A new licensing regime for trust or company service providers in Hong Kong
The new licensing regime introduced under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (“AMLO”) will take effect from 1 March 2018 (the “commencement date”).
Trust or company service providers (“TCSPs”) will be required to apply for a licence from the Registrar of Companies (the “Registrar”) and satisfy a “fit and proper” test before they can provide trust or company services as a business in Hong Kong. The Registrar will maintain the Register of TCSP Licensees (the “Register”) which contains information such as the name and business address of every TCSP licensee.
Who is required to apply?
A person who carries on or wishes to carry on a trust or company service business in Hong Kong (including a company which has already been registered under the Trustee Ordinance (Cap. 29)) is required to apply for a licence.
What is a trust or company service business?
Trust or company services are services specified in Part 1 of Schedule 1 to AMLO provided in Hong Kong by a person by way of business to other persons which include acting, or arranging for another person to act, as a trustee of an express trust or a similar legal arrangement. An express trust means a trust clearly created by the settlor, usually in the form of a written deed of trust, as opposed to a trust which comes into being through the operation of law only (e.g. constructive trust).
Based on the documentation provided during the course of the drafting of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Bill 2017, the question of whether something amounts to the carrying on of a business is a question of fact and degree to be answered upon a consideration of all the circumstances. In considering whether a person is carrying out a trust or company service by way of business, it is relevant to take into account whether the person:
- undertakes one or more of the activities of a TCSP;
- advertises or publicizes his business activity or receives referrals from other businesses;
- aims to make a profit when he carries out the activity; and
- carries out the activity with reasonable or recognizable continuity.
A licence is unlikely to be required if a person accepts a one-off appointment by a friend or relative to act as a trustee of a trust in a personal capacity and with no commercial gain.
How to apply for a licence?
(i) Application procedures
Applicants should make applications using the specified forms provided by the Registrar (https://www.tcsp.cr.gov.hk/tcspls/portal/form). For each person subject to the fit and proper test, a Statement as regards Fit and Proper Criteria should be signed and delivered together with the respective application form. An application fee of HK$3,440 and an additional fee of HK$975 for each person subject to the fit and proper test are payable.
(ii) Fit and proper test
The following persons are subject to the fit and proper test unless exempted:
- For an applicant that is an individual, the individual and each ultimate owner.
- For an applicant that is a partnership or corporation, each partner or director and each ultimate owner.
In determining whether a person is fit and proper, the Registrar will have regard to (amongst other relevant considerations) the person’s records of conviction (particularly in relation to terrorist acts, drug trafficking, organized or serious crime, and money laundering or terrorist financing offences), non-compliance and bankruptcy.
(iii) Validity period of a licence
Normally, the validity period of a licence granted will be 3 years.
(iv) Transitional arrangements
With effect from the commencement date, a person will be deemed to have been granted a licence to carry on a trust or company service business in Hong Kong if immediately before the commencement date, he or she was carrying on a trust or company service business in Hong Kong and for that purpose held a valid business registration certificate. If the deemed licensee does not apply for a licence during the transitional period of 120 days from the commencement date, the deemed licence will, unless terminated earlier (for example, when the deemed licensee ceases business), cease to have effect on the expiration of the transitional period.
(v) Addition of new ultimate owners, partners or directors
TCSP licensees are required to obtain prior written approval from the Registrar before any person (unless exempted) becomes an ultimate owner, a partner or a director of a licensee.
(vi) Renewal of a licence
Applications for renewal of licence should be made at least 60 days before the licence is due to expire. An application fee of HK$2,910 and an additional fee of HK$975 for each person subject to the fit and proper test are payable.
Who are exempted from the licensing requirements?
Persons exempted from the licensing requirements (including the fit and proper test) include:
- An authorized institution (as defined in the Banking Ordinance (Cap. 155))
- A licensed corporation (as defined in the Securities and Futures Ordinance (Cap. 571))
- An accounting professional
- A legal professional What are the penalties for a person carrying on a trust or company service business without a licence?
A person commits an offence under Section 53F(1) of the AMLO if the person carries on a trust or company service business in Hong Kong without a licence and is liable on conviction to a fine of HK$100,000 and imprisonment for 6 months.
What are the anti-money laundering and counter-terrorist financing requirements of TCSPs?
TCSP licensees are required to comply with the statutory customer due diligence and record-keeping requirements as set out in Schedule 2 to the AMLO. In particular, TCSP licencees and their senior management should devise and implement policies, procedures and controls in relevant operational areas. Enhanced customer due diligence should be conducted for high risk situations such as non face-to-face transactions or where the customer is a corporation which has issued bearer shares. Records should be kept throughout the continuance of the business relationship with the customer and for a period of at least 5 years after the end of the business relationship.
Is the Register of TCSP Licencees public?
The Register is open for public inspection free of charge on www.tcsp.cr.gov.hk.
If you have any queries on the above or require our assistance in applying for a TCSP licence or preparing internal policies to comply with the requirements of TCSPs, please feel free to contact us.