Hong Kong SFC: Censures Ching Tai International Financial Holdings and Fines It HK$7 Million, Temporarily Suspends the Licences of Its Responsible Officers

The Securities and Futures Commission (SFC) has issued a statement censuring Ching Tai International Financial Holdings Limited (Ching Tai) and imposing a fine of HK$7 million for its failure to comply with anti-money laundering and counter-terrorist financing (AML/CTF) and other regulatory requirements between 1 December 2021 and 30 September 2023 (the relevant period). The SFC has also temporarily suspended the licence of Ching Tai's responsible officer, Zhong Hao (male), for seven months, from 28 September 2026 to 27 April 2027. The SFC's investigation found that during the relevant period, Ching Tai did not conduct any due diligence or testing on the client self-developed systems used by 160 clients to place instructions for futures trading, resulting in its failure to properly assess and manage the money laundering and terrorist financing (ML/TF) risks and other risks associated with its clients' use of client self-developed systems. Ching Tai also failed to properly monitor its clients' use of client self-developed systems, exposing itself to risks of unlicensed activities, money laundering, nominee account arrangements and unauthorised use of client accounts. In addition, the amounts and frequency of deposits into eight client accounts were inconsistent with the financial status declared by the clients in their account opening documents. Although Ching Tai claimed that Zhong would make enquiries with selected clients to ascertain their latest financial status and the reasons behind their deposits and transactions, there was no record to prove that the company had made such enquiries with these clients. Accordingly, Ching Tai failed to demonstrate that it had made appropriate enquiries regarding the deposits in these eight client accounts and properly addressed the ML/TF risks involved. The SFC also found that Ching Tai did not establish an effective ongoing monitoring system to detect and assess suspicious trading patterns in client accounts. During the relevant period, these eight client accounts frequently showed a large volume of transactions, including 176 instances where the same client placed buy and sell instructions for the same futures contract at the same price within the same second, none of which were detected by Ching Tai. The SFC considers that Ching Tai's systems and controls were inadequate and ineffective, and that Ching Tai failed to ensure compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, the Anti-Money Laundering Guidelines and the Code of Conduct. The SFC considers that Ching Tai's failures were attributable to Zhong's failure to discharge his duties as a responsible officer and senior management member of Ching Tai. In determining the above disciplinary sanctions against Ching Tai and Zhong, the SFC has taken into account: Ching Tai's failure to diligently monitor its client activities and its failure to establish adequate and effective AML/CTF systems and controls, which could undermine public confidence in the financial market and damage its integrity and stability; Despite the SFC having taken multiple enforcement actions during the same period in respect of similar breaches by other licensed corporations and having repeatedly reminded them that such failures were unacceptable, Ching Tai subsequently continued to allow its clients to place trading instructions through client self-developed systems without conducting any due diligence on such systems. Ching Tai did not cease accepting new client self-developed system applications and deactivate all existing client self-developed systems until August 2025; Ching Tai and Zhong cooperated in addressing the SFC's concerns; and Ching Tai and Zhong have no previous disciplinary record.