Brokerage UOB Kay Hian (UOBKH) has announced that it has taken remedial measures to enhance its internal policies and controls concerning its failures to comply with business conduct and anti-money laundering/countering the financing of terrorism (AML/CFT) requirements.
This comes after the Monetary Authority of Singapore (MAS) announced that the brokerage was slapped with a $375,000 fine on Aug 31, following an inspection by MAS.
In addition to the fine, UOBKH must appoint an independent external party to validate the implementation and effectiveness of its remediation measures.
UOBKH responded that it is following up to appoint such an independent external party, and added that the impact of this composition fine and requirement is not material.
MAS reveals that between September 2012 and June 2018, UOBKH failed to implement adequate controls for its corporate finance (CF) business and failed to ensure that this business was subject to internal audit.
Most notably, MAS highlights that the brokerage did not subject its CF activities to adequate internal audits. Specifically, since its inception in September 2012, no internal audits were carried out on the CF department.
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The authority also adds that UOBKH’s internal policies failed to involve its compliance function in compliance matters sufficiently, thereby compromising its effectiveness.
For example, there was no requirement for its compliance officers to attend internal business and risk management fora attended by UOBKH’s senior management members, where a range of issues that could potentially result in compliance risks to UOBKH were discussed.
Furthermore, UOBKH’s internal policies and procedures on conducting due diligence for IPOs failed to meet the standards in the Association of Banks in Singapore Listings Due Diligence Guidelines.
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Between December 2016 and August 2017, UOBKH also committed breaches of MAS’ AML/CFT requirements, which were a result of material lapses in its control processes.
MAS points out that UOBKH failed to verify their customers’ source of wealth during onboarding, even though the firm determined them to be of a higher money laundering risk.
In addition, UOBKH’s practice of verifying the source of wealth of such customers only upon specific trigger events did not comply with AML/CFT requirements on performing enhanced customer due diligence on customers with a higher money laundering risk.
Lastly, MAS also says UOBKH accepted third-party receipts representing a substantial amount of the value of an IPO 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,” the authority says.
