Hong Kong’s Securities and Exchange Commission (SFC) has reprimanded and fined Lion Futures Limited (LFL) $2.8 million for failing to comply with anti-money laundering and countering the financing of terrorism (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 customer supplied systems (CSS) used by five customers to place orders during real time. As a result, LFL was unable to properly assess and manage money laundering and terrorist financing and other risks associated with its customers’ use of CSS.
In addition, the SFC found that LFL’s failure to put in place an effective continuous monitoring system to detect suspicious trading patterns in customer accounts resulted in its failure to detect 1,098 self-matching transactions in five customer 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 Countering the Financing of Terrorism Ordinance, the Anti-Money Laundering Guideline proceeds from illegal activities and the fight against the financing of terrorism (AML guideline) and the Code of Conduct.
In deciding on the disciplinary sanctions against LFL, the SFC considered that LFL’s failures to diligently monitor the activities of its clients and to put in place adequate and effective AML/CFT systems and controls are serious as they could undermine public confidence and harm the integrity of the market.
LFL has taken corrective measures to improve its internal systems and controls to continuously monitor and detect suspicious transactions.
The regulator noted that a strong deterrent message must be sent to the market that such failures are not acceptable.
LFL worked with the SFC to resolve the SFC’s concerns.