HK regulator suspects brokers of inadequate AML controls

Hong Kong’s securities regulator is investigating several brokerages it suspects of having inadequate anti-money laundering (AML) internal controls and expects to bring a number of enforcement proceedings as a result. 

The Securities and Futures Commission (SFC) said licensed firms have had ample time to develop their internal controls since the latest AML rules* came into force in 2012.

During onsite inspections, the watchdog identified various areas of concern:

• failure to scrutinise cash and third-party deposits into customer accounts;
• ineffective monitoring of transactions in customer accounts;
• failure to take adequate measures to monitor business relationships with customers that present a higher risk of money laundering;
• inadequate enquiries made to assess potentially suspicious transactions as to whether it is necessary to make a report to the Joint Financial Intelligence Unit, and lack of documentation of the assessment results; and
• failure to monitor and supervise the ongoing implementation of anti-money laundering and counter-terrorist financing policies and procedures.

As licensees are vulnerable to being used to launder the proceeds of crime and to finance terrorism, said the SFC, it relies on them to implement effective AML measures to prevent and to take their AML responsibilities seriously.

The framework that came into force in 2012 comprises the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO) and the SFC Guideline on Anti-Money Laundering and Counter-Terrorist Financing.

The AMLO and guideline require licensees to conduct due diligence on customers before and during a business relationship, to ensure that licensees understand who their clients are and their business so that they can identify unusual transactions.