SFC imposes $100,000 fine on City International Futures (Hong Kong) Limited
Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined City International Futures (Hong Kong) Limited (CIFHKL), now known as VERCAP Financial Services Limited, $100,000 for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements. The regulatory breaches occurred between March 2016 and October 2018.
The SFC’s investigation found that CIFHKL did not conduct any due diligence on the customer supplied systems (CSSs) used by 16 clients for placing orders. As a result, CIFHKL was not in a position to properly assess and manage the money laundering and terrorist financing (ML/TF) and other risks associated with the use of such CSSs by its clients.
In addition, the SFC identified that the amounts of deposits made into two client accounts were incommensurate with their declared financial profiles. Although CIFHKL claimed that it conducted daily monitoring on client accounts’ fund movements and was aware of the substantial deposits in the two client accounts, it failed to demonstrate that it had conducted proper enquiries on the deposits and satisfactorily addressed the associated ML/TF risks.
The SFC further found that CIFHKL failed to put in place an effective ongoing monitoring system to detect suspicious trading patterns in client accounts as there were frequent, and large number of, trades in the two client accounts, and in many instances buy and sell orders for the same futures contracts were placed by the same client in the same second at the same price.
The SFC is of the view that CIFHKL’s systems and controls were inadequate and ineffective, and failed to ensure compliance with the AML Guideline and the Code of Conduct.
In deciding the disciplinary sanctions against CIFHKL, the SFC took into account that CIFHKL’s failures to diligently monitor its clients’ activities and put in place adequate and effective AML/CFT systems and controls are serious as they could undermine public confidence in, and damage the integrity of, the market. The regulator also considered that CIFHKL’s senior management has changed after the relevant period.
The SFC also took into account the need to send a strong deterrent message to the market that such failures are not acceptable.