Amendments to anti-money laundering and combating the financing of terrorism legislation in Hong Kong

Legislative authorities of Hong Kong had approved a bill that amends Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO). The changes will have effect from 1st of March 2018.

The amendment changes the criteria for identification of beneficial owner of a legal entity by percent of ownership or voting rights, and establishes the requirement to obtain a special license for trust and corporate service providers in Hong Kong. Besides this, the bill brings the Customer Due Diligence procedure in accordance with the requirements established by Financial Action Task Force (FATF). The more detailed description of these amendments is provided below.

1. In current version of AMLO the criteria for detecting a beneficial owner of a company is “not less than 10%” of ownership or voting rights held by a private individual directly or indirectly. The amendment modifies this criteria to “more than 25%” of ownership or voting rights in a company.
2. All corporate and trustee service providers operating in Hong Kong will have to obtain a special license for such type of activity. The license is to be issued by Companies Registrar of Hong Kong after the applicant passes a special test. Also sole entrepreneurs and partnerships can apply for such license along with companies. The license will have effect for 3 years starting from the date of issue and can be renewed after expiration.
3. The requirement to obtain and keep personal data of private individuals under Customer Due Diligence procedure previously was binding only for financial institutions. The bill extends the effect of this requirement to so called designated non-financial businesses and professions (DNFBP), such as accountants, real estate agents and legal services providers.
4. However, such DNFBPs have to follow the Customer Due Diligence procedure only in case of participation in transactions explicitly named by AMLO, such as administration of client’s property, administration of bank accounts, real estate operations, company incorporation and management, buying and selling of shares or membership rights in companies.