In view of the recommendations of the Financial Action Task Force (FATF) in the Mutual Evaluation Report on Hong Kong and the latest changes to the FATF Standards introduced in 2019, the Financial Services and the Treasury Bureau has proposed to amend the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO) to introduce (a) a licensing regime for virtual asset services providers (VASPs) and (b) a two-tier registration regime for dealers in precious metals and stones (DPMS), along with other miscellaneous and technical amendments. Public consultation was conducted from 3 November 2020 to 31 January 2021 and the consultation conclusion was published on 21 May 2021. Key features of the current legislative proposals are set out below.
(A) Licensing Regime for VASPs
Any person seeking to engage in the regulated activity of operating a virtual asset exchange in Hong Kong will be required to obtain a VASP licence from the Securities and Futures Commission (SFC). Virtual asset exchange(s) that are already regulated as a licensed corporation in SFC’s opt-in regime will not be required to obtain a new licence.
Licensed VASPs will be subject to the anti-money laundering and counter-terrorism financing (AML/CTF) requirements stipulated by AMLO as well as other regulatory requirements to be implemented by the SFC, which will include, among other things, requirements on financial resources, corporate governance, risk management policies and that the licensed VASPs may only offer services to professional investors.
(B) Two-tier Registration Regime for DPMS
Any person seeking to carry on the business of regulated activities as a DPMS for a customer in Hong Kong will have to be registered under the AMLO, and there will be two tiers of registration based on whether or not the DPMS intends to or may engage in cash transactions at or above HK$120,000 in the course of its business (specified cash transactions). Applicants who intend to or may engage in any specified cash transaction in the course of their DPMS business will be subject to an additional fit and proper test and only this tier of registrants will be subject to the AML/CTF obligations under the AMLO.
Further details on the legislative proposal can be found in the paper tabled at the meeting of the Legislative Council Panel on Financial Affairs on 7 February 2022.
Authored by: Simon Deane and Jennifer Lok
For further information, please contact:
Simon Deane, Partner, Deacons
simon.deane@deacons.com
