Hong Kong Monetary Authority disciplinary action against State Bank of India
On 31 July 2015, the Hong Kong Monetary Authority (HKMA) announced that it has taken disciplinary action against the State Bank of India, Hong Kong Branch (SBIHK) under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO).
The HKMA has:
- reprimanded SBIHK and ordered it to pay a pecuniary penalty of HK$7.5 million; and
- ordered SBIHK to submit to the HKMA (by a date and in a manner to be specified) a report prepared by an independent external advisor assessing:
- whether SBIHK's remedial plan (in response to the HKMA's onsite examination in 2012) is sufficient to address the contraventions found by the HKMA; and
- the effectiveness of the implementation of the remedial plan.
The HKMA found that SBIHK had contravened four provisions under Schedule 2 of the AMLO during the period from April 2012 to November 2013, namely, it had failed to:
- carry out certain customer due diligence measures before establishing business relationships with 28 corporate clients;
- continuously monitor its business relationships with its customers;
- establish and maintain effective procedures for determining whether its customers (or beneficial owners of its customers) were politically exposed persons; and
- establish effective procedures to ensure compliance with specified provisions of the AMLO.
This appears to be the first disciplinary action taken under the AMLO, which came into effect on 1 April 2012.
HKMA Cautions Banks on Malpractice by Intermediaries and Sales Agents
On 7 August 2015, the HKMA issued a circular to financial institutions regulated by it requiring them to enhance customer protection and mitigate reputational risk arising from possible malpractices of intermediaries or sales agents. In particular, the HKMA asked these financial institutions to:
- cease using intermediaries to source retail financial products, such as personal loans and credits cards; and
- undertake a review on their system of controls to ensure that their engagement of external parties as sales agents would not cause concerns to data privacy.
BNP Paribas Securities (Asia) Limited fined by Hong Kong's SFC for dark pool operations
On 3 August 2015, the Securities and Futures Commission (SFC) announced that it has fined BNP Paribas Securities (Asia) Limited (BNP Asia) HK$15 million for failures in relation to its dark pool operations. The SFC's enforcement was based on the following factors:
- BNP Asia did not operate as represented in materials provided to clients in terms of its order execution priority. Instead of using an order price priority, BNP Asia' dark pool treated all orders the same with allocation on a pro rata basis;
- Upon discovering the issue, BNP Asia suspended its dark pool operations without notifying the SFC;
- BNP Asia did not affirmatively seek client consent as it had disclosed to the SFC in its license application; and
- BNP failed to maintain proper records.
SFC hands out hefty fines against Nomura Hong Kong for failing to self-report non-compliance in a timely manner
On 30 July 2015, the SFC announced that it had reprimanded and fined Nomura International (Hong Kong) Limited (Nomura Hong Kong) HK$4.5 million for failing to report significant misconduct by a former trader in a timely manner.
This case underlines and reinforces the importance of the self-reporting obligations contained under Paragraph 12.5 of the SFC’s Code of Conduct, which requires intermediaries to report misconduct and suspected misconduct to the SFC immediately upon discovery, as opposed to waiting until they have concluded an internal investigation or obtained legal advice on the matter. For more information, see our Regulation e-bulletin.
Hong Kong Resources chairman faces bribery charges
On 3 August, Hong Kong Resources Holdings chairman and executive director Kennedy Wong Yin-ho resigned with immediate effect after being charged with bribery. This sent the value of the shares in the gold and jewellery retailer down 15 percent. The Independent Commission Against Corruption (ICAC) said Wong, 52, and two others face a joint charge of "offering an advantage to an agent" under the Prevention of Bribery Ordinance. The alleged incident related to the company's 2007 restructuring under its former name Ocean Grand Chemicals. Ho was later granted HK$1 million bail by the Eastern Magistrates court and the case has been adjourned until 11 September.