A new regulatory requirement for Trust or Company Service Providers ("TCSPs") in Hong Kong to be licensed by the Registrar of Companies and satisfy a 'fit and proper' test, in order to operate a trust or company service business in Hong Kong, took effect from 1 March 2018.
The new licensing regime, introduced under the Anti-Money Laundering (“AML”) and Counter-Terrorist Financing (“CTF”) Ordinance, reflects Hong Kong’s continued efforts to reinforce its regulatory framework and its position as a leading international financial centre. Failure to comply will constitute an offence, resulting in a fine of up to HK$100,000 and six months’ imprisonment.
The 'fit and proper' test requires a statement to be made by each partner, director and ultimate owner of a licensee. It will take into account any criminal conviction, in particular relating to money laundering, terrorist financing, fraud or dishonesty, in addition to status as an undischarged bankrupt, being in liquidation or receivership.
The test must be satisfied on application or renewal of a TCSP licence and on any application for a person to become an ultimate owner, partner or director of a TCSP licensee. An ultimate owner of a corporation is considered an individual that exercises ultimate control over management or directly or indirectly controls the exercise of the voting rights of more than 25 percent of issued share capital.
Exemptions from the new regulations apply to government and authorised institutions, as well as licensed companies operating a TCSP business ancillary to its principal activities, registered accounting and legal professionals and any person of a class or description prescribed by the Secretary for Financial Services and the Treasury by regulation.
In addition to complying with statutory requirements regarding customer due diligence and record keeping, TCSP licensees must obtain written approval from the Registrar for a person to become its ultimate owner, a partner or director. Any changes in particulars must be reported within one month of the change and notification of cessation of business must be made before that occurs.
Ongoing obligations of TCSP licensees include taking all reasonable measures to mitigate the risk of money laundering and terrorist financing and ensure compliance with all relevant legislation. A Compliance Officer must be appointed at senior level with responsibility for AML/CTF systems and a senior staff member named as Money Laundering Reporting Officer to oversee reporting of suspicious transactions.
As a market leader in the provision of fiduciary and corporate services, Maples Fiduciary has been at the forefront of regulatory change in Hong Kong, as in all the jurisdictions in which we operate. We work to the highest standards regarding compliance with international initiatives to counter money laundering and terrorist financing and over the years have introduced a range of policies, procedures and controls reflective of industry best practice. As we already adhered to these standards globally, we wish to reassure our Hong Kong related clients that these recent regulatory enhancements have had no impact on our ability to continue providing the high quality fiduciary and corporate services for which we are renowned.
These policies and procedures, which mirror the obligations of TCSP licensees in Hong Kong, include employing systems and controls relating to risk assessment, customer due diligence and ongoing monitoring or business relationships with customers. Additional measures include reporting suspicious transactions, record keeping and appropriate staff training. Furthermore, in line with the issue of our TCSP licence in Hong Kong, clients of Maples Fiduciary can continue to expect a seamless delivery of service.