Facilitation of Suspicious Fund Transfers

As announced on 25 Nov 2013, SFC suspended Mr Stephen Cho Yu Kwan for 3 years and reprimanded his wife Ms Ju You Li and fined her $100,000.

Between Aug and Dec 2010, there were a number of suspicious fund transfers of significant amounts to and from the personal bank accounts of Cho and Ju, who were licensed representatives of different securities firms. These transfers involved funds that had been advanced to them by money changers in both Hong Kong and the Mainland on behalf of Mainland clients. Money for Cho’s clients was routed through Ju’s personal bank account to the securities accounts of Cho’s clients and funds for Ju’s clients were transferred to the securities accounts of Ju’s clients via Cho’s personal bank account.

The effect of the arrangement was to create an additional layer of the fund transfer process disguising the true source of the funds that were being used and prejudicing their employers’ obligations to know the origin of their clients' money, both of which constitute important information in the prevention and identification of money laundering activities.

According to Cho and Ju, the funds deposited to their accounts came from their Mainland-based clients. However, they had no actual knowledge to confirm their belief. Nor did they verify whether the money received in Cho’s account was provided by the money changers and whether the relevant clients had transferred the equivalent amount of RMB to the money changers' accounts in the Mainland.

Cho admitted that he received a service fee from some of these clients for the services he rendered. Cho also admitted that on some occasions the money received from the money changers might be kept in his personal bank account temporarily, if the clients’ securities trading accounts at his employer had not yet been opened.

Use of money changers for fund transfers is already a red flag. Use of personal bank accounts to facilitate these is even an alarm.