12 Feb 2020
Hong Kong’s SFC (Securities and Futures Commission) has reprimanded and fined BMI Securities HKD 3.7 million (USD 477,000) for failures in complying with AML/CFT regulatory requirements.
In 2016, a number of BMI clients subscribed for the placing shares of two Hong Kong-listed companies – Bank of Jinzhou and Yadea Group Holdings – subsequently transferred most or all of these shares to third parties using BS notes (bought and sold notes) in a series of off-exchange transactions.
In the first case, Bank of Jinzhou shares were transferred to a third party for a total consideration of HKD 856 million. Both the client and third party were BVI incorporated, had opened Macau bank accounts on the same date, and opened BMI securities accounts on the same date – with the account opening forms certified by the same mainland CPA.
In the second case, a Beijing housewife with no previous investment experience subscribed for and subsequently transferred Yadea shares to 19 third parties for a total consideration of HKD 190.2 million. The relationships between the housewife and the 19 third parties were unknown, and no explanations regarding the background and purpose of the transactions were provided.
In the third case, a BMI client appeared to have opened an account to conduct two transactions only – buying Yadea shares from a different BMI client, and selling the same shares to a third party for a total consideration of HKD 15 million. The relationships between the two clients and with the third party were unknown.
In all three cases, the off-exchange transactions displayed various suspicious features including:
- the subscription amount for the placing shares was incommensurate with the clients’ financial profile
- the clients did not conduct any other transactions in their BMI Securities accounts
Further, the SFC says BMI Securities did not make appropriate enquiries to understand the reasons for, and the circumstances leading to, the clients’ sale of shares to third parties by way of BS Notes, and that BMI did not take any steps to ascertain the relationships between the clients and the third parties. BMI also did not put in place any policies or procedures governing the handling of suspicious transactions conducted through BS Notes.
Read more at Regulation Asia
RiskScreen: Eliminating Financial Crime with Smart Technology
Count this content towards your CPD minutes, by signing up to our CPD WalletFREE CPD Wallet