Who will be covered by the amendments to the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (the New Law)?
Persons who carry on a “trust or company service business” (TCSPs)*
"Trust or company service business" means the provision by way of business of the following services:
- forming corporations or other legal persons
- acting or arranging for another person to act as a director or a secretary of a corporation, as partner of a partnership, or other legal persons in a similar position
- providing a registered office, business address, correspondence or administrative address for a corporation, a partnership or any other legal person or legal arrangement
- acting or arranging for another person to act as a trustee of an express trust or a similar legal arrangement or as a nominee shareholder for a person other than a corporation whose securities are listed on a recognized stock market
*The New Law will also cover other types of persons, ie, accountants, estate agents and lawyers. However, the focus of this briefing is on TCSPs and the additional licensing requirement imposed on them
Who is the main regulator?
The Registrar of Companies.
What does a TCSP need to do under the New Law?
- obtain a TCSP license from the Registrar of Companies within the first 120 days after the implementation of the New Law (ie, 1 March 2018)
- carry out relevant customer due diligence (CDD) measures to identify and verify customers
- maintain identification data, account files, business correspondence and records of transactions for a period of six years
What is the criteria for obtaining a TCSP licence?
A TCSP must satisfy a fit and proper test. The following factors will be relevant:
- whether the applicant has been convicted of a relevant offence in or outside of Hong Kong
- whether the applicant has complied with the requirements imposed by the AMLO
- whether the applicant has been the subject of bankruptcy proceedings or in liquidation or subject to a winding up order
Does a TCSP need to renew its TCSP license?
- Yes – the TCSP license is only valid for three years from the date it is granted and a renewal application must be made at least 60 days before the expiry date.
Who else will be impacted by the New Law?
- the ultimate owner of the TCSP licensee
- any partner (if the TCSP licensee is a partnership)
- any director of the TCSP licensee (if the TCSP licensee is a corporation)
Will the licensing requirement impose additional liabilities on a TCSP?
- If a TCSP fails to obtain a TCSP license:
- the TCSP commits an offence for carrying on a “trust or company service business” without a TCSP license and may be liable on conviction to a fine capped at HK$100,000 and 6 months' imprisonment
- the magistrate may order that the TCSP be disqualified from holding a license for a certain period of time
- If the Registrar of Companies is no longer satisfied that the TCSP licensee or its ultimate owner is fit and proper to carry on a trust or company service business, the Registrar may revoke or suspend the TCSP licensee's license
- If the TCSP licensee contravenes any regulatory requirement under the AMLO or its subsidiary regulation or a condition of the TCSP license, the Registrar may exercise one or more of its disciplinary powers to publicly reprimand the licensee, order the licensee to take any action specified by the Registrar in order to remedy the contravention, and/or order the licensee to pay a penalty not exceeding HK$500,000.
How can a TCSP prepare for the New Law?
TCSPs may wish to consider the following actions to prepare for the implementation of the New Law:
- review internal policies and record keeping systems and consider if any consequential amendments need to be made to comply with the licensing, CDD and record keeping requirements
- review their agreements with customers to see if they need to be amended to facilitate their compliance with the New Law
- assess whether they have the necessary systems and controls in place to discharge their statutory obligations under the New Law
- consider whether professional third party trustees or outsourcing is necessary and if so, how this can be implemented
- provide training to relevant staff on CDD and record-keeping measures
When will the New Law become effective?
1 March 2018