Hong Kong Securities Regulatory Commission: Condemned Chia Tai International Financial Holdings and fined HK$7 million to temporarily revoke the license of the person responsible

Zhitong Finance App learned that the Hong Kong Securities Regulatory Commission issued a notice condemning Chia Tai International Financial Holdings Limited (Chia Tai) and fined HK$7 million for not complying with anti-money laundering and terrorist financing regulations and other regulatory requirements from December 1, 2021 to September 30, 2023 (relevant period). The Hong Kong Securities Regulatory Commission also temporarily suspended the license of Chia Tai's responsible officer, Chung Ho (male), for a period of seven months, from September 28, 2026 to April 27, 2027.

The investigation by the Hong Kong Securities Regulatory Commission found that during the relevant period, Chia Tai did not conduct any due diligence review or testing of client-owned systems used by 160 customers to issue instructions on futures trading, so it failed to properly assess and manage the money laundering and terrorist financing (money laundering/terrorist financing) risks and other risks associated with its clients' use of clients' own systems. Chia Tai also did not properly monitor its customers' use of clients' own systems, causing it to face the risk of improper practices such as unlicensed activities, money laundering, nominee account arrangements, and unauthorized use of customer accounts.

Furthermore, the amount and frequency of funds deposited into the eight customer accounts are not commensurate with the financial situation declared by the customer in the account opening documents. Although Chia Tai claims that Chung will make inquiries to selected customers to understand their latest financial situation and the reasons behind their deposits and transactions, there is no record that the company has made inquiries to such customers. As a result, Chia Tai failed to prove that it had made proper inquiries into the deposits in the eight customer accounts and properly handled the money laundering/terrorist financing risks involved.

The Hong Kong Securities Regulatory Commission also found that Chia Tai did not have an effective continuous monitoring system to detect and evaluate suspicious transaction patterns in clients' accounts. During the relevant period, the eight customer accounts frequently carried out a large number of transactions, including 176 cases where the same customer issued trading instructions for the same futures contract at the same price within the same second, but none of them were detected.

The Hong Kong Securities Regulatory Commission believes that Chia Tai's systems and surveillance measures are inadequate and ineffective, and that Chia Tai has failed to ensure compliance with the Anti-Money Laundering and Terrorist Financing Ordinance, the Anti-Money Laundering Guidelines and the Code of Conduct.

The Hong Kong Securities Regulatory Commission believes that the absence of Chia Tai is due to Chung's failure to perform his duties as a responsible person and Chia Tai's senior manager.

The Hong Kong Securities Regulatory Commission has taken into account when deciding to take the above disciplinary action against Chia Tai and Chung:

Chia Tai's failure to diligently monitor its clients' activities, as well as its failure to establish adequate and effective anti-money laundering/terrorist financing systems and surveillance measures, may damage public confidence in the financial market and damage its integrity;

Although the Hong Kong Securities Regulatory Commission has taken multiple enforcement actions against similar irregularities by other licensed corporations during the same period, and has repeatedly reminded that such omissions are unacceptable, it has continued to allow its clients to issue trading instructions through clients' own systems without any due diligence review of such systems. Chia Tai will stop accepting applications from customers for new customer-specific systems until August 2025, and will stop using all original customer-specific systems;

Chia Tai and Chung have shown cooperation in addressing the concerns raised by the Hong Kong Securities Regulatory Commission; and

Chia Tai and Chung have no records of being subject to disciplinary action in the past.