The HKMA investigation found that Coutts Hong Kong failed to establish and maintain effective procedures for determining whether its customers or the beneficial owners were politically exposed persons (PEPs).
The fine of HK$7m (£0.7m, $0.9m, €0.85m) relates to five breaches between April 212 and June 2015.
Meena Datwani, executive director enforcement and AML of the HKMA, said: “PEPs are individuals whose prominent position in public life may make them vulnerable to corruption and they therefore pose a higher risk of money laundering.
“Banks are expected to have in place AML/CTF systems and controls that are commensurate with the risks presented and the HKMA will take enforcement action where appropriate to reinforce this message.”
The bank also failed to obtain senior management approval to continue a business relationship after it became known that they were a PEP.
The investigation further found that Coutts Hong Kong failed to identify PEPs despite relevant information being publicly available and to follow up promptly on PEP alerts received from a commercially available database to which the bank subscribed.
HKMA said these failures were symptomatic of the deficiencies in procedures.
The Hong Kong reprimand follows swiftly on the heels of a $6.6m (£5.3m, €6.2m) fine by Switzerland’s financial regulator for violating money laundering rules and illegally profiting from transactions associated with sovereign wealth fund 1Malaysia Development Bhd.
The Swiss Financial Market Supervisory Authority (Finma) uncovered serious deficiencies in the bank’s anti-money laundering processes associated with scandal-plagued 1MDB in February 2017.