On 20 January 2022, the Securities and Futures Commission (SFC) reprimanded and fined Zhonghui International Futures Company Limited (ZIFC) HK$5 million for breaching know-your-client, anti-money laundering and counter-terrorist financing requirements (AML/CFT) between May 2017 and July 2018. ZIFC is licensed to carry on Type 2 (dealing in futures contracts) regulated activity.
The SFC found that ZIFC had permitted clients to use their designated customer supplied systems (CSSs) to place orders, yet failed to conduct adequate due diligence on the CSSs such that it could not properly assess the associated AML/CFT risks. Also, ZIFC did not implement two-factor authentication for clients to log in to their trading accounts via CSSs.
Furthermore, the SFC identified eight of ZIFC’s clients who authorised third parties to place orders for their accounts via CSSs, but ZIFC took no reasonable steps to establish those clients’ and their ultimate beneficial owners’ true and full identities and did not make proper enquiries. There was also a failure to establish an effective monitoring system that detects unusual money movements.
This enforcement action reflects that compliance with AML/CFT requirements is one of SFC’s areas of focus, in line with SFC’s consultation conclusions on its AML/CFT guidelines published in September 2021.
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