Hong Kong’s Financial AI Frontier (a 5-part series)

Inside Sandbox++ and Algorithmic Defense

Developing a Balanced Regulatory Framework

​Hong Kong has developed a balanced, risk-based AI governance model designed to support business innovation while maintaining strong alignment with international compliance standards.

​The regulatory foundation is set by the Office of the Privacy Commissioner for Personal Data’s (PCPD) Artificial Intelligence: Model Personal Data Protection Framework, published on June 11, 2024. This framework focuses on the customization and implementation of pre-existing foundation models, reflecting the commercial reality that most enterprises deploy third-party AI systems rather than building proprietary base models.

​Expanding Financial Sandboxes to Sandbox++

​In the financial sector, this regulatory approach is supported by active testing environments. Building on the initial Generative AI Sandbox launched by the HKMA in September 2024, regulators introduced "Sandbox++" in March 2026.

​This expanded program covers all financial sectors, including insurance, wealth management, securities, and pension administration.

                  +----------------------------------------+

                  |    Hong Kong Financial Governance      |

                  +----------------------------------------+

                                       |

                     +-----------------+-----------------+

                     |                                   |

     +-------------------------------+   +-------------------------------+

     |   Privacy & Vendor Controls   |   |   Techn[span_56](start_span)[span_56](end_span)ical Live Testing      |

     |          (PCPD Model)         |   |        (Sandbox++)            |

     +-------------------------------+   +-------------------------------+

     | - Customized impact risk caps |   | - Multi-sector pilot program  |

     | - Vendor contract audits      |   | - Active "AI vs. AI" audits   |

     | - Clear data ownership rules  |   | - Real-time fraud detection   |

     +-------------------------------+   +-------------------------------+

Implementing Active "AI versus AI" Defense

​A key feature of Sandbox++ is the introduction of mandatory "AI versus AI" defensive requirements. To manage the speed of automated transactions, financial institutions are now expected to deploy specialized monitoring AI models to continuously audit and control their primary operational AI systems.

​This dual-system architecture helps detect algorithmic drift, identify data anomalies, and prevent automated fraud in real time.

​For institutional trading firms, aligning with Sandbox++ standards is essential for maintaining compliance and preserving market access. This strategy is reinforced by Zilkroad's partnership with Blackwired, which provides companies with proactive, real-time threat intelligence and automated risk mitigation tools.