Hong Kong: Hong Kong Proposes Enhanced AML Obligations For Professionals And Beneficial Owner Registries For Hong Kong Companies

The Hong Kong Government has recently proposed to expand its anti-money laundering ("AML") laws. This is expected to assist Hong Kong in keeping pace with AML developments in other financial centers, and to prepare for its upcoming FATF mutual evaluation in 2018.1

Key Proposals

  • Hong Kong companies would be required to maintain a register of "beneficial owners" or "persons with significant control," known as a PSC register.
  • Solicitors, accountants, real estate agents, and trust or company service providers would be required to perform customer due diligence in certain circumstances.

Beneficial Owner Registers

The government proposes to amend the Companies Ordinance to require Hong Kong companies to identify and maintain records of their "beneficial owners." The definition of "beneficial owners" would also be significantly revised. These proposed rules would apply to all companies incorporated in Hong Kong, including companies limited by shares, companies limited by guarantee and unlimited companies. However, listed companies will be exempt given the existing regime already imposed on them under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

If approved, such companies will be required to create a "PSC Register" of persons with "significant control." Persons with "significant control" include both registrable individuals and registrable legal entities. This register would be available for public inspection on payment of a fee.

"Registrable individuals" are beneficial owners, as that term is newly defined under the proposed amendments.

Historically, a "beneficial owner" was defined as an individual who owns or controls, directly or indirectly, not less than 10% of the issued share capital of the corporation, or who is, directly or indirectly, entitled to exercise or control the exercise of not less than 10% of the voting rights at general meetings of the corporation, or who exercises ultimate control over the management of the corporation.

Under the proposed amendments, "beneficial owners" would be individuals who meet one or more of the following specified conditions:

  • Directly or indirectly holding more than 25% of shares;
  • Directly or indirectly holding more than 25% of voting rights;
  • Directly or indirectly holding the right to appoint or remove a majority of directors;
  • Otherwise having the right to exercise, or actually exercising, significant influence or control; or
  • Having the right to exercise, or actually exercising, significant influence or control over the activities of a trust or a firm that is not a legal person, but whose trustees or members satisfy any of the first four conditions (in their capacity as such) in relation to the company, or would do so if they were individuals.

In its consultation paper, the government stated that they might "take this opportunity to align the threshold under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (the "AMLO") with the proposed 25% threshold to be adopted under the Companies Ordinance."2 Accordingly, this revision would likely also apply to financial institutions that are currently subject to AML customer due diligence requirements.

"Registrable Legal Entities," in turn, are defined as any legal entity immediately above the company in its ownership chain that meets the beneficial ownership definition.

Companies would be required to obtain and ascertain the accuracy of the following information required to be included in the PSC register: the beneficial owner's name; his or her or its identity card or passport details, or company registration number; his or her or its address; the date he or she or it became a registrable individual or entity; and the nature of the control exerted over the company. If there is no person or entity that falls within the definition of registrable individual or legal entity, the new rules would also require that this be stated in the PSC register. Registrable individuals and entities would be required to comply with notices to ascertain and confirm the relevant particulars.

Customer Due Diligence and Recordkeeping Obligations for Solicitors, Accountants, Real Estate Agents and Trust and Company Service Providers.

A proposed amendment to the AMLO would extend customer due diligence ("CDD") recordkeeping requirements to three types of professions performing specified kinds of roles:

  • Solicitors and accountants, when preparing for or carrying out transactions for clients concerning

    1. the buying or selling of real estate;
    2. managing of client money, securities or other assets;
    3. management of bank, savings or securities accounts;
    4. organization of contributions for the creation, operation or management of companies;
    5. creation, operation or management of legal persons or arrangements; or
    6. buying or selling of business entities;
  • Real estate agents, when engaged in transactions concerning the buying and selling of real estate; and
  • Trust or Company Service Providers ("TCSPs"), when preparing for or carrying out transactions for clients concerning

    1. the forming of companies or other legal persons;
    2. acting, or arranging for another person to act, as a director or secretary of a company, a partner of a partnership, or a similar position in relation to other legal persons;
    3. providing a registered office, business address, correspondence or administrative address or other related services for a company, a partnership or any other legal person or arrangement; or
    4. acting, or arranging for another person to act, as a trustee of an express trust or similar legal arrangement, or a nominee shareholder for a person other than a company whose securities are listed on a regulated market.

Under these proposals, effectively, the current rules governing financial institutions would be extended to such professionals. Such professionals would be required to undertake customer due diligence measures in the following circumstances: (1) when establishing business relationships with new customers; (2) when carrying out transactions above HK$120,000 with customers with whom they do not already have a business relationship; (3) where there are suspicions of money laundering and/or terrorist financing; and (4) when there are doubts about the veracity or adequacy of previously obtained customer identification data.3

In the first two scenarios, these professionals would be allowed to apply simplified CDD measures when dealing with specified categories of business that are considered to pose a lower risk. Simplified CDD would apply for clients who are financial institutions subject to AML regulation, listed companies, government organizations, certain types of pension schemes, investment vehicles where the managers are financial institutions supervised for AML/CFT compliance, and certain types of insurance policies.

Like financial institutions, such professionals would also be subject to enhanced CDD requirements when dealing with higher-risk situations, such as when a customer is a politically exposed person or is not physically present for identification purposes. Enhanced CDD requirements would include obtaining management approval for establishing or continuing the business relationship, and taking additional measures to mitigate the AML/CFT risk, such as enquiring with customers about their source of funds.

The proposed amendments would also codify additional recordkeeping rules, including requirements to maintain customer identification data collected, account files, business correspondence, and records of transactions with respect to each customer for a period of six years.

Enforcement of these proposed requirements would be implemented through the existing professional regulatory bodies for solicitors, accountants and estate agents. TCSPs would be required to apply for a license from the Registrar of Companies before they provide trust or company services as a business to the public; it will be a criminal offense to operate a TCSP business without a license.

Background and Context

These proposals are intended to enhance Hong Kong's regulatory regime for combating money laundering and terrorist financing to bring it up to date and in line with international requirements as promulgated by the Financial Action Task Force ("FATF"), an inter-governmental body that sets standards on combating money laundering and terrorist financing.

Hong Kong has been a member of the FATF since 1991. As most clients will be aware, Hong Kong already maintains strict requirements in respect of AML compliance and reporting that are in line with many of the world's other financial capitals. However, in recent years, the FATF has increased its focus on CDD, including with respect to businesses that have not historically been subject to such requirements in many jurisdictions. Following the Panama Papers leak in April 2016, recent meetings of the G20 Finance Ministers have also paid particular attention to promoting greater transparency of beneficial ownership of legal persons, and the G20 has requested the FATF and the Global Forum of the OECD to improve the implementation of international standards on transparency of beneficial ownership information. The FATF and the Global Forum of the OECD are set to jointly recommend that G20 members lead by example and bring forward their plans to fully and effectively implement the FATF recommendations on beneficial ownership by the end of 2017.

The FATF has long recommended that financial institutions implement CDD measures to identify and verify customers and maintain records on customer identification and transactions for at least five years. Hong Kong has implemented such recommendations through the AMLO. However, the FATF also recommends that such requirements be applied to "designated non-financial businesses and professions," or "DNFBPs," which in its view present money-laundering and terrorist financing risks. Among others, DNFBPs include casinos, dealers in precious metals and stones, real estate agents, lawyers, notaries, accountants, and TSCPs. Member jurisdictions have generally been less robust about implementing CDD requirements for DNFBPs, and the FATF has in recent mutual evaluations emphasized their importance. Notably, in its recent mutual evaluation the United States was criticized by the FATF for not having CDD requirements for certain types of DNFBPs. Other jurisdictions, such as the U.K., already have such requirements, although such jurisdictions are in the minority. Hong Kong enacted the AMLO in April 2012 to implement the FATF's recommendations relating to financial institutions. Under the AMLO, certain types of financial institutions currently have a statutory obligation to conduct CDD on their customers and keep relevant records for a specified period. However, in Hong Kong – as in certain other jurisdictions – there are currently no such statutory regulations in respect of DNFBPs. The current proposed amendments to the AMLO are expected to bring Hong Kong in line with these international recommendations.

FATF's 2012 Recommendations (as updated in 2013, 2015 and 2016) also recommend that countries require companies to maintain information on beneficial ownership,4 and in 2014 the FATF published additional guidance on how to implement this.5 In response to this, in its latest AML Directive the EU has required that trusts and similar structures obtain and hold information on their beneficial ownership.6 Hong Kong's latest proposal in requiring companies to maintain PSC registers can be seen as an effort to keep in step with these recommendations.

The proposed amendments are made in anticipation of Hong Kong's upcoming mutual evaluation by the FATF (scheduled for 2018). In the Hong Kong Government's view, given the recent emphasis on beneficial ownership, Hong Kong's efforts in implementing CDD requirements will be closely examined during this upcoming evaluation.

The Hong Kong Government launched its public consultation period on the proposals on January 6, 2017. The consultation period closes on March 5, 2017. We expect the proposed amendments to become effective, potentially in modified form, at some point shortly thereafter.


1 Hong Kong Financial Services and the Treasury Bureau, Consultation on Enhancing Anti-Money Laundering Regulation of Designated Non-Financial Businesses and Professions, available here; and Hong Kong Financial Services and the Treasury Bureau, Consultation on Enhancing Transparency of Beneficial Ownership of Hong Kong Companies, available here.

2 See Hong Kong Financial Services and the Treasury Bureau, Consultation on Enhancing Anti-Money Laundering Regulation of Designated Non-Financial Businesses and Professions, p.19, available here.

3 Notably, solicitors in Hong Kong are already required to conduct such diligence by the Law Society of Hong Kong under Practice Direction P.

4 FATF, International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation – The FATF Recommendations, February 2012 (updated October 2016), Recommendation 24, paragraph 8, available here.

5 FATF Guidance, Transparency and Beneficial Ownership, October 2014, available here.

6 Directive 2015/849 of the European Parliament and of the Council, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No. 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC, 20 May 2015 (the "Fourth Anti-Money Laundering Directive").

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions