In our previous article dated 27 January 2022, we reported on the enforcement action of Hong Kong’s Securities and Futures Commission (SFC) against Zhonghui International Futures Company Limited for breaching know-your-client, anti-money laundering and counter-terrorist financing (AML/CFT) requirements. On 16 Mar 2022, the SFC once again reprimanded and imposed a substantial fine (HK$5.4 million) on two licenced corporations, i.e. Emperor Securities Limited (ESL) and Emperor Futures Limited (EFL), for their AML/CFT breaches. Each of ESL and EFL is licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities, and Type 2 (dealing in futures contracts) and Type 5 (advising on futures contracts) regulated activities, respectively.
The SFC found that ESL and EFL failed to implement adequate and effective policies and procedures to mitigate the risks of money laundering and terrorist financing associated with a total of 732 and 32 third-party fund transfers, respectively, involving funds of approximately HK$1.05 billion and HK$17.6 million respectively. The breaches of ESL and EFL include approving relevant transfers without adequate explanations or verifying documents, despite presence of red flags.
The imposition of this substantial disciplinary sanction is another example of the SFC sending a “strong deterrent message” to the market to guard against AML/CFT failures. For further information, please visit the SFC’s website here.