The Securities and Futures Commission (SFC) has reprimanded and fined Jinrui Futures (Hong Kong) Limited (Jinrui Futures) $4.8 million for failures in complying with anti-money laundering and counter-terrorist financing (AML/CFT) and other regulatory requirements between April 2015 and June 2018 (Note 1).
The SFC has also banned Shen Chun, a former executive director and responsible officer of Jinrui Futures, from re-entering the industry for six months from 6 February 2023 to 5 August 2023 (Note 2).
Jiang Xiaoqing, another responsible officer of Jinrui Futures, has been suspended for five months from 6 February 2023 to 5 July 2023 (Note 3).
The SFC’s investigation found that Jinrui Futures, which permitted 258 clients to use customer supplied systems (CSSs) for placing orders during the material time, had failed to conduct adequate due diligence on the CSSs. As a result, Jinrui Futures was not in a position to properly assess and manage the money laundering and terrorist financing and other risks associated with the use of such CSSs by its clients (Notes 4 & 5).
In addition, the SFC identified that some of the deposits made into four clients’ accounts were unusual and/or suspicious and inconsistent with the clients’ declared net worth. Although Jinrui Futures performed certain enquiries on these clients, they were inadequate and did not satisfactorily explain the suspicious transactions.
The SFC further found that Jinrui Futures failed to comply with its account opening procedures which require its staff to conduct AML investigations on its clients before account opening, including identifying whether the clients were politically exposed persons or under existing terrorist and sanction lists.
The SFC is of the view that Jinrui Futures’ conduct was in breach of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the Guideline on Anti-Money Laundering and Counter-Terrorist Financing and the Code of Conduct (Notes 6 & 7).
The SFC considers that Jinrui Futures’ failures were partly attributable to the failures of Shen and Jiang in discharging their duties as the firm’s responsible officers and senior management.
In deciding the disciplinary sanctions against Jinrui Futures, Shen and Jiang, the SFC took into account that:
Jinrui Futures’ 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;
a strong deterrent message needs to be sent to the market that such failures are not acceptable;
Jinrui Futures, Shen and Jiang cooperated with the SFC in resolving the SFC’s concerns; and
Jinrui Futures, Shen and Jiang have otherwise clean disciplinary records with the SFC.
End
Notes:
Jinrui Futures is licensed under the Securities and Futures Ordinance to carry on Type 2 (dealing in futures contracts) regulated activity.
Shen was accredited to Jinrui Futures and approved to act as its responsible officer for Type 2 (dealing in futures contracts) regulated activity from September 2008 to May 2018. Shen is currently not licensed by the SFC. Shen was Jinrui Futures’ Manager-In-Charge (MIC) of the Overall Management Oversight function from September 2008 to May 2018.
Jiang has been accredited to Jinrui Futures and approved to act as its responsible officer for Type 2 (dealing in futures contracts) regulated activity since June 2009. Jiang has been Jinrui Futures’ MIC of the (i) Operational Control and Review and AML/CFT functions since March 2016, and (ii) Compliance function from March 2016 to July 2019.
CSSs are trading software developed and/or designated by the clients that enable them to conduct electronic trading through the internet, mobile phones and other electronic channels.
The CSSs were connected to Jinrui Futures’ broker supplied system (BSS) through application programming interface (a set of functions that allows applications to access data and interact with external software components or operating systems). BSSs are trading facilities developed by exchange participants or vendors that enable the exchange participants to provide electronic trading services to investors through the internet, mobile phones and other electronic channels.
Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
Please refer to the Statement of Disciplinary Action for the relevant regulatory requirements.
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