UOB Kay Hian fined $375,000 for business conduct compliance failures

SINGAPORE – Brokerage firm UOB Kay Hian (UOBKH) was on Wednesday fined $375,000 for failing to comply with business conduct requirements.

The firm breached the Securities and Futures (Licensing and Conduct of Business) Regulations, as well as anti-money laundering and countering the financing of terrorism (AML/CFT) requirements listed by the Monetary Authority of Singapore (MAS).

MAS said it had discovered these failures during an inspection, some of which include accepting third-party receipts that “represented a substantial amount of the value of an initial price offering” without conducting adequate due diligence.

“As a result, UOBKH failed to detect and report suspicious transactions despite red flags of potential nominee arrangements, which may be abused to conceal beneficial ownerships and facilitate market misconduct,” said MAS.

UOBKH also failed to verify customers’ source of wealth, even though they were determined by the firm to be of higher money laundering risk.

These culminated in breaches of the MAS’ AML/CFT requirements and exposed the firm to the risk of being used as a conduit for financial crime, said the authority.

The brokerage was found to have lacked in “sufficiently involving its compliance function” in matters of compliance, thereby compromising its effectiveness. For example, compliance officers were not required to be present at internal business and risk management fora attended by UOBKH’s senior management members, where a range of issues which could potentially result in compliance risks to UOBKH were discussed.

MAS also reported that the company had not carried out any internal audits on its corporate finance department since its founding in September 2012.

UOBKH has since paid its penalty in full and taken remedial measures to enhance their internal policies and controls, according to MAS.

The brokerage was also asked to appoint an independent external party to validate the implementation and effectiveness of its remediation measures and report the findings to MAS.

“MAS expects capital markets services licensees to comply with all business conduct and AML/CFT regulations, including ensuring that its control functions act as an effective and independent line of defence against risks,” said Loo Siew Yee, its assistant managing director (policy, payments and financial crime).

“Boards and senior management of licensees should exercise strong oversight of risk management and inculcate a high level of AML/CFT and compliance risk awareness among staff.”

Shares of UOB Kay Hian traded flat at $1.42 on Thursday as at 9.11am. THE BUSINESS TIMES