A new licensing regime for trust and company service providers (“TCSPs”) came into force on 1 March 2018 pursuant to the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Ordinance 2018. The amendment is with a view to align with international standards on combating money laundering and terrorist-financing and extends the existing Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”) to solicitors and foreign lawyers, accounting professionals, real estate agents and trust and company service providers (collectively, designated as non-financial businesses and professions or “DNFBPs”) when they conduct certain transactions.
Overview
From 1 March 2018, the new law will require, inter alia any person providing trust or company service business to apply for a license from the Companies Registry (AMLO Section 53G) and the applicant and the directors / partners / ultimate owners (where applicable) must satisfy a “fit and proper” test before they will be granted the license to carry on such business in Hong Kong (AMLO Section 53H).
Criteria for “Fit and Proper Test” Test
In determining whether a person is fit and proper to carry on, or be associated with a TCSP business, the Registrar of Companies (“Registrar”) will have regard to any matter that the Registrar considers relevant, including for example, whether the person has any criminal conviction, in particular those relating to money laundering or terrorist financing or involving fraud or dishonesty. Other matters to be taken into consideration include whether the person is an un-discharged bankrupt / in liquidation or receivership (AMLO Sections 53H and 53I).
If the Registrar is not satisfied that the person is a fit and proper person, the Registrar may decide not to grant or renew a license, or not to give an approval for the person to become an ultimate owner, a partner or a director of the TCSP licensee.
Exemption
The TCSP licensing requirement (including the fit and proper test) does not apply to an authorized institution, a licensed corporation that operates a TCSP business that is ancillary to the principal business of the corporation, an accounting professional or a legal professional (AMLO Section 53B). As a result, these persons are also exempted from the fit and proper test and are not required to obtain the Registrar’s approval to become a TCSP licensee’s ultimate owner / partner / director.
Do You Need a Trust and Company Service License ?
In determining whether the provision of your services including in-house group corporate secretarial services amount to the carrying on of trust or company service business, all the factual circumstances need to be taken into account. The following (non-exhaustive) factors will be considered, including whether a person or entity :-
(a) undertakes one or more of the activities of a TCSP;
(b) advertises or publicizes its business activity or receives referrals from other companies;
(c) aims to make a profit when it carries out the activity; and
(d) carries out the activity with reasonable or recognizable continuity.
Validity Period / Renewal of License
The TCSP license is normally granted for a period of 3 years. The Registrar will keep a register of all TCSPs licensees, which will be open for public inspection (AMLO Section 53D). A licensee may apply to the Registrar for a renewal of the license. Applicants for renewal of a license will be subject to the same “fit and proper” test applicable to an application for a new license (AMLO Sections 53K and 53O).
Transitional Period for TCSPs
A person will be deemed to have been granted a license to carry on a trust or company service business if immediately before 1 March 2018, the person was carrying on a trust or company service business in Hong Kong and held a valid business registration certificate (“Deemed License”). Deemed licensees have up to 120 days of transitional period to apply for a license (from 1 March 2018 to 29 June 2018).
A Deemed License will cease to be effective in certain circumstances, such as where :-
1. No application for a license is made within the transitional period, and the transitional period ends;
2. An application for a license is made within the transitional period and the license is granted; or the license is not granted and the decision not to grant takes effect as a specified decision under AMLO Section 75;
3. The deemed licensee ceases to hold a valid business registration certificate; and
4. The deemed licensee ceases to carry on the TCSP business (AMLO Section 53ZQ).
Penalties for non-compliance
TCSPs should note that any person who carries on a trust or company service business in Hong Kong without a license will commit an offence and be liable on conviction for a fine of up to HK$100,000 and imprisonment of up to six months (subject to transitional period from 1 March 2018 to 29 June 2018).
If you would like to know more about the information regarding the new TCSPs licensing regime or if your business requires such license, experienced lawyers in our Corporate and Commercial team will be happy to assist you.