BMI Securities Limited breaches anti-money laundering regulatory requirements, gets severely fined by SFC.

BMI Securities Limited breaches anti-money laundering regulatory requirements, gets severely fined by SFC.

BMI Securities Limited (BMISL), a Hong Kong based financial securities investment firm, got a penalty of $3.7 million by Securities and Futures Commission (SFC). They failed to comply with the anti-money laundering (AML) and counter-terrorist financing (CFT) regulatory requirements. (#1)

BMISL’s responsible officer, SFC did suspend Ms Maggie Tang Wing Chi for five and a half months from 11th February 2020 to 25th July 2020. (#2)

The shares of two listed companies placed were subscribed through BMISL in 2016. Using the bought and sold notes in off-exchange transactions the clients transferred most of their placing shares to third parties for the substantial amounts ranging from $4.4 million to $855 million. (#3)

These transactions showed suspicious features like:

  • The shares placed were disproportionate to the subscription amount with the client’s financial profile.
  • No transactions were done in BMISL accounts. Apart from acquiring and disposing of the shares placed.

Findings by SFC are as follow:

  • Inadequate implementation of controls alleviates the risk of money laundering and terrorist financing associated with bought and sold notes via suspicious transactions.
  • No distinguishing, proper inquiry and insufficient scrutiny on suspicious dealings. No consideration for reporting them to Joint Financial Intelligence Unite where appropriate
  • Neglecting proper customer due diligence and keep customer-related information updated and relevant.
  • Absence of adequate and effective framework for identifying politically exposed persons and singling out terrorists and sanction designations.

From SFC’s point of view, BMISL’s conduct was breaching the Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML guideline) and Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). (#4)

SFC’s investigation further resulted in the findings and the BMISL’s breaches because of Ms Tang’s incapability to discharge her duties as a responsible officer and as a member of BMISL’s senior management. She failed to identify, conduct appropriate inquiries and implement effective AML/CFT systems to subside the risks of money laundering and terrorist financing.

Factors in consideration so that SFC could decide sanctions against BMISL:

  • The message that AML/CFT is intolerable, is propagated in the market.
  • Tang and BMISL’s cooperation for resolving the concerns from SFC.
  • The remedial actions by BMISL to better its AML/CFT systems and controls.
  • An independent reviewer will prepare a report to log the successful rectification of identified concerns. BMISL will submit this report to SFC within twelve months.
  • BMISL’s financial situation.
  • Clean disciplinary records of BMISL and Tang with the SFC.

 Notes (#)

  1. For carrying out Type 1(transactions in securities) regulated activities, Securities and Futures Ordinance (SFO) did provide the license to BMISL.
  2. SFO provided the license to Tang for carrying out Type 1(transactions in securities) on behalf of BMISL and Type 9(asset management) regulated activities on behalf of BMI Funds Management Limited since 17th February 2016.
  3. SFC reported suspicious activities to the Joint Financial Intelligence Unit. The focus of the investigation was on the adequacy and effectiveness of BMISL’s AML/CFT systems and controls.
  4. The licensed corporations must implement appropriate internal AML/CFT policies, procedures and controls to ensure compliance with relevant regulatory and legal requirements. Every reasonable measure is undertaken to ensure proper safeguards to palliate the risks of money laundering and terrorist financing.
(Image Source:- Riskscreen.com)

Transaction Monitoring in Anti-Money-Laundering

Transaction Monitoring in Anti-Money-Laundering

Transaction Monitoring in Anti-Money-Laundering

As the volume of transactions continues to increase and money laundering techniques become ever more sophisticated. The financial institutions face fundamental challenges on anti-money laundering (AML) in  transaction monitoring, making this an increasingly expensive task.

What is Transaction Monitoring?

In simple words, Transaction monitoring is an Anti-Money Laundering and fraud prevention security process that reviews and analyzes suspicious financial transfers or commercial transactions in digital and fiat currencies, ultimately exposing the origins.

Why Transaction Monitoring?

Companies and Financial Institution are using transaction monitoring to prevent terrorism financing, financial fraud, evasion of taxes, and other types of money laundering.
A vital part of any bank or Financial institution is to Monitor the client’s profiles and their transactions.

The AML monitoring Transactions are

1. Deposits
2. Transfers between accounts
3. Withdrawals
4. Exchanges of currency
5. Extensions of credit
6. Any monetary instrument or investment security;
7. Any other payment or transfer, etc.

Money-Laundering Alerts in Monitoring Transactions

1. Monitoring of cash deposits,
2. Withdrawals, wire transfers that exceed statistical thresholds
3. Complete assessment of money transaction history of the Customer
4. Blacklist screenings
5. Sanctions screening
6. High-risk transaction regulation and exposure.

The 5 Real-time Indicators of Transaction Monitoring in AML

1.Suspicious Activity Report

This is the final result of an investigation, and broadly indicates the meeting of overall Transaction monitoring system objective related to the suspicious activity. There is a need to make sure the Case categorization along with other details is represented to provide to the investigation.

2.Quantum of False Positives

a well-performing transaction monitoring system makes sure that the number of false positives is greatly reduced which accounts for about 87%.

3.Changes in Regulations

Understanding changes will drive investigative activities. current transaction monitoring systems are oblivious to the current regulatory changes which need to missing of suspicious transactions. a robust transaction monitoring will have the changes in the regulations incorporated so that suspicious transactions are tracked in real-time

4.Different Monitoring scenarios

Lack of proper customer and account segmentation, new products will need to more scenarios to be created. Transaction monitoring systems have to be well aware of the above to make a difference in the operations.

5.Operational costs

Cost related to the Operations teams used to complete investigations and systems tasks needs to be taken into account along with the system infrastructure to support the transaction monitoring system.

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