Hong Kong SFC Fines China Everbright Securities $484,000 for Anti-Money Laundering Breaches, Failure to Identify $31 Million from 178 Transactions
17th June 2022 | Hong Kong
The Hong Kong Securities & Futures Commission (SFC) has reprimanded and fined China Everbright Securities HK (CESL) $484,000 (HKD 3.8 million) for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) regulatory requirements, including not identifying $31 million (HKD 250 million) from 178 3rd-party deposits. Hong Kong SFC: “The SFC found that CESL failed to implement adequate and effective systems and controls to guard against and mitigate the risk of money laundering and terrorist financing associated with third party deposits between January 2015 and February 2017.”
“ Failure to Identify $31 Million from 178 Transactions “
Hong Kong SFC Statement
The Securities and Futures Commission (SFC) has reprimanded and fined China Everbright Securities (HK) Limited (CESL) $3.8 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) regulatory requirements. The SFC found that CESL failed to implement adequate and effective systems and controls to guard against and mitigate the risk of money laundering and terrorist financing associated with third party deposits between January 2015 and February 2017.
The SFC’s investigation, which included a sample review of deposits received by CESL during the relevant period, revealed that CESL failed to identify 178 third party deposits amounting to over $250 million made through the sub-accounts maintained by CESL with a local bank. CESL also failed to detect suspicious fund deposits in some of the client accounts and make appropriate enquiries despite the presence of the following red flags:
- 11 clients received five or more deposits from multiple third parties, whose relationships with the clients were unknown;
- the amount of net deposits received by seven clients were not commensurate with their estimated net assets; and
- five clients, who did not appear to have any relationship with each other, received a total of approximately $5 million from the same third party within four days, and they used the funds to trade in the same stock.
The SFC is of the view that CESL’s conduct was in breach of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the Guideline on Anti-Money Laundering and Counter-Terrorist Financing and the Code of Conduct.
In deciding the disciplinary sanction, the SFC took into account that:
- a strong deterrent message needs to be sent to the market that AML/CFT failures are not acceptable;
- CESL has taken remedial actions to enhance its AML/CFT internal controls and systems; and
- CESL cooperated with the SFC in resolving the SFC’s concerns.
The Securities and Futures Commission (SFC) is an independent statutory body set up in 1989 to regulate Hong Kong’s securities and futures markets. We derive our investigative, remedial and disciplinary powers from the Securities and Futures Ordinance (SFO) and subsidiary legislation. Operationally independent of the Government of the Hong Kong Special Administrative Region, we are funded mainly by transaction levies and licensing fees.