The Government has launched a two month consultation exercise on proposals to enhance the transparency of beneficial ownership of Hong Kong incorporated companies. This is part of a number of reform proposals aimed at bringing Hong Kong in line with international standards to combat money laundering and terrorist financing. With a mutual evaluation of Hong Kong’s regime with other members of the Financial Action Task Force (FATF) looming in 2018, the Government is keen to enhance Hong Kong’s regime to require transparency of beneficial ownership in line with FATF’s standards.
The consultation paper proposes amending the Companies Ordinance (Cap 622). Under the proposals, all Hong Kong incorporated companies (other than listed companies who will be exempt) will be required to obtain and hold beneficial ownership information which will be available for public inspection. The regime will be backed by criminal sanctions for non-compliance.
Summary of the key features of the proposals to enhance transparency of beneficial ownership
Timeframe for the reforms
The consultation is open for comments until 5 March 2017 and the Government seems set to move quickly towards introducing a bill into the Legislative Council in the second quarter of 2017. With the mutual evaluation of Hong Kong’s regime with other FATF members fast approaching in 2018, the Government is under time pressure to push through these changes.
Other reform proposals
To ensure consistency in the regulatory regimes, the current definition of beneficial owner in the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) (AMLO) may be increased from 10% to 25% consistent with the proposed level for beneficial ownership under the Company Ordinance.
Further, the Government has also simultaneously launched a consultation setting out proposals to enhance the anti-money laundering regulatory regime under the AMLO. The AMLO currently only applies to financial institutions and the Government proposes to extend aspects of this to certain non-financial businesses and professions. This would provide a statutory obligation on solicitors, accountants, real estate agents and trust or company service providers to carry out due diligence on their clients before they engage in certain types of transactions. The Government is also proposing that trust or company service providers become subject to a licencing regime. We will discuss these proposals in more detail in an upcoming e-bulletin.