Fined 460k for anti-money laundering violations! Western Securities faces multiple challenges in its first year after consolidating Guorong Securities.

On April 1, the Shaanxi Branch of the People’s Bank of China released an announcement of administrative penalties. For violating relevant anti-money laundering (AML) management regulations, West Securities was fined 460k yuan. The date of the penalty decision was March 30, 2026.

Source of data: Official website of the Shaanxi Branch of the People’s Bank of China

Compliance tests for securities firms under intensified regulation

For securities firms, anti-money laundering is not only a compliance bottom line, but also an important line of defense for maintaining financial order, preventing illegal funds from flowing into the capital markets, and protecting investors’ interests. It directly affects the industry’s reputation and the safety of the financial system.

On November 8, 2024, the 14th National People’s Congress Standing Committee passed the newly revised Anti-Money Laundering Law of the People’s Republic of China, and it was stipulated that it would take effect on January 1, 2025. This revision raised the compliance requirements for financial institutions to a higher standard, significantly tightening key obligations such as customer identity penetration and identification, and full-process monitoring of suspicious transactions. At the same time, it improved the accountability mechanism, implementing a “dual-penalty system” for both institutions and individuals, and made clear that responsible persons may face hefty fines and even a lifelong ban from the industry, overall increasing the cost of AML violations.

In fact, various financial institutions—including securities firms—generally exposed weak links in their AML performance of duties. In addition, as money-laundering methods have become increasingly complex and covert, regulatory enforcement has continued to be intensified in recent years. According to iFunD data, in the first quarter of 2026, alone, AML-related penalty notices received by financial institutions in the banking industry (including the head office, various branches, credit card centers, etc.) were no fewer than 586 entities, with a total forfeiture amount of 576 million yuan.

According to a report in China Securities Journal on April 30, 2025, an internal notice from the AML Bureau of the People’s Bank of China stated that securities firms’ money-laundering risk assessments are often oriented toward meeting regulatory demands, and there are issues such as low participation by business departments and an incomplete set of assessment indicator systems and methodologies.

Specifically in the customer due diligence process, although securities firms’ foundational compliance level for customer identity identification has improved significantly, there are still shortcomings such as insufficient depth of understanding of money-laundering risks and confusion over boundaries with investor suitability management. In terms of transaction monitoring, most securities firms’ transaction monitoring systems have already covered brokerage businesses, and the list monitoring and backtracking screening mechanisms are more robust. However, the effectiveness of suspicious transaction monitoring still needs to be further enhanced.

The penalty notice issued by the Shaanxi Branch of the People’s Bank of China targeted only the institution and did not pursue individual accountability, reflecting that the related violations were more likely due to systemic compliance management shortcomings. Although West Securities, in its latest disclosed 2025 annual report, provided a fairly detailed account of its AML work, the compliance facts revealed by the penalty notice still indicate gaps in both the implementation of the company’s AML制度 (system) and the identification of substantive risks.

Contraction of bulk commodities trading business

West Securities was established in January 2001, with its registered address in Xi’an, Shaanxi Province. On May 3, 2012, the company’s first public offering of A-share stock was listed on the Shenzhen Stock Exchange, making it the 19th securities company to go public nationwide.

The 2025 annual report shows that West Securities achieved total operating revenue of 5.99B yuan for the full year, down 10.84% year over year, while attributable net profit was 1.75B yuan, up 24.97% year over year. Non-recurring profit and loss (deducted) net profit grew in tandem by 25.36%. Return on weighted net assets (ROE) rose to 5.95%, and total assets also increased to 121.66B yuan, up 26.78% year over year.

Among listed securities firms that had already disclosed annual reports as of April 2, West Securities was the only one whose operating revenue declined year over year on a consolidated income statement basis. The growth rates of its operating revenue and attributable net profit showed a clear divergence, which is precisely due to the year-over-year declines in both revenue and operating costs from the company’s subsidiary’s bulk commodities trading business. Meanwhile, from the parent-company level, benefiting from the push in wealth management business, West Securities’ parent-company operating revenue increased 11.97% year over year, and the gross margin rose by 3.91 percentage points compared with last year.

Table: Performance of West Securities’ various businesses in 2025

Source of data: West Securities’ 2025 annual report

Bulk commodities trading businesses are typically characterized by large revenue scale, relatively low gross margins, and high capital occupation, which makes them a typical low value-added, high consumption type of business for securities firms. The annual report shows that the subsidiary, West Futures, adjusted its operating principles from last year’s “business-oriented” to “profit-oriented,” strengthened the application of assessment results, and eliminated inefficient business units. This change in wording also reflects that the company’s contraction of this business was not a proactive strategic upgrade, but more a practical business choice made in response to unfavorable operating conditions.

It is also worth noting that this annual report is the first one in which West Securities consolidates Guorong Securities. In September 2025, West Securities completed the transfer registration of 64.5961% of Guorong Securities’ equity and became the controlling shareholder. For the acquired party, Guorong Securities achieved operating revenue of 1.12B yuan in 2024 and net profit of 85.53M yuan. In 2025, although operating revenue increased significantly to 2.49B yuan, net profit fell to 76.06 million yuan, showing a pattern of increased revenue but not increased profit. This also indirectly confirms the necessity for West Securities to proactively reduce bulk commodities trading and shift toward a profit-oriented approach.

Table: Performance of West Securities’ non-wholly-owned subsidiaries in 2025

Source of data: West Securities’ 2025 annual report

In addition, in 2025, West Securities’ net cash flow from operating activities was 2.22B yuan, a sharp year-over-year decline of 81.64%. The company continued to increase its OCI strategy allocation and focused on high-dividend assets to smooth performance fluctuations, but overall its proprietary trading business still recorded a loss from fair value changes of 316 million yuan (mainly from trading financial assets), which weighed on performance.

In October 2025, West Securities announced the results of the management leadership reshuffle of its subsidiary, Guorong Securities. The company’s vice president and secretary of the board, Huang Bin, was elected chairman, the former chairman Zhang Zhihe was reassigned as vice chairman, and Liu Xiang continued to serve as president. With integration advancing further, the new management team also faces challenges in optimizing the profit structure and improving operational efficiency.

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