Prior to the introduction of a registration regime for dealers in precious metals and stones (“PMS”) business which came into force on 1 April 2023 in Hong Kong, the industry of PMS in Hong Kong was not strictly regulated.
Dealing in PMS
The registration regime operated and supervised by the Customs and Excise Department of Hong Kong applies to any person/entity who carries on any of the following activities, either by way of a “specified transaction” or a “specified cash transaction”:
- trading in, exporting or importing precious metals, precious stones or precious products;
- manufacturing, refining or carrying out any value adding work on precious metals, precious stones or precious products;
- issuing, redeeming or trading in precious-asset backed instruments; or
- acting as an intermediary in respect of any of the activities (a), (b) or (c).
Registration is however not required for logistics service business importing or exporting precious metals, precious stones or precious products in the ordinary course of business.
Gold, Precious Metals and Stones
Precious metal includes gold, silver, platinum, iridium, osmium, palladium, rhodium or ruthenium, in a manufactured or unmanufactured state.
Precious stone includes diamond, sapphire, ruby, emerald, jade or pearl.
Precious product includes any jewellery or watch made up of, containing or having attached to it, any precious metal or precious stone, or both.
Precious-asset-backed instruments refers to a certificate or an instrument which is backed by one or more precious metals, precious stones or precious products, and excludes securities, futures contracts, interests in collective investment schemes, structured products, over-the-counter derivative products and virtual assets.
Registration Requirement
(i) Specified transactions (Category A registrant)
A “specified transaction” means a transaction in respect of which a payment or payments, of at least HK$120,000 (about US$15,385) or equivalent amount in another currency in total, is or are made or received in any way or combination of ways (other than in cash) in Hong Kong, whether the transaction is executed (i) in a single operation or (ii) in several operations that are linked or appear to be linked.
Category A registration requires submission of the following documents: (a) a completed application form; (b) an application for registration fee; (c) a copy of valid business registration certificate;
(d) addresses of all business premises and correspondence address; (e) a declaration by the applicant that the applicant’s precious metals and stones business has been carried on and will be carried on for a lawful purpose; and (f) supporting documents such as copies of identity and address proof.
(ii) Specified cash transactions (Category B registrant)
A “specified cash transaction” means a transaction in respect of which a payment or payments in cash, of at least HK$120,000 (about US$15,385) or equivalent amount in another currency in total, is or are made or received in Hong Kong, whether the transaction is executed (i) in a single operation or (ii) in several operations that are linked or appear to be linked.
Category B registration requires submission of the following documents: (a) a completed application form; (b) a copy of valid business registration certificate; (c) addresses of all business premises and correspondence address; and (d) supporting documents such as copies of identity and address proof.
There are also additional requirements, such as putting in place an effective Anti-Money Laundering and Counter-Terrorist Financing system to mitigate risks, and attending an interview.
Penalty
A person, other than a registrant, who carries out a specified transaction or a specified cash transaction in Hong Kong is liable on conviction to a maximum fine of HK$100,000 (about US$12,820) and imprisonment for six months.
Exemptions from the Registration Requirement
The registration requirements do not apply to the Government, banks, licensed pawnbrokers, and SFC-licensed corporations carrying on a PMS business that is ancillary to any regulated activity for which the corporation is licensed.
Authorised insurers, licensed insurance broker companies, licensed individual insurance agents, licensed insurance agencies, licensed stored value facilities, system operators and settlement institutions of a designated retail payment system will also be exempted provided that their PMS business is ancillary to their principal business.
How we can help
We can assist with the application for the appropriate registration and advise generally on these matters, including sale and purchase contracts and if required, letters of credit.
We can also assist in scrutinising the contractual documentation to minimise possible trading pitfalls and risks.
