SFC Fines Zheng Da HK$7 Million Over AML Failures and Suspends Responsible Officer

Hong Kong’s Securities and Futures Commission (SFC) has reprimanded and fined Zheng Da International Financial Holding Limited HK$7 million for a series of regulatory deficiencies involving anti-money laundering and counter-financing of terrorism (AML/CFT) controls, client trading systems, deposits and futures-order monitoring.

The regulator has also suspended the licence of Zheng Da’s responsible officer, Zhong Hao, for seven months. His suspension runs from 28 September 2026 until 27 April 2027.

The enforcement action, announced by the SFC on 29 September 2026, concerns shortcomings identified during the period from 1 December 2021 to 30 September 2023.

The SFC said the failures were connected to Zhong’s responsibilities as a responsible officer and senior manager.

Zheng Da is licensed to conduct Type 2 regulated activities involving dealing in futures contracts and Type 5 activities relating to advising on futures contracts. The disciplinary action was taken under section 194 of the Securities and Futures Ordinance.

Client Trading Systems Raised Significant Control Concerns

The investigation followed complaints from two individuals concerning the ability of Zheng Da clients to establish sub-accounts underneath their principal brokerage accounts. One complainant raised concerns that the arrangement could potentially be used to facilitate illicit fund movements.

The allegation itself did not establish that money laundering had occurred. However, the SFC's investigation identified substantial weaknesses in the way Zheng Da assessed and monitored trading systems supplied or designated by its clients.

During the period examined, 160 clients used customer-provided trading applications to execute 10,444,295 futures transactions. These applications connected to Zheng Da’s trading infrastructure through an application programming interface.

According to the SFC's findings, Zheng Da had asked clients questions about the functionality of their systems and had submitted application materials to its system provider.

Zhong also made enquiries concerning the purpose and operation of the systems before authorisation codes were issued to connect them to the broker's infrastructure.

The regulator nevertheless found that Zheng Da had not carried out adequate due diligence or testing of those systems. It also lacked supporting records demonstrating that the relevant enquiries had been made or documenting the systems' design and functionality.

Zheng Da maintained that its external system provider was responsible for conducting due diligence, testing and monitoring. The SFC found that the relevant service agreement did not actually assign those responsibilities to the provider. Moreover, the provider stated that it had not carried out the claimed due diligence.

The shortcomings created potential risks involving unauthorised access, nominee arrangements, unlicensed activities and money laundering. The case therefore highlighted the importance of firms understanding and testing technology before permitting it to connect directly to their trading infrastructure.

Client Deposits Were Inconsistent With Declared Financial Profiles

The SFC also examined eight clients who used the external trading systems. Seven were selected on the basis of transaction volume, while the eighth account was connected to one of the complaints that had prompted the investigation.

The review identified significant discrepancies between the clients' stated financial circumstances and the scale and frequency of deposits made into their accounts.

One client told Zheng Da that he worked as a senior analyst at a global investigation firm. He identified salary savings as his source of income, reported annual income of more than HK$1 million and declared net assets of between HK$5 million and HK$10 million.

Despite that profile, the client made 439 deposits over a six-month period, with the total reaching approximately HK$28 million. The money originated from 22 bank accounts.

Another client, who worked as a manager at an elevator company, reported annual income of less than HK$200,000 and net assets of between HK$5 million and HK$10 million.

Nevertheless, approximately HK$37.5 million was deposited into his account over a period of ten months.

The SFC's concern was not simply the size of these transactions. Zheng Da's own procedures required the firm to periodically review customer information, examine unusually large or frequent transactions and assess whether activity was consistent with clients' declared income and assets.

Zheng Da said Zhong conducted monthly telephone calls with randomly selected clients and contacted as many as five of its highest-volume clients through WeChat voice calls.

However, the firm could not provide records demonstrating that these enquiries had been made, could not produce supporting documentation obtained from the clients and could not show that the explanations had been sufficiently followed up.

The firm's monitoring reports likewise failed to identify the risks arising from the discrepancies.

As a result, the regulator concluded that Zheng Da had not demonstrated an effective process for identifying, investigating and resolving transaction activity that was inconsistent with information held about its clients.

176 Same-Second Buy and Sell Orders Went Undetected

The SFC also identified serious weaknesses in Zheng Da's monitoring of trading activity.

Within the eight accounts reviewed, investigators found 176 instances in which the same client placed buy and sell orders for the same futures contracts, at the same price and within the same second.

Zheng Da did not identify these patterns at the time they occurred. Instead, the instances were discovered through manual analysis conducted during the SFC's investigation.

The firm acknowledged that it had not been aware of the transactions when they occurred. It also said it could not determine whether the orders had actually resulted in matched trades without obtaining confirmation from the relevant exchanges.

Consequently, the regulatory findings do not establish that all 176 instances were executed wash trades. Rather, they demonstrate that potentially significant trading indicators were not detected and investigated by the broker.

The SFC's AML guidance identifies matching buy and sell orders as a potential warning sign because such activity can create an artificial appearance of trading and potentially conceal illicit financial activity. Other relevant indicators include transactions that do not correspond with a customer's known financial circumstances or trading activity that lacks an apparent legitimate purpose.

Zheng Da had some self-matching controls in place for futures transactions on the Chicago Mercantile Exchange and other CME Group exchanges, including the Commodity Exchange Inc., Chicago Board of Trade and New York Mercantile Exchange.

However, the broker did not have equivalent system controls for identifying the same-second order pattern on other exchanges.

Zheng Da also stated that its brokerage system had a function capable of detecting such orders. The function had been disabled because, according to the firm, it interfered with normal client trading.

The resulting control environment therefore provided different levels of surveillance depending on the exchange involved and left an important detection capability switched off.

AML Monitoring Requirements Were Not Adequately Applied

The SFC linked the deficiencies to Zheng Da's obligations under Schedule 2 of Hong Kong's Anti-Money Laundering and Counter-Terrorist Financing Ordinance and the applicable AML/CFT Guideline.

Those requirements include monitoring transactions against information known about customers, keeping customer information under review and examining complex, unusually large or otherwise unusual transactions where there appears to be no clear economic or lawful purpose.

Firms are also expected to document the enquiries they undertake and the results of those enquiries. Where there are grounds to suspect money laundering or terrorist financing, relevant information must be reported to the Joint Financial Intelligence Unit.

In Zheng Da's case, the SFC found that the firm did not maintain sufficient evidence demonstrating that it had carried out the necessary enquiries or adequately addressed the warning signs emerging from customer deposits and trading activity.

The enforcement action does not amount to a finding that any particular client laundered criminal proceeds. Instead, it concerns Zheng Da's failure to maintain adequate systems and controls for identifying and responding to potential AML/CFT risks.

Zhong Hao Held Responsible for Supervisory Failures

The regulator also attributed the firm's deficiencies to Zhong Hao in his capacity as responsible officer and senior manager.

During the relevant period, Zhong had responsibility for areas including due diligence and testing of client trading systems, approving access to those systems, reviewing account-opening documentation, assessing whether deposits were consistent with customer profiles and monitoring futures trading and movements of funds.

He was also responsible for ensuring that effective mechanisms were in place to detect potentially suspicious activity.

The SFC found that the shortcomings breached senior management standards under General Principle 9 and paragraph 14.1 of the Code of Conduct.

The seven-month suspension therefore reflects the regulator's conclusion that Zhong failed to discharge the responsibilities attached to his senior roles.

Zheng Da Had Previously Been Warned About Similar Risks

The SFC also took into account previous enforcement actions involving other futures intermediaries for similar deficiencies between December 2021 and July 2025.

Despite those regulatory precedents, the regulator found that Zheng Da continued permitting clients to use inadequately assessed trading systems and did not sufficiently strengthen its monitoring of fund movements and trading patterns.

The company eventually stopped accepting new applications for the relevant systems and disabled existing client systems in August 2025. The disciplinary statement identifies 8 August 2025 as the date on which Zheng Da ceased permitting clients to trade through those systems.

The SFC also considered Zheng Da's cooperation during the investigation and the firm's otherwise clean disciplinary history when determining the appropriate sanction.

Regulatory Enforcement Highlights Need for Documented Controls

The case illustrates the importance of being able to demonstrate that AML controls operate in practice rather than simply existing in written policies.

Authorising a third-party trading system does not, by itself, establish that the system has been adequately assessed. Similarly, relying on an external service provider is insufficient when the contractual arrangements do not assign the relevant responsibilities to that provider and the provider has not actually performed the claimed work.

The SFC's findings also underline the importance of maintaining an evidential record of customer enquiries. A telephone conversation or informal contact with a client cannot, on its own, resolve concerns about substantial transaction activity unless the firm's records show what was asked, what information was obtained and how the explanation was assessed.

The trading surveillance findings provide another illustration of the same principle. A detection function that is disabled because it interferes with ordinary trading can leave the firm exposed if no alternative mechanism is introduced to identify the same risk.

The case demonstrates how customer due diligence, transaction monitoring and trading surveillance can intersect. Large and unexplained deposits may raise one set of concerns, while unusual trading patterns may raise another. Effective AML controls require firms to consider those indicators together and determine whether additional enquiries or escalation are necessary.

For Zheng Da, the SFC's action ultimately concerned regulatory and control failures rather than a finding that money laundering had been proven. The HK$7 million penalty against the firm and the seven-month suspension imposed on Zhong Hao underscore the regulator's expectation that licensed intermediaries maintain effective, documented and operational AML/CFT controls across the businesses and technologies they permit clients to use.

By fLEXI tEAM