Hong Kong Securities and Futures Commission enhances measures to address document forgery and money laundering risks and to improve account opening standards

Deep Tide TechFlow News, May 22 — Today, the Hong Kong Securities and Futures Commission (SFC) issued a circular setting out the monitoring measures to be implemented when opening accounts and maintaining client relationships.

The circular was issued following the SFC’s review of the account-opening practices of 12 securities brokerage firms. The review identified multiple major 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 is deeply concerned that clients’ accounts may be improperly used to conduct suspicious or unlawful transactions, thereby increasing the risks of money laundering and the financing of terrorist organizations.

The SFC requires all licensed corporations to conduct internal reviews as soon as practicable to detect whether any suspicious or forged documents had been accepted to open accounts. The SFC also sets out additional measures for licensed corporations when opening and managing relevant accounts for investors from the Mainland. These additional measures include closing investment accounts opened using suspicious or forged documents, closing zero-balance inactive investment accounts, and, when opening new investment accounts, obtaining written statements from investors, with settlement and fund deposits to be made only through bank accounts held at eligible banks in the client’s own name.