Briefs

FINANCIAL CRIME

Wash trading scandal in Canada – Canadian regulators have fined four senior employees of RBC Dominion Securities a total of US$250,000 for 'wash trading' in shares of RBC and Bank of Montreal. The Market Regulation Services (RS) panel decided that the four "did not engage in a pattern of manipulative or deceptive conduct [and] admitted their error to RS on being contacted". According to the RS summary, on August 11 last year RBC and another unnamed bank agreed a hedging transaction involving shares in Bank of Montreal and RBC. The agreements allowed RBC to place buy orders for Bank of Montreal shares and sell orders for RBC, while the other bank would place the corresponding sell and buy orders. The trades were to be completed using the Toronto Stock Exchange's market-on-close facility. However, the deal went wrong when a dealer at the other bank failed to enter his orders correctly, leaving RBC exposed. They then decided to rectify this by entering the offsetting orders themselves, producing 'wash' trades – which result in no change of ownership. RS acknowledged the initial error was not theirs and that the four were acting under time pressure – their key mistake was not to contact regulators as soon as they realised the situation, RS said. RBC was also ordered to pay C$231,500 compensation to those affected by the wash trades

China publishes AML report – In late July, China's central bank published a report on the country's anti-money laundering effort in 2004, according to the Xinhua News Agency, which is an arm of the government. The report showed that the country made "outstanding achievements" in anti-money laundering last year. Fifty money-laundering cases were jointly investigated by the police, the central bank and the State Foreign Exchange Administration last year. These involved 570 million yuan and US$447 million. According to Chinese experts, between April and December last year, police cracked down on 155 illegal "underground banks" and arrested 274 suspects for being allegedly involved in money-laundering activities. A total of 12.5 billion yuan were seized. In April 2004, China established an anti-money laundering monitoring analysis centre responsible for collecting, analysing and supplying information on money laundering activities in the country.