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The Securities and Futures Commission (SFC) has reprimanded Ping An of China Securities (Hong Kong) Company Limited (Ping An) and fined it $6 million over serious internal control deficiencies and other matters (Note 1).
An SFC investigation found that, between 1 August 2010 and 30 April 2011, Ping An failed to:
- establish anti-money laundering internal control procedures (Notes 2 & 3);
- actively identify and report to the SFC and the Joint Financial Intelligence Unit suspicious transactions in a timely manner (Notes 4 & 5);
- provide anti-money laundering training to its staff;
- establish and follow appropriate and effective procedures to protect client assets in effecting payments;
- effectively communicate and enforce its internal policies on employee dealings;
- enforce its account opening procedures in relation to address proofs; and
- have in place an effective compliance function.
In deciding the disciplinary sanction, the SFC took into account all relevant circumstances including Ping An’s otherwise clean record, the steps taken by Ping An to remedy its internal control deficiencies, including the appointment of a new management team and a new chief executive officer, as well as its agreement to engage an independent reviewer to confirm the new procedures have been implemented and are working properly.
Mr Mark Steward, the SFC’s Executive Director of Enforcement, said, “This was a case of serious internal control failures. Ping An has reacted properly and, in doing so, has saved itself from a harsher outcome. This case should send a clear warning to the industry that cavalier attitudes have no place in our market.”
The SFC would like to acknowledge and publicly thank the China Securities Regulatory Commission for its assistance in the investigation of this case.
Notes:
- Ping An is licensed under the Securities and Futures Ordinance (SFO) to carry on business in Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities.
- During the relevant period, the “Prevention of Money Laundering and Terrorist Financing Guidance Note”, published by the SFC in September 2009 under section 399 of the SFO, was in force. From 1 April 2012, it was superseded by the “Guideline on Anti-Money Laundering and Counter-Terrorist Financing” and the “Prevention of Money Laundering and Terrorist Financing Guideline” issued by the SFC.
- Licensed corporations should have in place proper systems and controls for the identification and reporting of suspicious transactions. The first and foremost step is to gain sufficient knowledge about a customer’s business and financial circumstances (through customer due diligence and ongoing monitoring) to recognise that a transaction, or a series of transactions, is unusual. There should also be procedures in place for reporting internally by escalation to senior management and reporting externally to the Joint Financial Intelligence Unit.
- The Joint Financial Intelligence Unit receives reports of suspicious financial activity and is jointly run by staff of the Hong Kong Police Force and the Hong Kong Customs and Excise Department.
- Section 25A of the Organized and Serious Crimes Ordinance requires a person who suspects that any property represents proceeds of, or was used in connection with or is intended to be used in connection with, an indictable offence to disclose that suspicion to an authorized officer “as soon as it is reasonable for him to do so”.
- A copy of the Statement of Disciplinary Action in relation to the matter is available on the SFC website.
