TechFlow news: On May 22, the Securities and Futures Commission (SFC) of Hong Kong issued a circular specifying the monitoring measures to be implemented when opening accounts and maintaining client relationships.
The circular follows the SFC’s review of account-opening practices at 12 securities brokerage firms. The review identified several significant deficiencies, including inadequate due diligence on account-opening documents, acceptance of suspicious or forged documents during the account-opening process, and weaknesses in managing cross-border agency relationships with overseas intermediaries. The SFC expressed serious concern regarding the potential misuse of client accounts for suspicious or illicit transactions—and the consequent heightened risks of money laundering and terrorist financing.
The SFC requires all licensed corporations to conduct internal reviews as soon as practicable to detect whether any suspicious or forged documents have been accepted for account opening. The SFC has also outlined additional measures for licensed corporations regarding the opening and management of accounts for Mainland Chinese investors. These additional measures include closing investment accounts opened using suspicious or forged documents; closing dormant investment accounts with zero balances; and, when opening new investment accounts, obtaining a written declaration from the investor and requiring that all settlement and fund withdrawal activities be conducted exclusively through bank accounts held in the client’s name at qualified banks.
