A few years ago, authorities in Hong Kong announced a new licensing regime for trust or company service providers (TCSPs) operating inside the jurisdiction. The new regime is part of a regulatory push associated with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
For clients seeking to do business in Hong Kong, it goes without saying that it is imperative to follow the lead of established companies like trust services firm Asiaciti Trust and retain TCSPs in full compliance with the new regime. It is equally important that entrepreneurs, principals, and partners understand how this new regime may affect business activity in Hong Kong — and what’s necessary to remain in compliance.
The Pre-AMLO Regime
Prior to the implementation of AMLO, trust and corporate services firms doing business in Hong Kong were required to register with local authorities under a special provision for firms with “trust” in their titles. However, they were generally not required to obtain special operating licenses from local regulatory authorities, as was and remains the case for certain other types of enterprises. It is therefore not inaccurate to state that, prior to AMLO, trust and corporate services companies operating in Hong Kong were not “regulated” per se.
The Post-AMLO Regime
This state of affairs changed decisively effective 1 March 2018. On that date, TCSPs operating within Hong Kong’s jurisdiction were required to apply for and obtain licenses from the city-state’s Registrar of Companies, subject to a transitional period that terminated 28 June 2018.
Under the terms of the new licensing regime, TCSPs operating in Hong Kong must exceed the standards of a “fit and proper” test. The “fit and proper” criteria are spelled out in depth on Form TCSP4, which requires applicants to affirm the extent and nature of their organization’s activities and answer sworn questions about prior sanctions or convictions for certain financial crimes. Foreign firms unsure of their obligations here should obtain qualified legal advice.
Once issued, TCSP licenses generally remain in force for three years, after which time the licensee must apply for renewal. Prior notification to and approval from the Registrar of Companies is also required before any significant change in ownership, partnership, or the composition of the licensee’s board. Notification is required before the termination or cessation of the license, as well. Unlicensed operation is subject to a substantial fine of HK$100,000 and a term of imprisonment of up to six months.
Further Information About The New Licensing Regime
Further information about the new post-AMLO licensing regime for TCSPs operating in Hong Kong is available in the government’s official circular announcing the change. The circular spells out the respective obligations of licensees and the Registrar of Companies, and provides additional details for new licensees seeking to comply with the law.
Compliance Is Worth The Cost
Hong Kong routinely tops lists of the world’s most business-friendly jurisdictions. Thanks to a confluence of favorable factors, it is likely to remain thus for the foreseeable future. If you have yet to open a local office or otherwise establish a business presence in Hong Kong, it may well behoove you to explore your options. The upside here means that complying with local regulations, such as TCSP licensing requirements under AMLO, is well worth the cost.
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