The warning was there in an Industry Insights of the Hong Lawyer Journal, April 2015 (“Internal Controls – No Passing the Buck or Turning a Blind-Eye"):
"… Unlike some regulators in some parts of the world who seem content to punish the corporate entity for misconduct, while certain individual miscreants apparently escape sanction, the SFC’s ban of the CEO concerned marks a sign of things to come for licensed entities and registered persons and their compliance with the SFC’s Guideline on AMLCTF".
At the time of writing, the Securities and Futures Commission's most recent disciplinary actions against a licensed entity and a responsible officer for anti-money laundering related regulatory failures are confirmed in the SFC's press releases, dated 22 June and 23 June 2020 – to which the Statements of Disciplinary Action are attached.
In the first action (22 June 2020), a licensed entity (Type 1 and 4 – dealing in and advising on securities) was handed a public reprimand and fined HK$25.2 million, pursuant to s. 194 of the Securities and Futures Ordinance (Cap. 571). In short, the licensed entity was found to have committed (among other things) multiple anti-money laundering regulatory failures with respect to its handling of a substantial number or amount of third-party fund transfers – these are stated to have shown serious deficiencies in its internal anti-money laundering controls.
In the second action (23 June 2020), a licensed entity's former responsible officer, director and head of dealing was prohibited from re-entering the industry for twelve months. Her oversight and "turning a blind-eye" are stated to have contributed to the licensed entity's failure to comply with anti-money laundering regulatory requirements when handling certain third-party fund deposits. The licensed entity was fined HK$15.2 million by the SFC in February 2019.
A familiar theme with these sorts of regulatory failures is:
- a failure to put in place adequate internal controls;
- a failure to implement internal procedures;
- a failure to report-up; and/or
- a failure to adequately train staff.
These concerns should be of as much interest to all licensed entities and regulated persons, including lawyers in Hong Kong. The consequences of failing to report suspicions of money laundering are serious (s. 25A of the Organized and Serious Crimes Ordinance, Cap. 455) – as are failures by a solicitor, foreign lawyer, or a director of a corporation that is a trust or company service provider licensee, to comply with anti-money laundering record-keeping or client due diligence requirements (s. 9A(1AA) of the Legal Practitioners Ordinance, Cap. 159 and Practice Direction P on "AMLCTF"). To quote from an Industry Insights, in March 2019 ("Due Diligence and Record-Keeping Stocktake for 2018-19"):
"… They (solicitors and foreign lawyers in Hong Kong) should be conducting periodic audits of their compliance with the AMLCTF requirements. Prosecutions against lawyers for money laundering offences in Hong Kong do happen and, in the current environment, it is probably only a matter of time until the next one."
– Warren Ganesh, Senior Consultant, RPC