In Hong Kong, under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“Anti-Money Laundering Ordinance”), a person who operates a money-changing service or a remittance service is a money service operator and must be licensed by the Hong Kong Customs and Excise Department.
In this article, Imishore Consultants’ team of licensing experts has provided an overview of the regulatory framework, looking at key issues such as what constitutes money services, what are regulatory requirements, and what are the steps to apply for Hong Kong money service operators (MSO) license.
Imishore Consultants’ team of expert attorneys and chartered accountants has years of experience securing relevant payment license for our international clients intending to operate money service business in the jurisdiction of their choice. Our service package for securing an MSO license in Hong Kong includes everything you need to register company in Hong Kong and submission of MSO license application in Hong Kong. Imishore Consultants through this article aims to guide a beginner on the most important things to know about MSO license in Hong Kong.
Introduction
In Hong Kong, anyone intending to carry out “money services” must apply for a Hong Kong Money Service Operator (MSO) license from the Customs and Excise Department under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”). The Anti-Money Laundering Ordinance provides a regulatory framework for money service providers that is overseen by the Hong Kong Commissioner of Customs and Excise (“CCE”). Money service operators must apply for a MSO license in Hong Kong under this framework, unless exempted, and must comply with conduct of business standards.
Under the Hong Kong law, any person operating a currency exchange or remittance service in Hong Kong, whether in the form of a shop, through the internet, at an office or at home, or by any other means is required to obtain licence from the Commissioner of Customs and Excise (CCE). Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Cap (AMLO), a person who wishes to operate a remittance and / or money changing service (i.e. money service as defined under the AMLO) is required to apply for a licence from the CCE. Operating a money service without obtaining a money service operator licence from the CCE is an offence and liable to a fine of $100,000 and imprisonment for six months. Under the AMLO, the CCE is the relevant authority to regulate Money Service Operators (MSOs) (i.e. Remittance Agents and Money Changers) and supervise licensed MSOs compliance with the customer due diligence and record-keeping obligations and other licensing requirements, as well as combating unlicensed operation of money service. According to the AMLO, MSOs are defined as financial institutions.
What is a Money Service in Hong Kong?
According to the rules of Hong Kong, a Money Service Operation means a money-changing activity and/or money remittance activity.
In Hong Kong, a money service refers to a range of financial activities or services related to the handling, transfer, or exchange of money. These services are regulated under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO) and are overseen by the Hong Kong Customs and Excise Department (C&ED).
Some common examples of money services in Hong Kong include:
Money Remittance: This involves facilitating the transfer of funds from one location to another, either domestically or internationally. Money remittance companies act as intermediaries to facilitate secure and efficient money transfers on behalf of individuals or businesses.
Currency Exchange: Money service providers engaged in currency exchange offer services for the conversion of one currency into another. These providers may operate physical currency exchange counters or offer online currency exchange platforms.
Money Changing: Similar to currency exchange, money changing involves the conversion of one form of currency or monetary instrument into another. However, money changing typically refers to the exchange of physical cash, such as banknotes or traveler’s cheques.
Stored Value Facilities: Stored value facilities (SVFs) are electronic payment systems that allow users to store funds electronically and use them for various transactions, such as making purchases, paying bills, or transferring funds. SVFs can be in the form of prepaid cards, electronic wallets, or mobile payment platforms.
Money Transmission: Money transmission services involve the transfer of funds electronically from one person or entity to another. This can include domestic or cross-border transfers, typically facilitated through electronic funds transfer systems or payment service providers.
What are the requirements?
Compliance Officer
A money service operator must have a compliance officer (“CO”). The CO acts as the focal point within the money service operator for the oversight of all activities relating to the prevention and detection of money laundering/terrorist financing. The CO provides support and guidance to the senior management to ensure that money laundering/terrorist financing risks are adequately identified, understood, and managed.
A Compliance Officer is an individual within an organization who is responsible for ensuring that the company operates in compliance with relevant laws, regulations, industry standards, and internal policies. Their primary role is to establish and maintain a compliance program that promotes ethical conduct, risk mitigation, and adherence to legal and regulatory requirements.
Money Laundering Reporting Officer
A money service operator should appoint a money laundering reporting officer (“MLRO”). The MLRO serves as the central reference point for suspicious transaction reporting and as the main point of contact with the Joint Financial Intelligence Unit (“JFIU”) and other law enforcement agencies. The MLRO should play an active role in identifying and reporting suspicious transactions.
Physical office premise
The premises for the operation of the “money service operator” business must be suitable. Such premises must be registered with the Customs and Excise Department (“C&ED”).
There must be a local management office (that is a physical office that can be reached in person and through telephone by officers of the C&ED to perform the functions under the Anti-Money Laundering Ordinance, as well as receive documents and correspondence from C&ED such as circulars and notices), a correspondence address, and a local place (that is a physical place for keeping the full set of books and records in respect of its money service transactions).
The applicants planning to apply for a money service operator license in Hong Kong needs to take note that sharing office premises with others will not be accepted and residential premises or care-of addresses will not be accepted as the registered office address.
MSO License Application Procedures
An applicant for an MSO license needs to first incorporate a company in Hong Kong and fulfill the prerequisites mentioned above. Further, the applicant needs to file and complete an application form and submit (i) A business plan, and (ii) AML/CFT policies (“AML Policy”) to Hong Kong regulatory authority.
Once the below-mentioned documents are submitted the regulatory authorities call for an interview with the representatives of company personnel which may include the AML/CFT officer, compliance officer, and other relevant board members as may be authorized.
Business Plan
The business plan should be a comprehensive overview of the business, which includes but is not limited to such components as the detailed operation mode, organizational structure, payment system, target customer, staffing, and finance of the company. The Money Service Supervision Bureau (“MSSB”) will look into the applicant’s entire business operation from an anti-money laundering and counter-terrorist financing (“AML/CFT”) perspective.
AML Policy
The AML Policy should set out, a money service operator’s own policies, procedures, and controls in the relevant operational areas with a view to mitigating the money laundering and terrorist financing risks (“ML/TF risks”) to which the money service operator is exposed and fulfilling the relevant statutory and regulatory requirements having regard to the money service operator’s particular business risk profile.
Interview
After submitting all the required documents, the money service operator must attend an interview and must nominate an eligible person(s), i.e. sole proprietor, partner(s) or director(s) of the applicant to attend a Competence Assessment.
The Competence Assessment is conducted to ensure that the senior management of the applicant has clear understanding of ML/TF risks to which it is exposed, and is capable of implementing effective AML/CFT systems to adequately manage and mitigate the ML/TF risks identified in order to meet the statutory AML/CFT obligations.
Conclusion
Engage Imishore Consultants as we make your registration of business in Hong Kong a smooth and hassle-free process. The team provides a comprehensive service package that includes planning and strategizing with our clients to select a suitable business entity, completing the registration and documentation processes, obtaining required offshore financial licenses, opening a corporate bank account, and ensuring compliance with government regulations.
For any individual or any business intending to provide a money service in Hong Kong, obtaining an MSO license is crucial. The fact that Hong Kong is one of the major financial centers in Asia and the rest of the globe is the main advantage of getting an MSO license there. In contrast to other licensing systems, the process is really simple and quick. Imishore Consultants has qualified team members that can help you with the application procedure of attaining a Hong Kong Money Service Operator (MSO) License.
What can we assist in
- To assess qualifications for applicants.
- To form a Hong Kong company for this purpose.
- To prepare all the required documents for license application.
- To liaise with case officers of Custom & Excise Department.
- To organize and prepare you for interview with Custom & Excise Department (the applicant has to be present at the interview).
- To negotiate licensing conditions until outcome of the application or issuance or license.
Contact us to find out more about how to secure a Hong Kong Money Service Operator (MSO) license and our dedicated and experienced team will revert within the next 24 hours.
