Hong Kong’s securities regulator banned a broker for three years and fined his wife after the pair used their personal bank accounts as conduits for transferring funds.
In handing down its ruling, the city’s Securities and Fund Commission (SFC) said the wife’s actions also merited a suspension of licence, but it took into account the effect on the couple’s family and the fact that her role was a secondary one in this case.
But the regulator stressed their actions posed a serious threat to market integrity, noting they had failed to perform know-your-customer procedures and a message needed to be sent that account executives should not meddle with settlement procedures.
The SFC probe found a number of suspicious transfers had taken place from August to December 2010 of significant sums to and from the personal accounts of Stephen Cho Yu Kwan and his wife, Ju You Li. The couple were licensed representatives of Bocom International Securities and Quam Securities at the time, respectively.
These transfers involved funds that had been advanced to them by money-changers in both Hong Kong and mainland China on behalf of mainland clients.
Money for Cho’s clients was routed through Ju’s personal account to the securities accounts of Cho’s clients, while funds for Ju’s clients were transferred to the securities accounts of Ju’s clients via Cho’s personal account.
The created an additional layer in the transfer process, noted the SFC, saying it disguised the true source of the funds being used and prejudicing their employers’ obligations to know the origin of their clients’ money, both of which constitute key information in the prevention and identification of money-laundering activities.
According to Cho and Ju, the funds deposited to their accounts came from their mainland-based clients. However, they had no actual knowledge to confirm their belief.
Nor did they verify whether the money received in Cho’s account was provided by the money-changers and whether the relevant clients had transferred the equivalent amount of renminbi to the money-changers’ accounts on the mainland.
Cho admitted he received a service fee from some of these clients for the services he rendered. He also admitted that on some occasions the money received from money-changers might be kept in his personal account temporarily, if the clients’ securities trading accounts at his employer had not yet been opened.
Both Cho and Ju knew they should not be involved in arranging money transfers and that by doing so they bypassed the processes and requirements of their employers, the SFC found.
The regulator suspended Cho from November 22 this year to November 21, 2016. He had been licenced to carry out type 1 and type 2 activities and was accredited to Bocom International Securities from September 12, 2007, to November 15, 2013.
It reprimanded Ju and fined her HK$100,000 ($12,900). She was licenced to carry out type 1 and type 2 activities and was accredited to Quam Securities from February 24, 2005, and October 23, 2010. She has since been accredited to Phillip Securities (Hong Kong) and Phillip Commodities (HK).
