The SFC Enforcement Division is investigating several
SFC-licensed brokerages for suspected inadequate AML internal
Reminder of SFC areas of concern.
SFC licensees should ensure that proper internal AML measures
On 21 September 2016, the Hong Kong Securities and Futures
Commission (SFC) issued an announcement concerning poor internal
anti-money laundering (AML) controls amongst many SFC
The SFC's Enforcement Division is investigating several SFC
licensed brokerages for suspected inadequate AML internal
controls. It is expected that the SFC will bring a number of
enforcement proceedings as a result of these investigations.
The Anti-Money Laundering and Counter-Terrorist Financing
(Financial Institutions) Ordinance (Cap. 615) (AMLO) and the
SFC's Guideline on Anti-Money Laundering and Counter-Terrorist
Financing (Guideline) came into effect on 1 April 2012.
The AMLO imposes customer due diligence and mandatory
recordkeeping obligations on financial institutions and sets out
penalties for breaches of such obligations. The Guideline,
which is published to assist licensed corporations and their
management in complying with the AMLO and other relevant legal and
regulatory requirements, provides guidance in relation to the
design and implementation of appropriate and effective AML
policies, procedures and controls.
Areas of Concern
As a result of its on-site inspections of SFC licensees and AML
investigations, the SFC has identified the following areas of
concern amongst SFC licensees:
failure to properly scrutinize cash and third-party deposits
into customer accounts
ineffective monitoring of transactions in customer
failure to take adequate measures to continuously monitor
business relationships with customers who present a higher risk of
inadequate enquiries made to assess potentially suspicious
transactions to determine whether or not it is necessary to make a
report to the Joint Financial Intelligence Unit, and lack of
documentation of the assessment results
failure to monitor and supervise the ongoing implementation of
AML and counter-terrorist financing policies and procedures.
The SFC further noted that SFC licensees are often susceptible
to being taken advantage of for money laundering purposes and
emphasized the need for SFC licensees to be self-disciplined in
terms of implementing effective AML measures.
The announcement is a reminder that the SFC is highly vigilant
with respect to compliance with AML obligations and that SFC
licensees can reasonably expect that the SFC will undertake further
on-site inspection of licensees.
In light of the SFC's intensified focus on AML compliance,
SFC licensees should ensure that proper AML measures are put in
at the establishment of the business relationship with each
for continuing client relationships, by conducting ongoing AML
monitoring to avoid committing any subsequent AML breaches or
SFC licensees, including Type 4 (advisory) and Type 9 (asset
management) licensees, are reminded that AML obligations apply in
connection with all counterparties.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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On the 9 September 2016 the MFSA issued feedback to its consultation of the 1 April 2016 in relation to intra-group loans.
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