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SFC reprimands and fines Grand International Futures Co., Limited $8 million and suspends its responsible officer for regulatory breaches

Issue date: 2021-12-30 16:45:01

The Securities and Futures Commission (SFC) has reprimanded and fined Grand International Futures Co., Limited (GIFCL) $8 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements between October 2017 and October 2018 (Note 1).

The SFC has also suspended the licence of GIFCL’s responsible officer, Mr Liang Benyou, for eight months from 28 December 2021 to 27 August 2022 (Note 2).

The SFC’s investigation found that GIFCL did not conduct any due diligence on the customer supplied systems (CSSs) used by 103 clients for placing orders.  As a result, GIFCL was not in a position to properly assess and manage the money laundering and terrorist financing (ML/TF) and other risks associated with the use of such CSSs by its clients (Notes 3 & 4).

In addition, the SFC identified that the amounts of deposits made into four client accounts were incommensurate with their declared financial profiles.  Although GIFCL claimed that it was aware of these anomalies, it failed to demonstrate that it had conducted proper enquiries on the deposits and satisfactorily addressed the associated ML/TF risks.

The SFC further found that GIFCL’s failure to put in place an effective ongoing monitoring system to detect suspicious trading patterns in client accounts resulted in its failure to detect 100,989 self-matched trades in nine client accounts (Note 5).

The SFC is of the view that GIFCL’s systems and controls were inadequate and ineffective, and failed to ensure compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML Guideline) and the Code of Conduct (Notes 6 & 7).

The SFC considers that GIFCL’s failures were attributable to Liang’s failure to discharge his duties as a responsible officer and a member of GIFCL’s senior management.

In deciding the disciplinary sanctions against GIFCL and Liang, the SFC took into account that:

• GIFCL’s failures to diligently monitor its clients’ activities and put in place adequate and effective AML/CFT systems and controls are serious as they could undermine public confidence in, and damage the integrity of, the market;
• a strong deterrent message needs to be sent to the market that such failures are not acceptable;
• GIFCL and Liang cooperated with the SFC in resolving the SFC’s concerns; and
• GIFCL and Liang have otherwise clean disciplinary records with the SFC.

End

Notes:

1. GIFCL is licensed under the Securities and Futures Ordinance to carry on Type 2 (dealing in futures contracts) and Type 5 (advising on futures contracts) regulated activities.
2. Liang has been accredited to GIFCL and approved to act as its responsible officer for Type 2 (dealing in futures contracts) and Type 5 (advising on futures contracts) regulated activities since 3 October 2017.  Liang has been GIFCL’s Manager-In-Charge of the (i) Overall Management Oversight, Operational Control and Review, Compliance and Information Technology functions since 1 September 2017, and (ii) Key Business Line function since 4 April 2018.
3. CSSs are trading software developed and/or designated by the clients that enable them to conduct electronic trading through the internet, mobile phones and other electronic channels.
4. The CSSs were connected to GIFCL’s broker supplied system (BSS) through application programming interface (a set of functions that allows applications to access data and interact with external software components or operating systems).  BSSs are trading facilities developed by exchange participants or vendors that enable the exchange participants to provide electronic trading services to investors through the internet, mobile phones and other electronic channels.
5. Self-matched trades refer to those trades where the client’s order matched with his/her own order in the opposite direction.  The AML Guideline specifies the entry of matching buys and sells in particular securities and futures as an example of situations that might give rise to suspicion of money laundering, as it might create the illusion of trading and be an indication of market manipulation.
6. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
7. Please refer to the Statement of Disciplinary Actions for the relevant regulatory requirements.

News captured as of:2021-12-30 16:45:02

Source: SFC