Hong Kong SFC fines Mason Securities over third-party deposits
Hong Kong’s Securities and Futures Commission (SFC) on Wednesday fined Mason Securities Limited (MSL) HK$3.6 million ($460,000) for failing to meet anti-money laundering and counter-terrorist financing laws.
The brokerage firm violated provisions of the rules between December 2014 and January 2015, the SFC said. MSL didn’t conduct relevant customer due diligence and handled third-party deposits without auditing the names of the originators.
More specifically, the company failed to identify that 15 cheques issued by third parties were deposited into five client accounts in 2016 until the SFC requested for the relevant cheque copies. As a result, many transactions were passed without reviewing the source of funds deposited into Mason bank accounts.
The review found lapses in Mason Securities’ internal controls and systems and that the company failed to put in place controls to ensure the accuracy of the information it submitted to the SFC.
The lapse in oversight also extended to the failure to train or provide sufficient guidance to its staff to ensure they have a clear understanding of their respective roles in monitoring suspicious transactions.
“MSL also failed to take reasonable measures to ensure that proper safeguards exist to mitigate the risks of money laundering and terrorist financing when identifying and handling third party deposits. This was due to GCL and MSL’s lack of policies and procedures for the identification of third party deposits prior to June 2017,” the agency said.
MSL has no previous disciplinary record
The broker hadn’t self-identified or reported deficiencies before the SFC requested to review all client deposits and trading activities in 2016. Only after that, MSL identified suspicious transactions and reported them to regulators.
In reaching its decision, the SFC said MSL had been cooperative during its investigation, and there is no evidence that failures were deliberate.
The SFC added that Mason Securities has no previous disciplinary record in relation to the anti-money laundering ordinance.
The case underlines the punitive measures being pursued by the SFC to maintain confidence in the local markets, which is made more difficult by the fact that many companies are based offshore.
Furthermore, Hong Kong regulators have been stepping up their compliance actions to enforce anti-money laundering rules. Last year, the HKMA fined and reprimanded Shanghai Commercial Bank HK$5 million for similar breaches. Also earlier this year, HSBC said it would contact all retail and corporate clients to update their contract and funding source information and warned that some accounts might be suspended.
