Hong Kong Roundup of SFC Regulatory Updates.

 

8 May, 2017

 

 

Anti-money laundering (“AML”) 

 

In their circular to licensed corporations and associated entities dated 26 January 2017, the SFC has identified compliance with AML and counter financing of terrorism (“CFT”) as a focus for their market supervision.

 

The SFC has been and will continue to conduct in-depth reviews of firms’ internal AML/CFT policies, procedures and controls. 

 

During 2016 and the review of AML/CFT practices in over 290 firms, the SFC found more than 200 incidents of non-compliance. No doubt, the SFC’s increased action is related to the fact that the Financial Action Task Force (the inter-governmental body promoting effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system) will be evaluating Hong Kong in mid-2018.

 

What can breaches of the AML/CFT requirements mean?

 

In April alone, the SFC has disciplined and fined: 

 

• Guoyan Securities Brokerage (HK) Ltd. HK$4.5 million for breaches between 2010 and 2012 of the SFC’s Prevention of Money Laundering and Terrorist Financing Guidance Note, the Guideline on Anti-Money Laundering and Counter-Terrorist Financing and Code of Conduct; and
• iStar International Futures Co. Ltd. HK$3 million for its failures to comply with AML requirements when processing third party deposits and transfers, such as not verifying the source of funds, providing AML training or having effective compliance.

 

Are you ready for new client agreements?

 

In December 2015, licensed intermediaries were instructed that they had until 9 June 2017 to comply with new Code of Conduct requirements governing the contents of all client agreements. 

 

Aimed at reducing misselling and the effect of contractual boilerplate, client agreements are required to include a representation that the sale or recommendation of any financial product must be reasonably suitable to investors taking account of their financial situation, investment experience and investment objectives.

 

The SFC has stated that all client agreements must be in compliance with the above by 9 June. Failure to do so will no doubt incur disciplinary action. 

 

 

For further information, please contact:

 

Ian Childs, Stephenson Harwood

ian.childs@shlegal.com