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HK Watchdog Fines Investment Firm For AML Breaches

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HK Watchdog Fines Investment Firm For AML Breaches

By Pathay Singh on 04/19/17

Hong Kong’s securities watchdog has fined and reprimanded an investment adviser for allegedly failing to adhere to anti-money laundering policies while processing third-party fund transfers.

The Securities and Futures Commission said that iSTAR International Futures Co. Ltd., now known as Rifa Futures Limited, between January and July of 2014 failed to take certain steps while handling third-party deposits to reduce the risk of money laundering, such as verifying the identities of third parties and keeping a log of such inquiries. The company will pay HK$3 million ($385,964) to settle the allegations.

“Rifa’s conduct was in breach of its obligation to take all reasonable measures to ensure that proper safeguards exist to guard against the risks of money laundering and terrorist financing associated with third party fund transfers,” the SFC said in a Wednesday statement

Rifa violated SFC rules, the agency said, because the investment adviser is required to investigate whether third-party fund transfers fall in line with the known legal activities of a customer, to record such investigations, and to implement and communicate appropriate anti-money laundering policies.

According to the SFC, while Rifa was processing third-party deposits and transfers, it failed to get written instructions from clients and verify the identities of third parties before making third-party deposits.

Other shortcomings included not providing adequate anti-money laundering training to staff members, failing to ensure that its approval process for such deposits was effective and not making sufficient investigations into third parties.

The SFC also said that Rifa violated its rules by “effecting a payment from a client’s account to the account of one of its responsible officers” on one occasion.

The securities watchdog said that in calculating the HK$3 million penalty, it considered that Rifa has since taken steps to fix its internal controls, cooperated with the agency in the investigation, agreed to have an independent review of its internal controls and maintained an otherwise spotless disciplinary record.

Contact information of Rifa was not available on Friday.

The SRC in January fined an investment management unit of Standard Chartered Bank (Hong Kong) Ltd. HK$3 million, finding the unit went long stretches of time with investment management personnel who did not have the required experience.

The rules require companies to keep at least two key personnel with five or more years of experience managing retirement funds or public funds on staff. However, from October 2000 to July 2015, the unit failed to meet these requirements.

Source: Law360