermind of the offense have led some lawmakers to ask if banks are doing enough to fight the problem.

Banks Warned
Authorities in Hong Kong now have more powers under a new anti-money laundering law introduced last year that makes it a criminal offense for financial institutions to fail to carry out due diligence checks and monitor business relationships. The maximum penalty for such breaches is seven years in jail and a HK$1 million fine.

The Hong Kong Monetary Authority last week told chief executives of banks in the city to strengthen their controls and systems and said it was doubling the size of its anti-money laundering team.

“The regulators will be looking to demonstrate that they are being effective and making an impact” with ramped-up enforcement, Abdulali Jiwaji, a partner at Simmons & Simmons in Hong Kong, commented in an e-mail.

Singapore, another Asian financial center, is also tightening its money-laundering laws. From July, laundering the benefits of tax offenses will be a crime there. Convictions for money laundering in the Southeast Asian city rose to 25 in 2011 from 18 a year earlier, according to figures from the Singapore police.

The case is Hong Kong Special Administrative Region and Yeung Ka-sing Carson, DCCC860/2011 in the Hong Kong District Court.