Hong Kong SFC Fines Southwest Securities over Third-Occasion Deposits

Hong Kong’s Securities and Futures Fee (SFC) on Monday fined Southwest Securities (HK) HK$5 million ($650,000) for failing to fulfill anti-money laundering and counter-terrorist financing legal guidelines.

The listed brokerage agency violated provisions of the foundations between January and December 2016, the SFC mentioned. SSBL didn’t conduct related buyer due diligence and dealt with third-party deposits with out auditing the names of the originators.

Extra particularly, the corporate didn’t determine almost 90 p.c of the third get together deposits. In consequence, 164 transactions totaling $110.1 million had been handed with out reviewing the supply of funds deposited into SSBL financial institution accounts.

The overview discovered lapses in Southwest Securities’ inner controls and methods and that the corporate didn’t put in place controls to make sure the accuracy of the data it submitted to the SFC.

“In some circumstances the place third get together deposits had been recognized by SSBL, the purchasers’ relationship with the third get together depositors (eg, pal) and the rationale for these deposits (eg, busy at work) supplied by the purchasers failed to clarify the rationale for the transfers satisfactorily.  Nonetheless, SSBL didn’t critically consider these deposits and doc the enquiries, in addition to the explanations for approving them,” the watchdog additional explains.

The lapse in oversight additionally prolonged to the failure to coach or present enough steerage to its workers to make sure they’ve a transparent understanding of their respective roles in monitoring suspicious transactions.

Southwest Securities has no earlier disciplinary document

The dealer hadn’t self-identified or reported deficiencies earlier than the SFC requested to overview all shopper deposits and buying and selling actions in 2016. Solely after that, SSBL recognized 31 suspicious transactions and reported them to regulators.

In reaching its choice, the SFC mentioned SSBL had been cooperative throughout its investigation, and there’s no proof that failures had been deliberate.‎ Moreover, the corporate had taken constructive and in depth remediation work. It has additionally performed a forward-looking overview of its inner controls to ‎guarantee compliance with the related regulatory necessities.

The SFC added that Southwest Securities has no earlier disciplinary document in relation to the anti-money laundering ordinance.

The case underlines the punitive measures being pursued by the SFC to take care of confidence within the native markets, which is made tougher by the truth that many firms are primarily based offshore.

Moreover, Hong Kong regulators have been stepping up their compliance actions to implement anti-money laundering guidelines. Final 12 months, the HKMA fined and reprimanded Shanghai Business Financial institution HK$5 million for comparable breaches. Additionally earlier this 12 months, HSBC mentioned it might contact all retail and company purchasers to replace their contract and funding supply info and warned that some accounts is perhaps suspended.

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