The Securities and Futures Commission (SFC) of Hong Kong has reprimanded and fined Zheshang International Financial Holdings Co., Limited $2.66 million for failures in complying with anti-money laundering and counter-financing of terrorism (AML/CFT) and other regulatory requirements between June 2016 and October 2018 (Relevant Period).
The SFC’s investigation found that Zheshang failed to put in place an effective ongoing monitoring system to detect and assess suspicious trading patterns in client accounts, which resulted in its failure to detect the majority of the 23,370 self-matched trades that occurred in three client accounts during the Relevant Period.
In addition, the SFC identified that the amounts of deposits made into two client accounts were incommensurate with their declared financial profiles. Although Zheshang claimed to have made enquiries with the clients, it did not keep record of such enquiries.
The SFC is of the view that Zheshang’s systems and controls were inadequate and ineffective, and Zheshang failed to ensure compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the AML Guideline and the Code of Conduct.
In deciding the disciplinary sanctions against Zheshang, the SFC has taken into account that:
- Zheshang’s failures to diligently monitor its clients’ activities and put in place adequate and effective AML/CFT systems and controls are serious as they could undermine public confidence in, and damage the integrity of, the market;
- a strong deterrent message needs to be sent to the market that such failures are not acceptable;
- Zheshang’s cooperation in resolving the SFC’s concerns, including its agreement to engage an independent reviewer to review its internal controls; and
- Zheshang has an otherwise clean disciplinary record.
