Hong Kong Securities Regulatory Commission: Yaocai Securities has now been criticized for a major flaw in suspicious transaction monitoring and fined HK$2.8 million

The Zhitong Finance App learned that on July 27, the Hong Kong Securities Regulatory Commission condemned Yaocai Securities International (Hong Kong) Limited (hereinafter referred to as “Yaocai”) and fined HK$2.8 million because the company failed to establish sufficient and effective internal control procedures to monitor and detect customer laundering transactions.

An investigation by the Hong Kong Securities Regulatory Commission found that between November 1, 2023 and September 13, 2025, due to flaws in Yaocai's internal controls, 615 customer accounts had a total of 1,021 laundered transactions involving 736 stocks and warrants.

The investigation also pointed out that before March 2024, Yaocai mainly relied on ex post facto monitoring and manual review to identify suspicious transactions, so customers had the opportunity to clean up transactions without being detected.

Although Yao Cai introduced a pre-transaction interception arrangement in March 2024, surveillance is still insufficient because the new arrangement relies on human intervention rather than automated monitoring to prevent transactions from being cleaned, and its human-led blocking mechanism is only triggered after the purge transaction is detected again. Furthermore, multiple laundering transactions that occurred on the same account within a single day were merged and treated as a single incident, so repeated irregularities within the same day could not be effectively identified and blocked. As a result, customers are able to carry out multiple cleaning transactions in a single day without restrictions.

The Securities Regulatory Commission determined that Yao Cai failed to maintain fully effective internal control procedures, lacked effective monitoring and detection of customer laundering transactions, violated the “Code of Conduct”, and failed to effectively maintain market integrity and stability.

The Securities Regulatory Commission has taken into account all relevant circumstances when deciding to take the above disciplinary action, including:

Although Yaocai has been pointed out many times that it is necessary to strengthen its relevant internal control systems, and has been identified many times in the past, the rectification has not been fully implemented each time; Yao Cai has taken steps to optimize its systems and monitoring measures to prevent future irregularities, and has promised to appoint an independent review agency to verify the effectiveness of such optimization measures; and Yao Cai cooperated with the Securities Regulatory Commission to resolve concerns raised by the Securities Regulatory Commission.