The Hong Kong government has launched two consultations on legislative proposals to enhance the regulatory regime for combating money laundering and terrorist financing in January 2017. The government propose to (1) amend the Companies Ordinance (CAP 622) to improve the transparency of beneficial ownership of companies incorporated in Hong Kong; and (2) amend the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (CAP 615), imposing a statutory duty on designated non-financial institutions and professions to conduct customer due diligence (“CDD”) on their clients and keep the relevant records for a specified period. The objective of the legislative proposals is to bring the local regulatory regime in line with international requirements set out by the Financial Action Task Force (the “FATF”).
Insofar as transparency of beneficial ownership is concerned, the FATF requires the member jurisdictions to take measures to ensure there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities. In contrast with the FATF’s requirements, the Companies Ordinance focuses only on the disclosure of legal ownership, but not information about the company’s ultimate beneficial owner. In light of the discrepancy and to promote greater transparency, there is a need to implement a statutory regime to enable beneficial ownership information of companies to be captured.
The second consultation paper deals with FSTF’s recommendation that, in addition to financial institutions, certain designated nonfinancial businesses and professions which engage in specified transactions should subject to CDD and record-keeping requirements to deter money laundering activities and ensure the integrity of financial systems. The current Hong Kong statutory regime has implemented the relevant FSTF’s recommendations in respect of financial institutions (for example, banks, securities firms, insurance companies, and money changers) only. To fill the regulatory gap, the government has proposed to (1) extend the statutory obligation to conduct CDD and record-keeping requirements to solicitors, accountants, real estate agents, and trust and company service providers (“TCSPs”); and (2) introduce a licensing regime for TCSPs for the purpose of overseeing the anti-money laundering and counter-financing of terrorism regulation.