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SFC reprimands and fines Mason Securities Limited $3.6 million for breaches of anti-money laundering regulatory requirements

Issue date: 2021-12-15 16:47:42

The Securities and Futures Commission (SFC) has reprimanded Mason Securities Limited (MSL), formerly known as GuocoCapital Limited (GCL), and fined it $3.6 million for failing to ensure proper certification of client identity before approving account opening and have in place controls for the identification of third party deposits, contrary to anti-money laundering and counter-terrorist financing regulatory requirements (Notes 1 & 2).

The SFC found that between December 2014 and January 2015, GCL failed to conduct proper customer due diligence before approving the opening of six clients’ accounts via a non-face-to-face approach because no controls were in place to ensure that proper certification of client identity documents was carried out (Notes 3 & 4).

MSL also failed to take reasonable measures to ensure that proper safeguards exist to mitigate the risks of money laundering and terrorist financing when identifying and handling third party deposits as it failed to identify 15 cheques issued by third parties were deposited into five client accounts between May and July 2016 until the SFC requested for the relevant cheque copies.  This was due to GCL and MSL’s lack of policies and procedures for the identification of third party deposits prior to June 2017 (Notes 5 to 7).

The SFC is of the view that MSL is guilty of misconduct, and its fitness and properness to carry on regulated activities have been called into question.  In deciding the disciplinary sanction, the SFC took into account:

• the authentication of client identity is paramount to an effective customer due diligence process and is necessary to guard against the risks of money laundering and terrorist financing;
• GCL and MSL’s failures in complying with AML/CTF requirements lasted for an extensive period of time, including its failure to put in place policies and procedures to identify third party deposits from September 2009 to June 2017 (Notes 8 & 9);
• a strong message has to be sent to the market to deter similar misconduct; and
• MSL’s cooperation with the SFC in resolving the SFC’s concerns.

End

Notes:

1. MSL was known as GCL until 25 February 2016.  MSL is licensed under the Securities and Futures Ordinance to carry on Type 1 (dealing in securities), Type 4 (advising on securities) and Type 9 (asset management) regulated activities.
2. References to the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML Guideline) are to the versions of the AML Guideline effective from April 2012 to March 2015 and from April 2015 to February 2018.
3. Paragraph 4.12.3 of the AML Guideline provides that for customers not physically present for identification purposes, the use of an independent suitable certifier guards against the risk that documentation provided does not correspond to the customer whose identity is being verified.  However, for certification to be effective, the certifier will need to have seen the original documentation.
4. Paragraph 4.12.5 of the AML Guideline further states that the certifier must sign and date the copy document (printing his/her name clearly in capitals underneath), and clearly indicate his/her position or capacity on it.  The certifier must also state that it is a true copy of the original (or words to similar effect).
5. Paragraph 2.1 of the AML Guideline requires licensed corporations to take all reasonable measures to ensure that proper safeguards exist to mitigate the risks of money laundering and terrorist financing under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance.  To ensure compliance with this requirement, licensed corporations should implement appropriate internal anti-money laundering (AML) / counter-terrorist financing (CTF) policies, procedures and controls.
6. Paragraph 5.1 of the AML Guideline requires licensed corporations to continuously monitor their business relationship with their customers by monitoring the activities (including cash and non-cash transactions) of the customers to ensure that they are consistent with the nature of business, risk profile and source of funds.
7. Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
8. The Prevention of Money Laundering and Terrorist Financing Guidance Note (AML Guidance Note) came into effect in September 2009.
9. Paragraph 6.1.2(d) of the AML Guidance Note provides that licensed corporations were required to conduct ongoing due diligence and scrutiny on the transactions and account throughout the course of the business relationship to ensure that the transactions being conducted are consistent with its knowledge of the customer, its business and risk profile, taking into account, where necessary, the customer’s source of funds.

News captured as of:2021-12-15 16:47:43

Source: SFC