On 7 December 2022, the Legislative Council passed the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022.
Under the amended Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLCTFO”), any person who engages in virtual asset exchange business is required to apply for a licence from the Securities and Futures Commission (“SFC”). The relevant person must also satisfy the fit and proper test and comply with the anti-money laundering and counter-terrorist financing requirements under the amended AMLCTFO. The requirements including customer due diligence and record keeping and other regulatory requirements on investor protection such as safe custody of client assets, avoiding conflicts of interest and financial soundness.
Licensed virtual asset exchange business is also required to regularly submit audited accounts and financial information to the SFC. The SFC is empowered to enter the business premises of such entities to conduct inspections and investigations.
We await to see SFC’s further consultation on the detailed regulatory requirements of the regime.
Separately, the amended AMLCTFO also introduced a new regime under which 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 is required to register with the Commissioner of Customs and Excise. There are two categories under the registration regime. 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. Category A registrants are not required to implement specified measures of customer due diligence and record keeping. Any dealer who intends to engage in cash transaction at or above $120,000 in the course of business is required to register as a Category B registrant. Category B registrants will be subject to supervision on anti-money laundering and counter-terrorist financing requirement.
The passage of the amendments is welcomed as it reinforces Hong Kong’s status as an international financial centre by enhancing Hong Kong’s regulatory regime for combating money laundering and terrorist financing and by establishing a comprehensive and balanced regulatory framework for virtual asset activities.
The amended AMLCTFO 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 registration regimes on dealing in precious metals and stones will take effect on April 2023. The licensing regime for virtual asset service provides will take effect on June 2023. 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 regimes.
