SFC Slaps City International Futures with $100,000 Fine for Regulatory Breaches

City
International Futures (Hong Kong) Limited (CIFHKL), which is now known as
VERCAP Financial Services Limited, has been <a href=”https://apps.sfc.hk/edistributionWeb/api/news/openAppendix?lang=EN&refNo=23PR15&appendix=0″>fined</a>
$100,000 and reprimanded by Hong Kong’s market supervisor, Securities and
Futures Commission (SFC). This is due to their failure to comply with
anti-<a href=”https://www.financemagnates.com/terms/m/money-laundering/” class=”terms__main-term” id=”f30ffb65-351e-44d6-9dae-0714f08b59b2″ target=”_blank”>money laundering</a> (AML), counter-terrorist financing (CTF) regulations, and other regulatory requirements.SFC Charges City
International Futures $100,000According
to the press release, SFC’s investigation found that between at least March
2016 and October 2018, CIFHKL failed to conduct due diligence on the customer-supplied
systems (CSSs) provided by 16 clients for order placement. This omission led to
CIFHKL’s inability to effectively evaluate and manage AML and CTF risks.Moreover,
CIFHKL failed to establish an effective system for monitoring and detecting
suspicious trading patterns in client accounts. In many instances, a large
number of trades in the same futures contracts were placed by the same client
in the same second and at the same price. CIFHKL’s systems and controls were
deemed ineffective and inadequate, failing to ensure <a href=”https://www.financemagnates.com/terms/c/compliance/” class=”terms__secondary-term” id=”569f58ee-534c-44f0-a7cd-f55b0f9a2b2a” target=”_blank”>compliance</a> with the AML
guideline and the SFC’s Code of Conduct.”In
addition, the SFC identified that the amounts of deposits made into two client
accounts were incommensurate with their declared financial profiles. Although
CIFHKL claimed that it conducted daily monitoring on client accounts’ fund
movements and was aware of the substantial deposits in the two client accounts,
it failed to demonstrate that it had conducted proper enquiries on the deposits
and satisfactorily addressed the associated risks,” SFC commented in the
statement.In making
its decision to impose a financial penalty of $100,000 dollars, the SFC took
into account several mitigating factors. CIFHKL’s senior management changed
after the relevant period, and it ceased business in March 2021, with the
financial position and clean disciplinary record being taken into account.
CIFHKL cooperated with the SFC in resolving the regulator’s concerns. However,
the SFC felt that a strong message needed to be sent to the market that such
failures are unacceptable.Another Day, Another Fine from
Hong Kong’s SFCThe Hong
Kong market watchdog is one of the most active on the worldwide regulatory
scene and has, on numerous occasions in the past, taken decisions to impose
severe penalties on financial companies or industry professionals.On Monday,
SFC <a href=”https://www.financemagnates.com/institutional-forex/sfc-imposes-10-year-ban-on-citigroup-global-markets-asias-ex-officer/” target=”_blank” rel=”follow”>banned Philip John Shaw</a>, a former responsible officer, board member and
Head of Pan-Asia Execution Services of Citigroup Global Markets Asia Limited
(CGMAL), for serious regulatory breaches. According to the regulator’s statement,
Shaw cannot re-enter the financial industry for the next ten years until 3
March 2033. The CMGAL itself <a href=”https://www.financemagnates.com/institutional-forex/hong-kong-sfc-fines-citigroups-asia-subsidiary-4468-million/” target=”_blank” rel=”follow”>was fined back in January 2022</a> for some serious regulatory failures and paid $44.68
million. However, after a further investigation, the SFC recognized that Shaw’s
inability to fulfill his duties as a responsible officer and senior management
member of the company was one of the leading causes of the company’s breaches.
His ten-year suspension is intended to set an example for others, discouraging
them from condoning unlawful activity.In addition,
Guosen Securities (HK) Brokerage Company, Limited <a href=”https://www.financemagnates.com/institutional-forex/sfc-fines-guosen-securities-hk28-million/” target=”_blank” rel=”follow”>was fined HK$2.8 million</a> by
the SFC in December 2022 due to its inadequate handling of client assets and
accounts. The SFC has also proposed several new market mechanisms to mitigate
risks associated with the futures industry and regulated futures brokers. These
proposals are <a href=”https://www.financemagnates.com/forex/hong-kongs-sfc-proposes-risk-management-rules-for-futures-brokers/” target=”_blank” rel=”follow”>currently open</a> for consultation.