The SFC of Hong Kong fined VERCAP Financial Services Limited (formerly CIFHKL) $100,000 for non-compliance with AML/CFT and other regulations.
The Securities and Futures Commission from Hong Kong imposed a penalty of $100,000 on City International Futures (Hong Kong) Limited (CIFHKL), now called VERCAP Financial Services Limited, due to its inability to comply with anti-money laundering and counter-terrorist financing (AML/CFT) rules and other applicable regulations.
The Securities and Futures Commission (SFC) determined that CIFHKL had neglected to conduct any due diligence on the Customer Supplied Systems (CSSs) employed by 16 customers for ordering purposes. This lack of review made it impossible for CIFHKL to assess and manage the money laundering and terrorist financing (ML/TF) and other risks associated with the use of such CSSs.
Additionally, the SFC saw that the deposits made into two client accounts were disproportionate with their declared financial profiles.
Although CIFHKL maintained that it monitored fund movements of accounts daily, it could not demonstrate that it had adequately inquired about the deposits or managed the related ML/TF risks.
Moreover, the SFC established that CIFHKL had failed to implement an effective ongoing monitoring system to detect potentially suspicious trading activity in client accounts, as there had been frequent trades on the two client accounts with large numbers of buy and sell orders for the same futures contracts being placed in the same second at the same price.
The Securities and Futures Commission (SFC) determined that the systems and controls of CIFHKL were insufficient, and ineffective and failed to adhere to the Anti-Money Laundering (AML) Guideline and the Code of Conduct.
The penalties imposed on CIFHKL by the SFC were based on the fact that its negligence in monitoring its clients’ activities and its lack of proper and effective AML/CFT systems and controls could damage the credibility and integrity of the market. Although the senior management of CIFHKL changed after the relevant period, the SFC felt that a strong message had to be sent to the market that such behavior was not tolerated.