(Adds JPMorgan comment in fifth paragraph)
HONG KONG, Dec 28 (Reuters) - The Hong Kong Monetary Authority (HKMA) said on Friday that it had fined the Hong Kong branch of JPMorgan Chase & Co HK$12.5 million ($1.60 million) and reprimanded it for breaching anti-money laundering and counter-terrorist financing rules.
The regulator said that the firm failed to "establish and maintain effective procedures" for identifying and handling wire transfers and for complying with rules on customer due diligence and "continuous monitoring" of business relationships.
The HKMA also ordered the Hong Kong unit of the U.S. bank to have an independent external adviser prepare a report into whether its remedial measures were sufficient to address the "contraventions and other deficiencies" it had identified.
The action follows an investigation by the HKMA which found that between April 2012 and February 2014 JPMorgan Hong Kong contravened six provisions of the anti-money laundering and counter-terrorist financing rules, the regulator said.
"We look forward to working with the independent adviser who will be appointed to review our current internal controls in Hong Kong to verify that the legacy issues have been addressed by the remedial actions already undertaken by JPMorgan," the bank said in an emailed statement to Reuters.
The HKMA statement said that JPMorgan Hong Kong had self-identified and reported certain deficiencies, and had taken "positive and extensive remediation work" after it became aware of the lapses.
"In particular, it has enhanced its control functions to prevent similar contraventions from recurring," it said.
The Asian financial hub's regulator has made combating money laundering and terrorist financing a priority, and the HKMA has recently stepped up action against banks for breaches in its 2012 anti-money laundering rules.
In August, the regulator fined unlisted Shanghai Commercial Bank HK$5 million ($638,000) for similar breaches.
$1 = 7.8310 Hong Kong dollars Reporting by Sumeet Chatterjee; Editing by Adrian Croft