The Securities and Futures Commission (SFC) has reprimanded and fined BMI Securities Limited (BMISL) $3.7 million for failures in complying with anti-money laundering (AML) and counter-terrorist financing (CFT) regulatory requirements (Note 1).
The SFC has also suspended BMISL’s responsible officer, Ms Maggie Tang Wing Chi, for five and a half months from 11 February 2020 to 25 July 2020 (Note 2).
In 2016, a number of BMISL’s clients subscribed for the placing shares of two Hong Kong-listed companies and subsequently transferred most or all of these shares to third parties using bought and sold notes in a series of off-exchange transactions.
The off-exchange transactions, whose consideration ranged from $4.4 million to $855.9 million apiece, displayed various suspicious features including (Note 3):
- the subscription amount for the placing shares was incommensurate with the clients’ financial profile; and
- the clients did not conduct any other transactions in their BMISL accounts apart from acquiring and disposing of the placing shares.
The SFC found that, during the period from 1 May 2016 to 30 November 2017, BMISL failed to:
- implement adequate internal controls to mitigate the risk of money laundering and terrorist financing associated with suspicious transactions conducted through bought and sold notes;
- identify, and conduct proper enquiries and sufficient scrutiny on, suspicious transactions and consider reporting them to the Joint Financial Intelligence Unit where appropriate;
- perform appropriate customer due diligence and keep customer information up-to-date and relevant; and
- put in place adequate and effective procedures for the identification of politically exposed persons and the screening of terrorist and sanction designations.
The SFC is of the view that BMISL’s conduct was in breach of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML Guideline) (Note 4).
The SFC further found that BMISL’s breaches were attributable to Tang’s failure to discharge her duties as a responsible officer and a member of BMISL’s senior management. In particular, Tang failed to identify and conduct appropriate enquiries on the suspicious transactions and to ensure that BMISL had established and implemented adequate and effective AML/CFT systems to mitigate the risks of money laundering and terrorist financing.
In deciding the sanctions against BMISL, the SFC took into account that:
- a clear and deterrent message needs to be sent to the market that AML/CFT failures will not be tolerated;
- the cooperation of BMISL and Tang with the SFC in resolving the SFC’s concerns;
- BMISL has taken remedial actions to enhance its AML/CFT systems and controls;
- BMISL has undertaken to provide the SFC with a report prepared by an independent reviewer within twelve months to confirm that all the identified concerns are satisfactorily rectified;
- BMISL and Tang have otherwise clean disciplinary records with the SFC; and
- BMISL’s financial situation.
- BMISL is licensed under the Securities and Futures Ordinance (SFO) to carry on Type 1 (dealing in securities) regulated activity.
- Tang is licensed under the SFO to carry on Type 1 (dealing in securities) regulated activity on behalf of BMISL and Type 9 (asset management) regulated activity on behalf of BMI Funds Management Limited. Tang has been a responsible officer of BMISL since 17 February 2016.
- The SFC has reported the suspicious activities to the Joint Financial Intelligence Unit. Our investigation focused on the adequacy and effectiveness of BMISL’s AML/CFT systems and controls.
- Section 23 of Schedule 2 to the AMLO and paragraph 2.1 of the AML Guideline (issued in April 2015) require licensed corporations to take all reasonable measures to ensure that proper safeguards exist to mitigate the risks of money laundering and terrorist financing, including implementation of appropriate internal AML/CFT policies, procedures and controls to ensure compliance with relevant legal and regulatory requirements.