SFC Fines Guosen Securities HK$15.2m for Violating AML rules

The Securities and Futures Commission (SFC) announced on Monday that it has fined Guosen Securities' Hong Kong division 15.2 million Hong Kong dollars ($1.94 million) for violating anti-money laundering (AML) regulations.

According to the SFC, Guosen processed over 10,000 third party deposits, for approximately 3,500 clients, between November 2014 and December 2015. The Hong Kong regulator said that those deposits were worth around 5 billion Hong Kong dollars ($637 million).

A substantial proportion of those deposits appear to have been of a fairly dubious origin. According to the SFC, 2,200 of those third party deposits, totaling around 2.3 billion Hong Kong dollars ($293 million), were suspect.

Those transactions were able to occur because of a litany of Compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term failings on the part of Guosen.

SFC: no systems in place

The SFC said that the brokerage failed to put in place any systems that would enable them to identify the people making deposits into their client's accounts. In fact, the brokerage apparently had no system in place that would have flagged suspicious activity concerning third-party deposits.

Back in 2013, a number of lower level staff warned senior management about the risks that were involved in accepting funds from these third parties. They also said that better procedures needed to be put in place to prevent Guosen from breaking AML rules.

According to the SFC, those concerns were ignored and senior management, including the compliance officer responsible for overseeing third party deposits, did nothing to change their behavior.

Having said this, once the problem was brought to the attention of the regulator, the firm did seem to take steps to remediate its compliance failings.

The regulator said that, since its investigation began, the executive responsible for the compliance failings had left the firm. Guosen has also, the SFC said, implemented new compliance procedures to ensure it doesn't break AML rules in the future.