Misuse of securities and futures market by money launderers – a general overview
| Published date | 05 January 2010 |
| DOI | https://doi.org/10.1108/13685201011010227 |
| Pages | 66-69 |
| Date | 05 January 2010 |
| Author | Louisa Lai |
| Subject Matter | Accounting & finance |
Misuse of securities and
futures market by money
launderers – a general overview
Louisa Lai
Department of Justice, Queensway, Hong Kong
Abstract
Purpose – The purpose of this paper is to discuss the vulnerability of the stock market in Hong Kong
being used by money launderers to launder proceeds of crime.
Design/methodology/approach – This paper considers case studies, legal authorities and other
research material to demonstrate the veracity of the proposition.
Findings – No similar prosecution due to difficulties in collating evidence, but the risk of the stock
market being used as a medium for money laundering is real.
Originality/value – There has been little discussion on this topic before. This paper may generate
the interests of prosecutors and investigators in other jurisdictions to share their experience in
handling this threat.
Keywords Money laundering,Stock markets, Securities, Futuresmarkets, Hong Kong
Paper type Viewpoint
Introduction
The stock market in Hong Kong ranked the seventh largest in the world in terms of
market capitalisation and the third largest in Asia as at the end of December 2008[1].
At that date, there were 1,261 listed companies in the stock market in Hong Kong and
137 new listing applications were accepted in 2008[2]. In 2008, the average daily
turnover in the stock market was HK$72 billion (equivalent to US$9.3 billion). As at
31 March 2009, there were 1,565 licensed corporations (LCs) and 35,745 licensed
individuals in Hong Kong, engaging in securities dealing and futures trading activities.
The stock market in Hong Kong is highly liquid with participation by international
and local investors and intermediaries. With these impressive figures, it is not difficult
to imagine that the stock market in Hong Kong would be attractive to money
launderers who seek to launder their illicit money and to make a quick profit.
The three common stages in money laundering – placement, layering and
integration as applied to the stock market – are illustrated as follows:
(1) The direct placement of illicit funds into the securities and futures market is
achievedby paying for the underlyingsecurities transactionsin cash. For example,
X, a money laundererwould approach an account executive in a stockbroker firm
and open a securities account. X then made a large deposit in forms of cash or
cheque into the securities account and whenthe funds are cleared, he would then
give instructions to the account executive to execute purchase and sale
transactions.
(2) With the liquidity of the securities and futures market, X could easily invest in
different financial products, divesting his illicit funds into the equity market,
futures market, commodity market, foreign exchange market and mutual funds,
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
JMLC
13,1
66
Journal of Money Laundering Control
Vol. 13 No. 1, 2010
pp. 66-69
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685201011010227
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