Hong Kong

HKMA publishes key messages and observations from thematic review of use of external information in AML/CFT control systems

The Hong Kong Monetary Authority (HKMA) has published its key observations and good practices from a thematic review of the use of external information and data by authorised institutions in their anti-money laundering and counter-financing of terrorism (AML/CFT) control systems.

The review was part of HKMA's response to emerging risks noted in connection with Covid-19 related fraud, mule account networks, and activities related to identity theft and investment scams, which have been the subject of increasing bank customer enquiries and complaints from the HKMA. [26 Apr 2021]

SFC and police conduct joint operation against listed company and senior executives in connection with suspected ramp-and-dump market manipulation schemes and fraud

The Securities & Futures Commission (SFC) has announced that it has conducted a joint operation with the Commercial Crime Bureau of the police against a syndicate suspected of market misconduct and fraud, as a follow-up to their previous joint operation on 4 and 5 March 2021 against a syndicate suspected of operating ramp-and-dump market manipulation schemes (see our previous update).

The follow-up operation involved a search of the office premises of a listed company and the residences of its senior executives for suspected market misconduct offences under the Securities and Futures Ordinance. In addition, four persons were arrested by the police in connection with suspected offences of conspiracy to defraud. They include three senior executives who are alleged to have conspired to use bogus transactions to embezzle their company of over HK$19 million in funds. [22 Apr 2021]

SFC revokes corporation's licence and bans its former co-CEOs for life

The SFC has revoked the licence of IDS Forex HK Limited (IDS) and imposed a lifetime ban on its former co-CEOs, Mr Chung Wooman and Mr Ki Bonggan. The SFC conducted an investigation in June 2017 following a self-report by IDS concerning the arrest and conviction in Korea of IDS’s then sole shareholder and chairman, Mr Kim Sunghun, for illegal fundraising and fraud. The SFC issued a restriction notice on 12 June 2017 prohibiting IDS from engaging in its licensed activities (see our previous update).

The case involved breaches of the SFC’s regulatory notification requirements as well as various requirements under the main code of conduct regarding compliance and maintenance of appropriate standards. The SFC also reported that it held serious doubts over Mr Chung’s and Mr Ki’s fitness and properness as regulated persons, as well as their character, reliability and ability to carry on regulated activities competently, honestly and fairly. [22 Apr 2021]

Hong Kong Customs cracks down on HK$2.5 billion money laundering syndicate

A six person money laundering syndicate was uncovered by Hong Kong Customs. The suspects had opened about 60 personal bank accounts at various Hong Kong banks and had made over 2,600 suspicious transactions between 2018 and 2020. [22 Apr 2021]

ICAC charged former government consultant with misconduct and fraud over HK$4.2 million services for overseas health organisations including WHO

The Independent Commission Against Corruption (ICAC) has charged Joseph Kam Kai-man, former consultant of the Centre of Health Protection of the Department of Health, with misconduct in public office and fraud for abusing his official capacity for personal gain in drug testing and other services. It is alleged that Kam made false representations to multiple overseas health organisations and entered into agreements with these organisations without approval from the Department of Health. [13 Apr 2021]

Solicitor acquitted of insider dealing in shares of listed company

The Eastern Magistrates’ Court has acquitted Mr Leung Pak Keung (a practising solicitor) of five charges of insider dealing in the shares of CASH Financial Services Group Limited (CFSG).

The SFC alleged that between 18 December 2014 and 2 January 2015, while acting as legal adviser to Oceanwide Holdings (Hong Kong) Co. Limited in a proposed share acquisition of a 44% shareholding in CFSG, Mr Leung purchased CFSG shares whilst in possession of specific, non-public and price sensitive information about CFSG (see our previous update).

The Magistrate found that the witnesses gave conflicting evidence and it was not demonstrated beyond reasonable doubt that Mr Leung knew that the subject information was inside information. [9 Apr 2021]

MMT sanctions two former executives of listed company for insider dealing

The Market Misconduct Tribunal (MMT) has sanctioned two former executives of a listed company (Mr Charles Yiu Hoi Ying and Ms Marian Wong Nam) for insider dealing in the shares of the company.

The MMT’s orders were made following an appeal brought by the SFC in the Court of Final Appeal, which found the two individuals guilty of insider dealing, reversing the earlier decision of the Court of Appeal (see our previous update). [6 - 7 Apr 2021]

Two former law firm employees jailed for fraud over HK$20 million mortgage loans and money laundering

Two former employees of a now defunct law firm (KLL-solicitors) were sentenced to 47 months and 30 months, respectively, in jail at the District Court for defrauding over mortgage loans totalling HK$20 million and laundering part of the sums.

One of the employees made false representation to a licensed money lender that he was authorised by some property owners to handle a mortgage loan, without instruction from the property owners. The other employee then disposed of the loan by transferring part of it to settle a payment owed to a client of the law firm. Other parts of the loan were kept in the employees' personal bank accounts. [11 Mar 2021]

China

Former top official of China's biggest policy bank accused of bribery

Zhang Maolong, the former chief operating officer of China Development Bank, the biggest policy lender in China, was investigated by the Commission for Discipline Inspection on suspicion of "serious violation in discipline and law". Eight years after the former officer's retirement in 2013, he is subject to investigation following allegations he took bribes worth millions of yuan. [19 Apr 2021]

China's anti-money laundering regulations tightened for financial institutions

China's central bank, the People's Bank of China, will soon impose stricter regulations on financial institutions to prevent money laundering and terrorist financing, in order to bring domestic practices in line with international standards.

The new regulations will apply to various types of financial institutions, including securities houses, insurance companies, and trust companies. Under the new regulations, financial institutions must establish a comprehensive internal control system, including an anti-money laundering information system, audit mechanism and risk management policy. The regulations will take effect on 1 August 2021. [15 Apr 2021] 

Vice Governor of Shanxi Province faced corruption investigations

Vice Governor and public security head of Shanxi Province, Liu Xinyun, is under investigation by the Commission for Discipline Inspection on suspicion of "severe violation of discipline and laws". Liu was formally in charge of cyber operations at the Ministry of Public Security. [12 Apr 2021]

Former Shanghai Clearing House chief faced corruption charges

The former chairman of the Shanghai Clearing House, a clearing and settlement platform for the interbank market, Xu Zhen, was charged with corruption and bribery. [2 Apr 2021]

China's financial regulators released new Know-Your-Customer rules for public consultation

China top financial watchdogs are expected to publish new rules on know your customer (KYC) requirements to strengthen the oversight of financial institutions. 

In the draft KYC rules jointly released by the People’s Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission, institutions will need to take more comprehensive measures to guard against money laundering and terrorist financing. Notably, the existing requirement for client identification will be upgraded to "client due diligence". Financial institutions will also need to identify the ultimate beneficiary of the accounts. [31 Mar 2021]

Former culture and tourism official faces corruption charges

The former vice minister of culture and tourism, Li Jinzao, was charged with taking bribes. The prosecutor alleged that Li took advantage of his positions at the time, providing benefits to others relating to qualification approval, project contracting and job promotion, and in exchange accepted large sums of money and gifts. [16 Mar 2021]

Former senior political advisor of Hainan charged with bribery

Wang Yong, the former vice chairman of the Hainan Provincial Committee of the Chinese People's Political Consultative Conference was charged with accepting bribes. The prosecutor alleged that Wang took advantage of his former positions while working in Hainan to seek gains for others in project approval and contracting, changing the nature of land, job promotion, among others, and accepted large sums of money and gifts in return. [15 Mar 2021]