diciembre 12 2022

Hong Kong: Passage of Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022

Author:

Sara S. M. Or

The Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 has been passed by the Legislative Council on 7 December 2022. The amended Anti-Money Laundering and Counter-Terrorist Financing Ordinance (the “Amended Ordinance”) introduces:

Licensing Regime for Virtual Asset Service Providers

Under the Amended Ordinance,

Any person engaging in the virtual asset exchange business is required to apply for a licence from the Securities and Futures Commission (SFC)¹.
Relevant persons must satisfy the fit and proper test and comply with anti-money laundering and counter-terrorist financing (AML/CTF) requirements under the Amended Ordinance (including requirements on customer due diligence (CDD) and record keeping), as well as other regulatory requirements on investor protection (such as safe custody of client assets, financial soundness and avoiding conflicts of interest)².
In addition, licensed virtual assets exchanges and their wholly owned subsidiaries need to regularly submit audited accounts and financial information to the SFC. The SFC is also empowered to enter business premises for conducting inspections and investigations when necessary³.

The SFC will carry out a further consultation on the detailed regulatory requirements of the regime⁴.

Two-tier Registration Regime for Dealers in Precious Metals and Stones

The Amended Ordinance introduces a two-tier registration regime for any person who is seeking to carry on a business of dealing in precious metals and stones in Hong Kong and engage in transactions at or above HK$120,000 (cash or non-cash). They are required to register with the Commissioner of Customs and Excise under this registration regime⁵.

There are two categories under the registration regime⁶:

Any dealer who intends to engage in non-cash transactions at or above HK$120,000 in the course of business is required to register as a Category A registrant, the registration requirement of which is simple and straightforward. A Category A registrant is not required to implement specified measures on CDD and record keeping.
Any dealer who is seeking to engage in cash transactions at or above HK$120,000 in the course of business is required to register as a Category B registrant in accordance with the requirements of the Financial Action Task Force (FATF). A Category B registrant is subject to AML/CTF supervision.

No registration is required for dealers who only conduct transactions under HK$120,000.

The Government has also taken this opportunity to make a number of miscellaneous amendments to ensure alignment with latest international standards set by the FATF, including:

amending the definition of “politically exposed person” (PEP) to align with the FATF requirement;
facilitating a risk-based approach in determining the degree of customer due diligence (CDD) that former PEPs are subject to;
supporting the use of technology by clarifying that a recognised digital identification system can be used for the purposes of CDD and satisfying the additional requirements where a customer is not physically present for identification purposes; and
clarifying that, where a trust is concerned, a beneficial owner includes a trustee of the trust, a beneficiary and a class of beneficiaries of the trust entitled to a vested interest in the trust.

According to the press release on 7 December 2022⁷, the Amended Ordinance will come into effect in phases in the second quarter of 2023 to provide industries concerned with sufficient time to prepare for the new regulatory requirements.

The Amended Ordinance, including the registration regime for dealers in precious metals and stones, will take effect on 1 April 2023, and the licensing regime for virtual assets service providers as well as other amendments on AML/CTF requirements, will take effect on 1 June 2023⁸. Transitional periods will be provided under the two new regimes to give industries concerned sufficient time to apply for a licence or undergo registration in accordance with the regulatory regimes⁹.

As regards banks and other authorised institutions, the Hong Kong Monetary Authority will soon consult the banking sector on corresponding changes to the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Authorised Institutions) as well as specific guidance on topical issues to help Authorised Institutions implement the changes.

Link to the HKMA Circular:

Passage of Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (hkma.gov.hk)

Link to the Press Release:

Government welcomes passage of Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022 (info.gov.hk)

¹ Source from: https://www.info.gov.hk/gia/general/202212/07/P2022120700263.htm

² Source from: https://www.info.gov.hk/gia/general/202212/07/P2022120700263.htm

³ Source from: https://www.info.gov.hk/gia/general/202212/07/P2022120700263.htm

⁴ Source from: https://www.info.gov.hk/gia/general/202212/07/P2022120700263.htm

⁵Source from: https://www.info.gov.hk/gia/general/202212/07/P2022120700263.htm

⁶ Source from: https://www.info.gov.hk/gia/general/202212/07/P2022120700263.htm

⁷ Source from: https://www.info.gov.hk/gia/general/202212/07/P2022120700263.htm

⁸ Source from: https://www.info.gov.hk/gia/general/202212/07/P2022120700263.htm