HK Securities and Futures Commission enforcement against Guotai Junan Securities

This is an AML enforcement action for failure to establish client identity, the really base activity of Customer Due Diligence:

In July 2014, the SFC requested Guotai Junan to provide details of the ultimate clients of certain transactions it effected for an intermediary client in Korea. Guotai Junan was unable to provide the requested information within two business days of the request pursuant to the Client Identity Rule Policy, due to the intermediary client’s failure to comply with its obligation under its client agreement (Notes 2 & 3). 

The intermediary client informed the SFC and Guotai Junan on 1 August 2014 that as a matter of Korean law, it could not provide the requested client identity information without its clients’ written consent.  It was not until January 2015 that Guotai Junan provided the requested information to the SFC. 

Notwithstanding this, Guotai Junan continued to effect more than 8,000 transactions for the intermediary client between August 2014 and January 2015 despite having been reminded by the SFC of its obligation to refuse the business of those who are not prepared to provide ultimate client information to the regulators. 

In the circumstances, the SFC found that at the time when Guotai Junan effected those transactions, it could no longer be satisfied on reasonable grounds that it would be able to make available the ultimate client information in relation to such transactions to the SFC on request, which is in contravention of the Client Identity Rule Policy (Note 4).

The action resulted in a 1.3MM HK Dollar penalty and a reprimand.


HK SFC Notice

Statement of Disciplinary Action

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