Personal Liability: HK SFC bans former officer for 6 months for AML failings

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SFC suspends former responsible officer of iSTAR International Futures Co. Limited for six months 

19 Jun 2017

The Securities and Futures Commission (SFC) has suspended Mr Wu Biwei, former responsible officer (RO) and managing director of iSTAR International Futures Co. Limited (iSTAR), now known as Rifa Futures Limited (Rifa), for six months from 16 June 2017 to 15 December 2017 (Note 1).

The disciplinary action follows the SFC’s sanctions against iSTAR over its failures to comply with anti-money laundering regulatory requirements when processing third party fund transfers between January and July 2014 (Note 2).

The SFC found that Wu, who was Rifa’s most senior person at the relevant time, was contributory to Rifa’s failure to have proper safeguards in place against the risks of money laundering and terrorist financing associated with third party fund transfers.

In particular, Wu, who was responsible for approving third party deposits and transfers, failed to:

  • make appropriate enquiries to ensure third party fund transfers were consistent with the customers’ known legitimate activities, and maintain records of such enquiries (Note 3); and
  • implement internal policies effectively for the prevention of money laundering and terrorist financing, and communicate such policies to staff members.

Wu also breached Rifa’s internal policies on employee dealing by exploiting Rifa’s lax controls.  In essence, he made deposits of substantial amounts into various clients’ accounts, and received substantial third party deposits in his trading account at Rifa when he needed additional margin to trade but did not have sufficient funds.

Furthermore, Wu breached the Securities and Futures (Client Money) Rules by causing a payment of US$200,000 from the account of a client to be made into his own (Note 4).

In deciding the disciplinary sanction, the SFC took into account all relevant circumstances including Wu’s otherwise clean disciplinary record.

End

Notes:

  1. Wu is licensed under the Securities and Futures Ordinance to carry on business in Types 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities) and Type 9 (asset management) regulated activities. Wu was accredited to Rifa as a RO between 25 October 2012 and 30 September 2014 in respect of Rifa’s business in carrying on Type 2 (dealing in futures contracts) regulated activities. He is currently accredited to Futu Securities International (Hong Kong) Limited as a RO.
  2. Rifa was reprimanded and fined $3 million by the SFC over internal control deficiencies and other regulatory breaches. Please refer to the SFC’s press release dated 12 April 2017.
  3. Under paragraphs 5.10 and 5.11 of the second edition of the Guideline on Anti-Money Laundering and Counter-Terrorist Financing, a licensed corporation is required to examine and make enquiries regarding the background, purpose and circumstances of transactions which are complex, large or unusual; the findings and outcomes of such examinations and enquiries should be properly documented in writing and be available to assist the relevant authorities.
  4. Section 5(3) of the Securities and Futures (Client Money) Rules provides that a licensed corporation may not pay any client money to any of its employees unless that employee is the client on whose behalf such client money is being held.
  5. Licensed corporations are reminded to refer to the “Circular to Licensed Corporations and Associated Entities – Anti-Money Laundering / Counter Financing of Terrorism (AML/CFT) Compliance with AML/CFT Requirements” issued by the SFC on 26 January 2017 which sets out key areas of concern identified by the SFC in its review of some licensed corporations’ AML/CFT systems.

Link:

HK SFC Notice

Statement of Disciplinary Action

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