Hong Kong’s SFC Fines China Everbright Securities HK$3.8 Million

by Felipe Erazo
  • The company failed to comply with AML and CFT regulatory requirements.
  • The regulator also imposed a reprimand.
SFC fine
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The Securities and Futures Commission of Hong Kong (SFC) said on Thursday that it had reprimanded and fined China Everbright Securities (HK) Limited (CESL) HK$3.8 million for failures in complying with anti-money laundering and counter-terrorist financing regulatory requirements.

According to the press release, between January 2015 and February 2017, the SFC determined that CESL had not implemented adequate and effective systems and controls to guard against and mitigate the risk of money laundering and terrorist financing associated with third-party deposits.

Based on the SFC’s investigation, which included a sample review of deposits received by CESL during the relevant period, it was found that CESL failed to identify 178 third-party deposits amounting to more than $250 million made through sub-accounts maintained by CESL with a local bank.

SFC investigators observed that 11 clients received five or more deposits from third parties whose relationships with the clients were unknown; the amount of net deposits received by seven clients did not match their estimated net assets; and five clients, who did not appear to have any relationship with one another, received approximately $5 million from the same third party within four days and traded the same stock with the proceeds.

“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,” the SFC noted.

Reprimand against Citigroup

The SFC levied a fine of HK$348.25 million against Citigroup Global Markets Asia Limited by the SFC for some serious regulatory failures earlier this year.

In its Cash Equities business, the company allowed various trading desks to spread mislabeled Indications of Interest (IOIs). Additionally, between 2008 and 2018, they misrepresented institutional clients in facilitation trades.

From 174 sample facilitation trades completed by Citi's Asian subsidiary and reviewed by Hong Kong's regulator, 127 provided incorrect or misleading information to clients or failed to obtain consent from them before routing their orders.

The Securities and Futures Commission of Hong Kong (SFC) said on Thursday that it had reprimanded and fined China Everbright Securities (HK) Limited (CESL) HK$3.8 million for failures in complying with anti-money laundering and counter-terrorist financing regulatory requirements.

According to the press release, between January 2015 and February 2017, the SFC determined that CESL had not implemented adequate and effective systems and controls to guard against and mitigate the risk of money laundering and terrorist financing associated with third-party deposits.

Based on the SFC’s investigation, which included a sample review of deposits received by CESL during the relevant period, it was found that CESL failed to identify 178 third-party deposits amounting to more than $250 million made through sub-accounts maintained by CESL with a local bank.

SFC investigators observed that 11 clients received five or more deposits from third parties whose relationships with the clients were unknown; the amount of net deposits received by seven clients did not match their estimated net assets; and five clients, who did not appear to have any relationship with one another, received approximately $5 million from the same third party within four days and traded the same stock with the proceeds.

“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,” the SFC noted.

Reprimand against Citigroup

The SFC levied a fine of HK$348.25 million against Citigroup Global Markets Asia Limited by the SFC for some serious regulatory failures earlier this year.

In its Cash Equities business, the company allowed various trading desks to spread mislabeled Indications of Interest (IOIs). Additionally, between 2008 and 2018, they misrepresented institutional clients in facilitation trades.

From 174 sample facilitation trades completed by Citi's Asian subsidiary and reviewed by Hong Kong's regulator, 127 provided incorrect or misleading information to clients or failed to obtain consent from them before routing their orders.

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