Hong Kong subsidiary of Guotai Junan was fined HK $25 million for three crimes

category:Finance
 Hong Kong subsidiary of Guotai Junan was fined HK $25 million for three crimes


Another brokerage in Hong Kong was fined.

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.

Third party funds transfer not properly reviewed

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 Hong Kong Securities Regulatory Commission has determined that, despite the early warning that some third-party funds transfer shows suspicious signs, Guotai Junan has not fully monitored the activities of its customers, properly reviewed the relevant funds transfer, identified suspicious transactions and reported to the joint wealth intelligence unit in a timely manner. In terms of third-party funds transfer, Guotai Junan also failed to ensure its proper and effective implementation of policies and procedures related to combating money laundering and terrorist fund-raising.

In addition, Guotai Junan handled 5406 third-party deposits between July 2015 and June 2016, but failed to record the identity of depositors, the relationship between account holders and depositors, and the reasons for making such third-party deposits, which is contrary to the companys written policies and procedures.

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.

The SFC found that although the failure of the trading mode monitoring system was mainly attributed to a third-party supplier, Guotai Junan (Hong Kong) failed to detect the virtual sales for more than two years, during which about 590 potential virtual sales were not detected.

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