Summary: The SFC issued a circular on November 17, 2025, to combat emerging money laundering trends in Hong Kong, targeting licensed corporations and virtual asset trading platforms. It emphasized adherence to AML/CFT obligations to mitigate risks. The circular highlighted suspicious fund movements, including frequent deposits and withdrawals, and provided red flags for suspicious transactions. It stressed the importance of vigilance by senior management, compliance officers, and other officials in implementing effective AML/CFT measures. Licensed firms were reminded of their obligations to detect and prevent suspicious activities, monitor transactions, and report any suspected money laundering to the JFIU. They were also required to establish and regularly review robust transaction monitoring systems to detect layering activities and facilitate ongoing scrutiny of client transactions. The SFC underscored its commitment to supervising firms' compliance with these requirements and taking regulatory actions against non-compliant firms.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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On November 17, 2025, the Securities and Futures Commission ("SFC") issued a circular addressing emerging trends of potential money laundering via layering activities among licensed corporations and virtual asset trading platforms.
The circular underscores the critical role of adhering to Anti-Money Laundering ("AML") and Counter-Terrorism Financing ("CTF") obligations to mitigate risks in the financial sector.
The SFC identified suspicious fund movements characterized by frequent and swift deposits and withdrawals, suggesting potential layering activities that obscure the origin and destination of funds. These patterns are indicative of illicit activities.
Some licensed firms have failed to detect these suspicious transaction patterns, highlighting the need for improved red flag identification and vigilance.
The SFC provided illustrative indicators of suspicious activities, including frequent deposits and withdrawals with minimal trading activities, short-term client business relationships, and transactions inconsistent with declared interests.
Senior management, responsible officers, compliance officers, and the board of directors are emphasized in implementing effective AML/ CTF measures to address Money Laundering/ Terrorism Financing ("ML/TF") risks.
Upon detecting suspicious activities, firms should promptly investigate and, if necessary, file suspicious transaction reports to the Joint Financial Intelligence Unit ("JFIU").
Licensed firms are advised to establish robust and effective transaction monitoring systems and conduct regular reviews to ensure their effectiveness in detecting unusual or suspicious transactions.
Transaction monitoring should focus on identifying patterns indicative of layering activities, such as minimal trading activities between deposits and withdrawals, structured deposits and withdrawals in odd amounts, and sudden changes in bank or wallet details.
Firms should scrutinize transfers between jurisdictions, especially if they do not align with clients' nationalities, residences, or business operations.
Licensed firms must screen virtual asset ("VA") transactions and associated wallet addresses using technological tools to identify their sources and destinations.
Reasonable measures should be taken to ensure proper safeguards against ML/TF risks, and firms should exercise heightened vigilance when processing deposits and withdrawals for their clients.
Licensed firms are expected to monitor transaction patterns and implement controls to detect and prevent layering activities when processing deposits and withdrawals through bank accounts or wallet addresses owned by clients.
They should establish registration mechanisms for bank accounts or whitelisting mechanisms for wallet addresses to facilitate ongoing monitoring and review any addition or replacement of these addresses.
Firms should prohibit the sharing of bank accounts or wallet addresses among clients and set limits on the number of registered accounts per client.
Immediate withdrawal requests should be subjected to thorough scrutiny, and firms must take reasonable measures to mitigate the risk of facilitating layering activities, such as limiting withdrawals to original deposit accounts.
The SFC reaffirms its commitment to supervising licensed firms' compliance with AML/CTF requirements and will take regulatory actions against non-compliant firms.
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