The Hong Kong Securities and Futures Commission (SFC) has reprimanded and fined Jinrui Futures (Hong Kong) Limited $4.8 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements. The violations allegedly occurred between April 2015 and June 2018.

The regulator has also banned Shen Chun, a former executive director and responsible officer of Jinrui Futures, from re-entering the industry for six months from 6 February 2023 to 5 August 2023.

Jiang Xiaoqing, another responsible officer of Jinrui Futures, has been suspended for five months from 6 February 2023 to 5 July 2023.

The SFC’s investigation found that Jinrui Futures, which permitted 258 clients to use customer supplied systems (CSSs) for placing orders during the material time, had failed to conduct adequate due diligence on the CSSs. As a result, Jinrui Futures was not in a position to properly assess and manage the money laundering and terrorist financing and other risks associated with the use of such CSSs by its clients.

In addition, the SFC identified that some of the deposits made into four clients’ accounts were unusual and/or suspicious and inconsistent with the clients’ declared net worth. Although Jinrui Futures performed certain enquiries on these clients, they were inadequate and did not satisfactorily explain the suspicious transactions.

The SFC further found that Jinrui Futures failed to comply with its account opening procedures which require its staff to conduct AML investigations on its clients before account opening, including identifying whether the clients were politically exposed persons or under existing terrorist and sanction lists.

The regulator concluded that Jinrui Futures’ 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 considers that Jinrui Futures’ failures were partly attributable to the failures of Shen and Jiang in discharging their duties as the firm’s responsible officers and senior management.

In deciding the disciplinary sanctions against Jinrui Futures, Shen and Jiang, the SFC took into account a variety of factors such as the cooperation of Jinrui Futures, Shen and Jiang with the SFC, as well as the need to send a strong deterrent message to the market.