On June 22, Guotai Junan Securities (Hong Kong) Co., Ltd. was denounced by the Hong Kong Securities Regulatory Commission and fined HK $25.2 million for committing a number of internal monitoring deficiencies and violations. Specifically, it involves combating money laundering, dealing with third-party fund transfer and placement activities, detecting false sale transactions and delaying reporting.
Guotai Junan (Hong Kong) is the grandson of Guotai Junan, a large domestic securities firm. Guotai Junan holds 73.12% of the shares of the Hong Kong listed company Guotai Junan International (1788. HK), while Guotai Junan international indirectly holds the shares of Guotai Junan (Hong Kong) through its subsidiaries. After penetration, Guotai Junan indirectly holds 68.48% of Guotai Junan (Hong Kong) shares.
Structure of Guotai Junan international subsidiary (photo source: Guotai Junan international official website)
According to the investigation of the Hong Kong Securities Regulatory Commission, Guotai Junan failed to take reasonable measures to ensure that there are appropriate safeguards to reduce the risk of money laundering and terrorist fund-raising when handling more than 15000 third-party deposits or withdrawals totaling about HK $37.5 billion for its customers between March 2014 and March 2015.
The company also failed to identify that the two deposits totaling 38.2 million yuan for share subscription in December 2015 did not come from relevant customers, but from a third party. According to the survey, Guotai Junan (Hong Kong) did not develop a written procedure for identifying third-party deposits until about September 2016.
No reasonable steps have been taken in the placing activities
It is worth noting that the funds used by five customers to subscribe for the shares worth 28.8 million yuan of the listed company are deposited by the same third party into their respective customer accounts, and the relevant amount is far more than their self declared net asset value.
Despite these early warning signs, Guotai Junan did not take reasonable steps to verify the ultimate beneficial owner of such customer accounts and their sources of funds, nor did it conduct appropriate inquiries to determine whether the relevant customers are independent of the listed company. Finally, three of the five assignees were employees of the listed company, and the shares they were allotted accounted for 11% of the total international allotment of the listed company.
Failed to detect the false sale in time
In addition to the above-mentioned crimes, between January 2014 and July 2016, Guotai Junan (Hong Kong) failed to detect 590 potential false sales in a timely manner due to the lack of sufficient written transaction monitoring procedures or guidelines and technical failure of the transaction mode monitoring system.
It was not until July 2016 that Guotai Junan Hong Kong realized 210 potential false sales and completed the report to the Hong Kong Securities Regulatory Commission in February 2017.
It is understood that Guotai Junan (Hong Kong) has taken remedial measures and promised to provide the CSRC with a report prepared by an independent review body within 12 months to confirm that all identified concerns have been properly corrected.
Mr Thomas Atkinson, executive director of the regulatory enforcement department of the CSRC, said that the punishment for the serious systematic lack of Guotai Junan (Hong Kong) and the lack of internal monitoring should alert the licensed companies, understand the importance of establishing adequate and effective safeguard measures, so as to reduce the real tool to promote illegal activities such as money laundering in the face of potential suspicious transactions Risk.
Source: interface news Author: man Le editor in charge: Wang Xiaowu_ NF