Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Lion Futures Limited (LFL) $2.8 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements between May 2017 and July 2019.
The SFC’s investigation found that LFL did not conduct any due diligence on the customer supplied systems (CSSs) used by five clients for placing orders during the material time. As a result, LFL was not in a position to properly assess and manage the money laundering and terrorist financing and other risks associated with the use of CSSs by its clients.
In addition, the SFC found that LFL’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 1,098 self-matched trades in five client accounts.
The regulator considers that LFL’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.
In deciding the disciplinary sanctions against LFL, the SFC has taken into account that LFL’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.
LFL has taken remedial measures to enhance its internal systems and controls for continuous monitoring and identifying suspicious transactions.
The regulator noted that a strong deterrent message needs to be sent to the market that such failures are not acceptable.
LFL cooperated with the SFC in resolving the SFC’s concerns.