SFC urges licensed firms to detect and prevent potential layering activities in money laundering

The Securities and Futures Commission (SFC) issued a circular today to urge licensed corporations and virtual asset trading platforms (collectively known as “licensed firms”) to stay vigilant against suspicious fund flows showing signs of layering activities in money laundering.

In the circular, the SFC highlights a rising trend in which bad actors exploit licensed firms for layering activities, with some attempting to launder illicit proceeds from deception and scam cases, by obscuring the source and destination of the illicit proceeds. A common red flag of layering is a series of suspicious activities involving frequent, swift and structured fund deposits in client accounts, followed by immediate withdrawals in the form of funds or VA.

In the same circular, the SFC also reiterates its expected robust standards on licensed firms to detect and prevent layering activities.

To address the risks of increasing exploitation of licensed firms, the SFC has stepped up its collaborative efforts with the Hong Kong Police Force (including the Anti-Deception Coordination Centre (ADCC) and the Joint Financial Intelligence Unit) and industry stakeholders, underscoring a firm commitment to public-private sector cooperation.

In particular, some licensed firms have agreed to facilitate the ADCC’s 24/7 stop payment mechanism to expedite the interception of crime proceeds and recovery of funds since September 2025. In the past two months, around a third of the known deception and scam-related crime proceeds that flowed to licensed firms were successfully intercepted.

To promote compliance with its anti-money laundering and counter-financing of terrorism (AML/CFT) standards, the SFC hosted a webinar today to provide licensed firms with updates on supervisory observations and regulatory responses concerning the securities and virtual assets markets in Hong Kong (Note 1).

In his opening remarks, Dr Eric Yip, the SFC’s Executive Director of Intermediaries, emphasised the importance for licensed firms, particularly their senior management, to safeguard the integrity of their operations and Hong Kong’s financial system.  

“Watchfulness is key to detecting layering activities, which could have been prevented through effective and robust AML/CFT controls,” said Dr Yip. “Licensed firms should stay alert to the red flags of suspicious transactions, while regularly assessing the robustness and effectiveness of their internal controls.”

The SFC will continue to supervise licensed firms’ compliance with applicable AML/CFT requirements and take decisive regulatory or enforcement actions against those failing to meet their obligations (Note 2).

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Notes:

1. The Cantonese session was held today and the English session will be hosted on 18 November 2025.

2. For example, imposing licensing conditions, limiting the business and activities of licensed firms, or taking disciplinary action such as revocation or suspension of licences.