A penalty related to anti-money laundering (AML) practices, potentially the first involving a securities firm after the holiday, has quietly appeared on the official website of the central bank. FIN STREET SEC, which has recently faced recurring compliance issues, is once again in the spotlight. The internal AML control weaknesses and compliance management shortcomings exposed by this case serve as a significant warning example for the securities industry.
How Serious Was the Violation? Just before the Spring Festival, we commented on a regulatory penalty FIN STREET SEC received from the securities regulator. Unexpectedly, shortly after the holiday, a penalty from the central bank has caused the firm's compliance crisis to deepen further.
Recently, the People's Bank of China Inner Mongolia Autonomous Region Branch publicly disclosed administrative penalty decision No. 2 of 2026. The penalty specifically cites FIN STREET SEC for three core AML violations: First, failing to establish and improve internal AML control systems and regulations as required. Second, failing to conduct customer due diligence in accordance with regulations. Third, failing to report suspicious transactions as stipulated. Consequently, the PBOC Inner Mongolia Branch fined FIN STREET SEC 1.412 million yuan, with the penalty being publicly disclosed for a period of three years.
Comparing this to the revised Anti-Money Laundering Law of the People's Republic of China (2024): Article 6 requires financial institutions to "establish sound internal control systems for anti-money laundering, perform obligations such as customer due investigation, preservation of customer identity information and transaction records, reporting of large-value and suspicious transactions, and special anti-money laundering preventive measures." Article 52 stipulates penalties for "failing to establish or improve internal control systems and regulations for anti-money laundering," stating that for serious circumstances or failure to rectify within a time limit, a fine between 200,000 and 2 million yuan may be imposed. Similarly, Article 53 prescribes fines within the same range for serious violations or failure to rectify related to "failing to conduct customer due diligence as required" and "failing to report suspicious transactions as required." Based on the fine amount, the violations by FIN STREET SEC likely fall into the "serious circumstances" category.
Who Bears Responsibility for Compliance? As an H-share listed securities firm, FIN STREET SEC's staffing of its core compliance roles can be considered "top-tier." Information from the Securities Association of China website shows that Liu Zhanjun joined what was then Hengtai Securities (the predecessor of FIN STREET SEC) in early 2020 as the Chief Compliance Officer. Since September 2023, he has also served as the Chief Risk Officer, overseeing the company's risk control and compliance functions comprehensively. Disclosures in HKEX annual reports provide further background: Liu Zhanjun, born in 1976, graduated with a bachelor's degree in Public Finance and Taxation from Inner Mongolia University of Finance and Economics in 2001, and later obtained an MBA from Inner Mongolia University of Technology. He previously held key positions at the Inner Mongolia branch of the China Securities Regulatory Commission, including Deputy Director and Director of the Listed Company Supervision Department, Office Director, Director of the Institutional Supervision Department, and Director of the Inspection Department, giving him thorough familiarity with regulatory rules and enforcement priorities. This executive, with his regulatory background, received compensation of 1.4 million RMB in 2023 and 1.86 million RMB in 2024.
As a professional who "understands the rules, holds significant authority, and commands a high salary," being responsible for compliance yet still failing to prevent major AML violations underscores the警示意义 of this penalty. Even with an executive possessing regulatory experience at the helm, if compliance systems are not genuinely embedded throughout business processes and fail to effectively constrain front-line operations, systemic risks can still be exposed during regulatory examinations. So, was the issue at FIN STREET SEC a failure to implement systems effectively, or did business priorities override compliance? This is a question the market must pursue, and regulators even more so.
A Warning for the Industry Certainly, a fine of 1.412 million yuan might seem like a "drop in the bucket" for a securities firm. However, the compliance management vulnerabilities revealed by the penalty, and the signal of "sustained high-pressure scrutiny and zero tolerance" sent by regulators, represent the core issues the entire industry must confront.
For FIN STREET SEC, the administrative fine is merely a short-term cost. The more profound impact lies in the fact that repeated regulatory penalties will directly damage its brand reputation and regulatory ratings, and could potentially affect future business licenses and eligibility for innovation pilot programs. It is crucial to recognize that anti-money laundering is not merely about preparing for inspections or a resume booster for executives; it is a fundamental baseline for the survival of securities firms. Tolerating laxity in customer due diligence today can lead to concealment of suspicious transactions tomorrow. The ultimate cost will be borne not just by one firm, but by the credibility of the entire securities industry.