It is the first agreement of its kind between the two authorities and marks a step towards greater financial cooperation between the Middle East and Asia.

The MoU aims to strengthen regulatory collaboration between the two financial centres, reduce duplication of requirements, and facilitate cross-border market access.

It also includes provisions for information exchange, joint on-site visits, and the sharing of expertise and regulatory practices.

Waleed Al Awadhi, Chief Executive Officer of the SCA, said:

“This partnership with Hong Kong marks a transformative milestone in redefining the global investment landscape, unlocking unprecedented opportunities for investors to engage with one of the world’s most advanced financial centres. We are deeply committed to empowering investors through a resilient investment ecosystem, one that drives innovation, sets new benchmarks in international best practices, and underscores the UAE’s strategic leadership as one of the top global financial centres.”

Julia Leung, Chief Executive Officer of the SFC, said:

“This significant collaboration with the SCA has opened a new chapter in Hong Kong-UAE regulatory cooperation, not only reaffirming the city’s standing as a preferred fund domicile, but also highlighting its role as a premier gateway between Mainland China and the Middle East, especially in a fast-evolving global landscape.”

The agreement is intended to expand investment opportunities and reinforce cooperation in international financial markets, while supporting a more sustainable and resilient financial framework.

Featured image credit: SCA

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The agreement aims to ensure compliance, governance, and alignment of cross-border regulatory practices.

The MoU was presented during the 10th Belt and Road Summit in Hong Kong.

The MoU establishes a framework for consultation, cooperation, and information exchange to enhance the supervision of regulated entities involved in cross-border investment management or advisory activities.

The agreement follows a year of joint efforts by the SFC and DFSA, including a high-level meeting and a co-hosted roundtable with leading asset managers in Hong Kong.

Mark Steward, Chief Executive of the DFSA, said:

“Today’s MoU between the DFSA and the SFC will help firms operate in each other’s markets with confidence and integrity, and demonstrates our shared commitment to regulatory excellence and cross-border innovation. Together, we are strengthening the regulatory framework for global investment and capital mobility between Dubai and Hong Kong.”

Julia Leung, Chief Executive Officer of the SFC, said:

“The strengthened SFC-DFSA partnership underscores our shared commitment to bolstering regional market connectivity to create mutual long-term benefits for Hong Kong and DIFC as international financial hubs. This new milestone is set to reinforce Hong Kong’s pivotal role on the China-Middle East Corridor amidst ongoing global challenges.”

Featured image credit: DFSA

This article first appeared on Fintech News Middle East

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Here we unpack some key questions around this important topic.

• Understand financial sanctions and why they matter.
• Uncover best-practice approaches for remaining compliant as well as the consequences for non-compliance.

Financial sanctions enforce economic and trade bans against foreign jurisdictions and regimes, as well as individuals and entities engaging in harmful activity.

In the United States, the Office of Foreign Assets Control (OFAC) is responsible for implementing and enforcing financial sanctions, but the sanctions landscape is global in nature.

Specific sanctions have been outlined by the EU, the UN and many other governments, including Canada, Australia, the UK, and many more.

The 5th edition of the Global Sanctions Index (GSI) report by LSEG Risk Intelligence provides a detailed account of the key changes in global sanctions over the past year, as well as insights into the most important mega-trends – including uncertainty – that will shape sanctions in the coming months.

Here we answer some key questions around financial sanctions.

Five key questions answered

1. What are financial sanctions?

Financial sanctions are measures taken against targeted jurisdictions and regimes (including individuals and entities) engaging in harmful activities.

They are designed to restrict or prohibit transactions and can include entire countries or geographic regions.

They are primarily used to exert pressure to change negative behaviour, such as involvement in terrorism, money laundering, human rights abuses, the spread of weapons, and more.

These sanctions can be effective tools for achieving foreign policy objectives and guiding a nation’s interactions with other countries.

Some examples of common types of sanctions include:

• Asset freezes, including blocking access to the bank accounts, property or investments of a sanctioned individual or entity.
• Trade embargoes, such as bans on imports and exports to or from a sanctioned country.
• Investment bans, which can restrict or prohibit investments in sanctioned countries.
• Financial aid restrictions, which can prevent access to financial assistance, including loans, grants and aid programmes.

2. Why do financial sanctions matter?

Financial sanctions matter because they have economic and geopolitical repercussions and can therefore significantly impact global stability.

Sanctions can have:

• Economic consequences, for example governments can prohibit transactions with entire countries or geographic regions.
• Geopolitical implications, for example trade-related delays because of sanctions can create tension between countries and/or entities across the globe.

3. What are some of the consequences of non-compliance?

Non-compliance with global sanctions can have serious consequences, including:

• Potentially severe reputational damage: The impact of reputational damage is often unquantifiable – it can lead to long-term lack of credibility, tarnished customer relationships, and a loss of trust in your brand.
• Operational disruptions: If you are subject to an investigation, this can substantially disrupt day-to-day operations, with knock-on effects for your organisation.
• Criminal charges: In many cases, failure to comply with financial sanctions can result in criminal charges and even imprisonment.

4. What are the biggest challenges in sanctions compliance?

Implicit or narrative sanctions are often the biggest challenge in sanctions compliance.

Entities or individuals may not be explicitly named, but may be covered by broad narrative sanctions or be sanctioned based on their connections to a sanctioned entity or individual.

Some other key challenges include, but are not limited to:

• Complexity: The sheer volume and complexity of sanctions can be overwhelming, and often specialist knowledge is needed to navigate requirements.
• Inaccurate data: Inaccurate or incomplete data can leave you vulnerable to inadvertently transacting with a sanctioned entity or individual.
• High false positive rates: In some instances, robust screening can lead to false positive rates, disrupting legitimate relationships.

5. How can I improve my compliance?

The sanctions landscape is dynamic and complex, but there are resources and solutions that can cut through this complexity and help you keep abreast of ongoing changes.

The OFAC Framework for Compliance Commitments provides useful guidelines around sanctions compliance, and all organisations subject to US jurisdiction and foreign entities doing business with the US should review this.

It also is essential to implement a robust sanctions screening programme that starts with reliable access to accurate data, deep insights and comprehensive reports.

Sanctions are constantly updated, so timely data is essential to keep you informed of changes as they happen.

Some key points to remember include:

• Screening – of both customers and transactions – is an important first step in ensuring that you do not transact with any sanctioned individual or entity.
• Where heightened potential risk is identified, further investigations in the form of enhanced due diligence (EDD) can help you understand more about potential risk. Effective EDD delivers detailed insights and background checks.
• Ongoing transaction monitoring is also essential, because new risks can emerge at any time. Robust monitoring helps you uncover potential links to sanctioned individuals or entities.

The key take-away is this: complying with financial sanctions is non-negotiable, but with the right data, tools and expertise, you can cut through complexity, boost your efficiency and streamline your compliance function.

Download the latest Global Sanctions Index (GSI) report for more insights.

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This upward trend is expected to continue, as financial institutions maintain strong investment in technology and increasingly embrace innovations such as artificial intelligence (AI) and distributed ledger technology (DLT).

Regtech adoption in Hong Kong reached 97% in 2025, making it one of the most mature fintech verticals in Hong Kong. This near-universal adoption reflects the strategic importance institutions are placing on leveraging technology to enhance risk management while reducing operational costs, amid a shifting regulatory landscape.

Within regtech, the strongest growth 2022 to 2025 was seen in governance and accountability, conduct and customer protection, and risk management, where adoption grew by 116%, 42% and 37%, respectively.

Insurtech also saw significant gains, with adoption rising from 28% to 57% between 2022 and 2025. This represents the largest increase among fintech categories. In Hong Kong, at least one-third of retail banks have already implemented insurtech, according to HKMA. It is expected that all retail banks will have adopted insurtech to support their bancassurance services by the end of 2025.

Greentech also made significant progress, with adoption growing from 26% to 45% between 2022 and 2025. This reflects growing institutional focus on sustainable finance and climate risk management.

Finally, wealthtech adoption rose from 43% to 52% during the same period, underscoring the sector’s ongoing investment in enhancing investment services through digital platforms and automated advisory solutions. This growth is being driven by rising customer expectations for more sophisticated digital wealth management offerings.

AI and DLT drive innovation

Booming adoption of fintech in the financial services industry is accompanied by increased implementation of AI and DLT. In 2025, AI usage climbed to 75%, up from 59% in 2022, while DLT adoption rose from 30% to 45%.

Many institutions are moving from experimentation to operational implementation. In May 2025, Citigroup introduced Citi AI, a suite of AI tools for its employees in Hong Kong. The tools support internal operations including information retrieval from Citi’s policy library, document summarization and creation of electronic communications drafts among others.

That same month, HSBC launched its Tokenised Deposit Service for corporate clients in Hong Kong, claiming the first bank-led blockchain-based settlement service in the city. In its initial phase, the service supports treasury management with real-time HKD and USD payments between corporate wallets, as well as tokenization use cases settlements.

Future growth outlook

Looking ahead, AI and DLT are expected to continue driving innovation across all fintech domains. For example, in wealthtech and regtech, approximately 80% of anticipated use cases that will reach advanced maturity levels or higher are expected to be supported by AI and DLT. For greentech, this proportion is estimated to reach about 70% of advanced use cases, while in insurtech, around 60% of advanced implementations are expected to incorporate AI and DLT.

This momentum is backed by strong financial commitment. 95% of financial institutions plan to maintain or increase their fintech investments over the next three years, with half anticipating budget growth of 10% to 20%.

Financial institutions are also adoption a more strategic approach to technology spending. On average, 43% of technology budgets are allocated to in-house solution development, 30% to vendor partnerships, and 21% to critical support activities. This suggests a more balanced approach, underscoring growing recognition that successful digital transformation requires both new capabilities and robust operational foundations.

Persistent challenges

Despite progress, institutions face increasingly complex challenges. High implementation costs was cited by 75% of respondents as a primary concern, particularly for technologies requiring significant infrastructure investments or specialized expertise. Other major concerns include risks tied to new technologies (73%), such as cybersecurity, operational disruptions, and regulatory compliance issues, as well as challenges relating to integrating new technologies with existing systems (71%), as institutions must navigate complex technical environments while maintaining operational continuity.

HKMA’s Tech Maturity Stock-take study, conducted in January 2025, covers 56 submissions from authorized institutions. It examines both the quantitative progress in technology progress and the qualitative aspects of implementation maturity, aiming to provide insights into the evolution of fintech in the banking sector over the past few years and the challenges that lie ahead.

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The initiative is expected to enhance the efficiency, speed, and security of SME account opening and KYC processes.

Through this partnership, Standard Chartered Hong Kong will integrate Know Your Customer’s technology to automate company search data retrieval via CDI’s application programming interface (API).

The system also facilitates the identification of ultimate beneficial ownership (UBO) structures, contributing to more accurate risk assessments.

By consolidating and automating data collection processes, the bank aims to streamline SME onboarding, reduce turnaround times, and improve operational efficiency.

Stephen Man, Head of Wealth Management and Retail Banking at Standard Chartered Hong Kong, said:

“By automating KYC via Know Your Customer, we’re speeding up SME account opening and enabling non-face-to-face account applications anytime, anywhere. By leveraging alternative data through CDI and pursuing opportunities to collaborate with data partners, we can offer SMEs tailored loan solutions, helping them to enhance their operational efficiency and facilitate growth. This also contributes to the development of Hong Kong’s digital economy.”

Claus Christensen, CEO and Co-Founder of Know Your Customer, added:

“Through real-time registry integrations and intelligent automation, we are helping to make financial access faster, safer, and more inclusive. I’m proud that our technology plays a part in empowering future entrepreneurs and excited to collaborate with Standard Chartered Hong Kong to support the HKMA’s digitalisation agenda.”

Featured image credit: Standard Chartered Hong Kong

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According to Yicai, the central bank recently revised the Measures for the Supervision and Administration of Anti Money Laundering in Financial Institutions (Trial).

The 2014 version of the list of financial institutions already subject to the PBOC’s oversight included three major policy banks, six state owned commercial banks, nine joint stock commercial banks, two brokerages, two insurance firms, China UnionPay and UnionPay International.

Alipay and Tenpay, both non bank institutions, have a dominant position in China’s third party payments sector.

UnionPay led the market with a 26.6% share last year, followed by Shanghai based Alipay with 20.7% and Tenpay with 18.3%, according to industry data.

NetsUnion, established in August 2017 with the central bank’s approval, plays a critical role in the country’s financial infrastructure by serving as a licensed clearing house for transactions made by commercial banks and non bank payment firms.

“Alipay and Shenzhen based Tenpay together essentially form a duopoly in the non bank payments space, making them systemically important payment institutions,”

said Dong Ximiao, Deputy Director of the Shanghai Institute for Finance and Development.

“However, when it comes to enforcing real name account registration and other anti money laundering measures, they still lag behind traditional banks.”

Anti money laundering compliance has become a significant regulatory focus for third party payment firms in recent years.

In 2024 alone, the PBOC issued 55 penalties to such companies, with fines and confiscations amounting to around CNY174 million (US$24 million).

The most severe penalties, those exceeding CNY10 million (US$1.4 million), were related to failures in anti money laundering practices and weak customer identity verification.

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This surge brings with it opportunity and the heightened risk of fraud.

As more transactions move online, fraudsters are leveraging increasingly advanced tactics to exploit vulnerabilities in onboarding and transaction processes.

Traditional fraud prevention methods are struggling to keep up with the sheer scale and speed of today’s changing threat landscape.

Synthetic identity fraud now ranks among the top five threats keeping fraud teams up at night, particularly in mobile-first, high-growth markets like Southeast Asia.

Fraud tactics are no longer opportunistic; they are highly coordinated, cross-border and data-driven.

Organisations today must protect both their platforms and their customers without sacrificing the seamless experiences that have become their hallmark.

In fact, 62% of high-performing fraud teams now list real-transaction monitoring as their top investment priority, highlighting an industry-wide pivot from reactive to proactive security strategies.

The Limits of Traditional KYC

Know Your Customer (KYC) protocols have long served as the first line of defense.

Built around documentation verification and static data checks, these processes are essential for regulatory compliance.

However, in high-speed onboarding flows, KYC often becomes a bottleneck for real users and a sieve for bad actors.

Traditional KYC checks are increasingly falling short in the face of modern fraud.

Criminals have become adept at forging documents, acquiring stolen credentials and creating synthetic identities that can easily pass basic KYC checks.

The reactive approach to fraud prevention means that many companies are only able to detect fraud after the onboarding process is complete, when the damage may already be done.

Worse, legitimate customers may face unnecessary friction, leading to annoyance and abandoned applications.

The result is a costly balancing act: companies are paying to process fraudsters who ultimately fail KYC, while genuine users are left waiting in the wings, frustrated.

Digital Footprint Analysis: A Proactive Approach

A new approach is emerging, one that goes beyond KYC by harnessing the power of digital footprint analysis.

This approach analyses the digital trails users leave behind, such as email and phone number histories, social media presence and public records.

By evaluating the authenticity and richness of these digital signals, organisations can build a more nuanced risk profile for each user before onboarding even begins.

For example, a user with a long-standing email address linked to multiple online services and social profiles is far less likely to be a fraudster than one with a recently created, untraceable account.

Digital footprint analysis enables modern companies to spot these differences instantly, flagging suspicious users early and allowing genuine customers to move through the process with minimal friction.

Such a proactive stance helps to prevent fraud before it occurs, rather than responding after the fact.

It’s no surprise then that 85% of companies globally are increasing their fraud prevention budgets this year, reflecting widespread recognition of fraud’s rising cost and complexity.

Device Intelligence to Strengthen Defenses

Alongside digital footprint analysis, device intelligence offers a powerful, complementary layer of protection.

By analysing the characteristics of the devices accessing a platform — such as hardware details, software versions and network attributes — companies can detect anomalies that may indicate fraudulent intent.

For instance, the use of emulators, device spoofing or unusual browser configurations can signal attempts to bypass security measures.

Behavioral biometrics further enhances this approach. By monitoring how users interact with forms, their typing patterns and navigation behaviors, organisations can identify bots, automation and other non-human activities.

These insights provide a dynamic, real-time view of user risk, making it possible to adapt defenses on the fly without disrupting legitimate transactions.

Proof in Practice: What Real-World Adoption Looks Like

Adopting digital footprint analysis and device intelligence already yields tangible regional results.

Remittance companies have leveraged these technologies to enhance anti-money laundering (AML) controls, identifying high-risk users at the earliest stages and reducing both fraud rates and compliance costs.

Payment platforms, facing intense competition, have used these tools to maintain robust security while delivering the fast, frictionless experiences that customers demand.

Platforms like SEON are helping fintechs in the region operationalise these advanced capabilities — combining real-time digital footprint analysis, device intelligence and behavioral biometrics in a single platform that integrates quickly and scales with growth.

This empowers teams to detect risk earlier in the customer journey, reduce false positives and automate decisions with transparency and control.

These innovations are not just about stopping fraud; instead, they are about enabling growth.

By reducing false positives and manual reviews, companies are free to allocate more resources to customer service and product development.

The result is a more secure, efficient and customer-centric ecosystem, better equipped to handle the challenges of rapid digital expansion.

Toward a Smarter, Safer Future

The evolution of fraud tactics demands a corresponding evolution in defense.

Moving beyond static KYC checks, fintechs and payment services alike are embracing intelligent, real-time risk assessment powered by digital footprinting and device intelligence.

As the industry grows, the imperative is clear: companies today must stay one step ahead of fraudsters by leveraging the latest digital intelligence.

The next wave of success will belong to those who move boldly beyond KYC, creating an ecosystem where innovation and security go hand in hand.

Those that do will not only reduce fraud but also position themselves for sustainable growth in a region where digital acceleration shows no signs of slowing.

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Governments remain cautious, driven by concerns over financial stability and the absence of centralised control. As a result, many have passed legislation to implement the Travel Rule for virtual asset service providers (VASPs).

Yet according to Sumsub’s guide on enabling secure crypto payments, 75% of jurisdictions in the region are still either non-compliant or only partially compliant, leaving loopholes that fraudsters are already exploiting.

Identity fraud is a major concern, especially with the use of AI to carry out sophisticated scams. Since 70% of fraud occurs after onboarding, ongoing user monitoring is a non-negotiable for crypto companies.

Four Years In, The Compliance Gap in the Travel Rule Still Exists

In 2021, the FATF updated its risk-based guidance for virtual assets and VASPs, reinforcing the Travel Rule. It requires financial institutions and crypto firms alike to collect and share accurate information on both the sender and recipient of virtual asset transfers. This is crucial to fighting money laundering and terrorist financing.

However, implementation has been inconsistent across jurisdictions, worsened by the “sunrise issue”: uneven adoption prevent compliant data exchange between VASPs in different regions. Four years since the standard was introduced, private-sector compliance still trails behind other financial industries.

Key issues include weak risk assessments, delayed rollout of the Travel Rule, and a lack of interoperability among compliance tools. VASPs must adopt robust risk mitigation strategies and ensure their systems can communicate across borders to close these critical compliance gaps.

Future trends also indicate that more countries like India and Indonesia are expected to begin enforcing the Travel Rule more strictly, raising the stakes for VASPs.

If left unchecked, poor compliance procedures don’t just expose individual firms to regulatory and reputational risks. They undermine trust across the entire crypto ecosystem and open the door to massive industry-wide losses.

VASPs must act decisively by adopting robust, interoperable risk mitigation frameworks that meet global standards and enable secure cross-border data exchange.

Andrew Ilinsky, Product Owner at Mercuryo, a global payments ecosystem, notes that while regulators are introducing frameworks similar to those for traditional finance, the crypto landscape presents unique challenges. This is why the industry remains cautious about overregulation, which could stifle innovation.

He adds that compliance is key to accelerating crypto adoption, and tools like Sumsub will be essential in helping companies scale and support industry growth.

Strengthen Your Compliance to Ensure Secure Crypto Payments

To help crypto companies better understand and tackle these evolving challenges, Sumsub’s Guide to Secure Crypto Payments in the APAC Region with RedotPay offers actionable insights on Travel Rule implementation, fraud prevention, and regulatory best practices.

It breaks down where compliance gaps remain, what businesses must do to protect themselves, and what’s next for verification in an increasingly high-stakes environment.

Download the Guide to Secure Crypto Payments in APAC, with Sumsub and RedotPay. 

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The company intends to submit its application once Hong Kong’s Stablecoins Ordinance takes effect in August 2025. It will also apply for similar licenses in Singapore and Luxembourg.

Hong Kong’s stablecoin regime is expected to offer greater clarity for stablecoin issuers and encourage institutional participation in the digital asset space.

Stablecoins, which are digital tokens typically pegged to fiat currencies, serve as a more stable alternative to volatile cryptocurrencies like bitcoin and ether. They are seen as a key on-ramp for traditional financial institutions and tech giants exploring blockchain use cases.

In other recent news, Ant International partnered with HSBC to launch a tokenised deposit solution and is also eyeing a Hong Kong IPO.

Ant International has not yet publicly commented on the Ant International stablecoin license plans, according to Coindesk.

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Based on a report from GovHK, the Amendment Ordinance establishes a voluntary, secure electronic system for information sharing between banks and the related law enforcement agencies.

When suspected money laundering, terrorist financing, or related activities are detected, information about corporate and individual accounts can be shared swiftly via HKMA-designated platforms.

It also offers legal protection to banks that share relevant information. This Hong Kong bank information sharing mechanism allows banks and law enforcement to act quickly to block illicit funds and speed up intelligence gathering, enhancing public protection against fraud and related money laundering.

The Secretary for Financial Services and the Treasury, Christopher Hui, said,

“The new mechanism not only enhances Hong Kong’s ability to combat fraud and associated money laundering activities, providing better protection for citizens, but also helps maintain the stability of Hong Kong’s banking system and showcases the efforts made by Hong Kong, as an international financial centre, in international collaborations to combat relevant illegal activities.”

HKMA’s Chief Executive Eddie Yue added on, saying that the new information sharing mechanism would enhance the capabilities for banks to detect and prevent fraud and other financial crimes, too.

Yue added that the HKMA will work with the Hong Kong Police Force and banks to prepare for the new mechanism, including system upgrades and practical guidelines, aiming for swift implementation for the Hong Kong bank information sharing.

The Amendment Ordinance will take effect this year, with the official start date to be announced later.

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