Hong Kong and China

Hong Kong

HKMA takes disciplinary action against PSSVFO licensee for breach of AML/CTF requirements

The Hong Kong Monetary Authority (HKMA) has taken disciplinary action against 33 Financial Services Limited (33FS) under the Payment Systems and Stored Value Facilities Ordinance (PSSVFO). The HKMA reprimanded and fined 33FS HK$875,000 for failing to fulfil the minimum criterion relating to AML/CTF measures under the PSSVFO.

The HKMA found that during the period from November 2016 to June 2019, 33FS had failed to have in place adequate and appropriate systems of control to comply with the relevant paragraphs of the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism for Stored Value Facility Licensees. [14 Jan 2022]

Hong Kong issuers now required to establish whistleblowing and anti-corruption policies

The Hong Kong Stock Exchange has amended the Main Board Listing Rules to implement the proposals of the “Consultation Conclusions on Review of the Corporate Governance Code & Related Listing Rules, and Housekeeping Rule Amendments” published on 10 December 2021. The amendments came into effect on 1 January 2022.

Issuers are now required to establish a whistleblowing policy and system for employees and those who deal with the issuer to raise concerns, in confidence and anonymity, with the audit committee (or any designated committee comprising a majority of independent non-executive directors) about possible improprieties in any matter related to the issuer.

They should also establish policies and systems that promote and support anti-corruption laws and regulations. [31 Dec 2021]

SFC reprimands and fines licensed corporation HK$8 million and suspends RO and MIC for eight months for AML/CTF and other regulatory breaches

The Securities and Futures Commission (SFC) has reprimanded and fined Grand International Futures Co., Limited (GIFCL) HK$8 million for failures to comply with AML/CTF and other regulatory requirements between October 2017 and October 2018. 

The SFC has also suspended the licence of Mr Liang Benyou for eight months. Mr Liang is GIFCL’s responsible officer (RO) and manager-in-charge (MIC) of the overall management oversight, operational control and review, compliance, information technology, and key business line functions.

The SFC's findings conclude that Mr Liang had failed to discharge his duties as a RO and a member of GIFCL’s senior management and that GIFCL's breaches were attributable to such failure. [30 Dec 2021]

HKMA takes disciplinary action against stored value facility licensee for AML/CTF-related regulatory breaches

The HKMA has announced that it has reprimanded and fined ePaylinks Technology Co., Limited (ePaylinks) HK$1 million for AML/CTF related breaches under the PSSVFO.

This follows an on-site examination and further investigation, during which the HKMA found that ePaylinks had failed to have in place adequate and appropriate systems of control to ensure compliance with the relevant paragraphs of the AML/CTF guideline for stored value facility licensees.  This amounted to a failure to fulfil the minimum criterion relating to AML/CTF measures under the PSSVFO. 

The deficiencies by ePaylinks were in relation to transaction monitoring, name screening and taking additional measures or conducting enhanced due diligence to mitigate money laundering or terrorist financing in high-risk situations. [20 Dec 2021]

Hong Kong and Singapore authorities conduct a joint operation against suspected cross-border ramp-and-dump syndicate

A joint operation against a syndicate suspected of conducting ramp-and-dump manipulation schemes has been launched by the SFC, the Hong Kong Police Force, the Monetary Authority of Singapore, and the Singapore Police Force.

Ramp-and-dump schemes are a type of market manipulation in which fraudsters use various methods to artificially "ramp" up the share price of a listed company before "dumping" the shares to other investors at a higher price.

On 15 December 2021, ten people, including individuals believed to be key members of the syndicate and their associates, as well as some senior executives of Hong Kong-listed companies, were arrested during searches of 33 premises. [16 Dec 2021]

SFC reprimands and fines licensed corporation HK$3.6 million for breaches of AML/CTF regulatory requirements

The SFC has reprimanded and fined a licensed corporation HK$3.6 million for failing to ensure proper certification of clients' identities before approving account opening and failing to implement controls for the identification of third party deposits, contrary to AML/CTF regulatory requirements. 

The SFC made the following key findings:

  • Between December 2014 and January 2015, the licensed corporation failed to conduct proper customer due diligence before approving the opening of six clients' accounts using a non-face-to-face approach because no controls were in place to ensure that proper certification of client identity documents was carried out.
  • Between May and July 2016, the licensed corporation failed to take reasonable measures to ensure that proper safeguards existed to mitigate the risks of money laundering and terrorist financing when identifying and handling third party deposits, as it failed to identify that 15 cheques issued by third parties were deposited into five client accounts until the SFC requested copies of the cheques.  This was due to its lack of policies and procedures for the identification of third party deposits prior to June 2017.

The above was in breach of the SFC’s Guideline on Anti-Money Laundering and Counter-Terrorist Financing and the main code of conduct. [15 Dec 2021]

HKMA takes disciplinary actions against four banks for contraventions of AMLO

The HKMA has announced that it has taken disciplinary action against China Construction Bank (Asia) Corporation Limited (CCBA), CTBC Bank Co., Ltd., Hong Kong Branch (CTBCHK), Industrial and Commercial Bank of China (Asia) Limited (ICBCA) and UBS AG, Hong Kong Branch (UBSHK) for breaches of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).

The HKMA imposed pecuniary penalties of a total of HK$44,200,000 against the four banks, as well as issuing orders against two banks to remedy the contraventions where warranted. Those two banks were required to submit a report prepared by an independent external advisor assessing the sufficiency and effectiveness of the remedial measures taken by them to address the contraventions and other deficiencies identified by the HKMA. [19 Nov 2021]

China

China targets corruption with new anti-bribery guideline “Opinions on Further Promoting the Investigation of Bribery and Acceptance of Bribes”, a new anti-bribery guideline designed to focus on multi-national corporations and individuals that pay bribes in China, as opposed to bribe recipients, has recently been released in China.

Under the new guideline, companies found to have paid bribes could be blacklisted and barred from doing business in China. Authorities will also be stricter in giving credit in relation to mitigating circumstances.

International companies that conduct business in China should be alert to the possibility that settling bribery allegations that involve China elsewhere in the world, such as entering into a settlement with the U.S. Department of Justice or the Securities and Exchange Commission, could lead to a "carbon copy" prosecution in China with heavy penalties. [4 Jan 2022]

Chinese court holds trial in the absence of embezzlement fugitive

A court in Central China's Henan province has tried a fugitive, Cheng Sanchang, in his absence over a charge of embezzlement. It was the first embezzlement case involving a fugitive defendant being tried in absentia. The court papers were delivered to Cheng in compliance with the law, but Cheng did not attend the trial.

Cheng fled the country in early 2001 and the Interpol issued a Red Notice against him a year later. [10 Dec 2021]