The Hong Kong Securities and Futures Commission enhances measures to combat forged documents and money laundering risks and raises account opening standards

The Hong Kong Securities and Futures Commission (SFC) issued a circular outlining the monitoring measures that should be implemented when opening accounts and maintaining client relationships. This circular was issued after the SFC reviewed the account opening practices of 12 securities brokerage firms.

The review identified several significant deficiencies, including insufficient 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 expressed deep concern about the potential misuse of client accounts for suspicious or illegal transactions, which could exacerbate the risks of money laundering and terrorist financing.

The SFC requires all licensed corporations to conduct internal checks as soon as practicable to detect whether any suspicious or forged documents have been accepted for account opening. The SFC also outlined additional measures for licensed corporations when opening and managing accounts for mainland investors.

These additional measures include closing investment accounts opened with suspicious or forged documents, closing zero-balance dormant investment accounts, and requiring a written declaration from investors when opening new investment accounts, stipulating that settlements and fund withdrawals can only be conducted through bank accounts held in the investor's own name at qualified banks.