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
Today 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.
Since the establishment of the money service operators licensing system, there are currently over 1,700 licencees in Hong Kong. In view of this, a number of enthusiastic money service operators collectively prepared and founded an industry association which led to the registration and set up of the Hong Kong Money Service Operators Association Limited under the Hong Kong Companies Ordinance. Members of the Hong Kong Money Service Operators Association are mainly entities providing remittance services and/or money changing services in Hong Kong whereas our team of professional advisors is voluntarily formed by independent professionals from the legal, accounting, compliance, finance and banking sectors as well as experienced money changers. The team aims to provide comprehensive, objective, independent and professional advice to MSOA.
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.
What is the money service
Any person operating a money service should be licensed with the Commissioner of Customs and Excise pursuant to the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Chapter 615 of the Laws of Hong Kong) (the “AMLO”).
Money service includes money changing service and remittance service. It is an offence to operate a money service in Hong Kong without a license.
Money changing service means a service for exchanging of currencies that is operating in Hong Kong as a business, but not include those service that is incidental to the main business.
Remittance service means a service of one or more of the following that is operated in Hong Kong as a business:
- Sending, or arranging for the sending of, money to a place outside Hong Kong;
- Receiving, or arranging for the receipt of, money from a place outside Hong Kong;
- Arranging for the receipt of money in a place outside Hong Kong.
One shall only operate a money service after being granted a license by the Hong Kong Customs and Excise Department. Normally, the Money Service Operators (“MSO”) License has a validity period of 2 years. Hence the licensee shall apply for renewal of license before expiration to continue its operation of money service.
A MSO applicant could be a Hong Kong limited company, Hong Kong unlimited company or overseas company.
After submitting all the required documents, the The Commissioner of Customs & Excise (“CCE”) will request for payment of application fees (for application itself and for each partner/director/benefitial owner).
After payment, “CCE” will interview the applicant and issue an “additional information” form to the applicant. The applicant (or any partner / director / ultimate owner) must not have been convicted of a financial or criminal offence, or is an undischarged bankrupt, and the premises for operation of the “MSO” business is considered by “CCE” to be suitable.
The definition of “money services” under the AMLO covers two types of services operating in Hong Kong: “money changing service” and “remittance service”.
“Money changing service” is, as the name suggests, the service of exchanging of currencies (but note that it does not include the typical service exchange of foreign currencies for local currencies by tourists at hotel counters, which is considered “incidental”).
On the other hand, “remittance service” is defined to mean the transfer of funds from Hong Kong to a place outside of Hong Kong or the receipt of funds in Hong Kong from a place outside of Hong Kong. It also includes any arrangements for such transfer or receipt.
Money services under the AMLO are not limited to the traditional physical counters providing money changing or remittance services but also cover mobile operations with no fixed premises, including online operations, as will be discussed below.
What are the benefits of obtaining a Hong Kong MSO license
Obtaining a Hong Kong MSO (Money Service Operator) license can offer several benefits for individuals or companies engaged in money service activities. Here are some potential advantages of obtaining an MSO license in Hong Kong:
Legitimacy and Compliance: Operating as a licensed MSO in Hong Kong demonstrates legitimacy and compliance with the regulatory framework. It enhances the reputation and trustworthiness of the business in the eyes of customers, partners, and financial institutions.
Regulatory Oversight: MSOs in Hong Kong are subject to supervision and regulation by the Hong Kong Customs and Excise Department (C&ED) under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. This oversight helps ensure adherence to anti-money laundering (AML) and counter-terrorist financing (CTF) regulations, which are crucial in combating financial crimes.
Expanded Business Opportunities: With an MSO license, businesses can offer a broader range of money service activities in Hong Kong. This can include services such as remittance, currency exchange, stored value facilities, and money transmission, allowing for increased revenue streams and potential growth.
Access to Financial Infrastructure: Holding an MSO license may grant businesses access to financial infrastructure and services offered by banks and other financial institutions. This can facilitate partnerships and enable smoother operations, including banking relationships, settlement processes, and compliance with regulatory requirements.
Enhanced Consumer Confidence: Being a licensed MSO can instill confidence in customers, as they know their financial transactions are being conducted by a regulated entity. This can attract more customers, especially those who prefer to deal with licensed service providers for their money service needs.
Global Recognition: Hong Kong is recognized as an international financial hub, and obtaining an MSO license adds credibility and recognition on a global scale. It can facilitate business dealings with international partners, open doors to cross-border operations, and enhance the reputation of the business in the global financial community.
Networking and Industry Engagement: Being part of the licensed MSO community in Hong Kong allows businesses to network with peers, industry associations, and regulatory bodies. This engagement can provide valuable insights, updates on industry trends, and opportunities for knowledge sharing and collaboration.
It’s important to note that the specific benefits and requirements of obtaining an MSO license in Hong Kong may vary, and it is advisable to consult with legal and regulatory experts or engage with the Hong Kong Customs and Excise Department for detailed and up-to-date information regarding the MSO licensing process and its associated benefits.
What is the regulatory authority:
The Hong Kong Customs and Excise Department, a distinct authority, is in charge of policing payment service operations in Hong Kong. Since July 1, 2012, HK C&ED (Hong Kong Customs and Excise Department) had undertaken to conduct the regulatory supervision for MSOs (Money Service Operators). Only this one financial service is under the supervision and regulation of this government agency. Either the SFC (Securities and Futures Commission) or the HKMA (Hong Kong Monetary Authority) oversees and regulates all other financial services. Compared to the HKMA and the SFC, HKC&ED has less stringent oversight requirements.
Typically, financial institutions that are already subject to other regulations are exempt from the MSO license requirement. As a result, authorized institutions such as banks, restricted license banks, or deposit-taking companies regulated by the Hong Kong Monetary Authority, corporations licensed by the Securities and Futures Commission, insurers approved by the Insurance Authority (“IA”), and insurance brokers or agents licensed by the IA are exempt from MSO licensing.
Who is eligible:
According to the AMLO, an MSO license can be granted by the Commissioner of Customs and Excise to any applicant as long as the following conditions are met:
If the applicant is an individual, each individual and the ultimate owner must be a fit and proper person to operate a money service.
If the applicant is a business partnership, each partner and ultimate owner of the partnership must be a fit and proper person to operate a money service
If the applicant is a corporation, each director and ultimate owner of the corporation must be a fit and proper person to be affiliated with the business and to operate a money service.
All applicants for the MSO License must complete a form of fit and proper person declaration.
What are the requirements of a Hong Kong MSO license
In order to attain MSO authorization following requirements have to be complied with:
- Supporting documents of the applicant’s particulars, such as business registration certificate and certificate of incorporation;
- Supporting documents of particulars of each premises, such as a tenancy agreement and floor plan;
- Supporting documents of particulars of individual partner, director or owners of the applicant business, known as Fit and Proper Person Declaration Forms;
- Authorization letter signed by all partners or board of directors authorizing the application.
An MSO license can be obtained by a Hong Kong-registered company with limited and unlimited liability, as well as a foreign one, this means that it can be obtained by both a resident and a non-resident.
A company wishing to obtain an MSO license must pass a special test that is aimed at identifying unreliable or corrupt people.
After that, an obligatory requirement is that the company must register the premises at a specific address. In such a room, meetings with partners and clients are held, questions about the main activity are resolved and advertising activities are carried out. And the work must be under the control of the licensee (landlord or tenant). The choice of premises must be approved by a representative of the Customs and Excise Department.
The management of a company wishing to engage in financial transactions submits a certain package of documents to the company, which will deal with obtaining a license and pays a fee for filing an application with the Customs and Excise Department.
After that, a special interview is held and a special form is issued for entering other necessary information. Usually, the company dealing with the matter of obtaining a license accompanies the applicant at all stages starting with its registration until the license is obtained. The main documents for obtaining an MSO license are information about the company, and its members, confirming the office address, business plan, and related AML policies. It must be remembered that a bankrupt company, not reinstated in rights, and also having managers with a criminal record of any nature, cannot obtain a license.
The validity of a Hongkong MSO License:
The validity of a Hong Kong MSO (Money Service Operator) license typically depends on the specific terms and conditions set by the regulatory authority, which is the Hong Kong Customs and Excise Department (C&ED) in the case of MSO licenses.
As of my knowledge cutoff in September 2021, the initial validity period for an MSO license in Hong Kong is typically two years. After the initial period, the license can be renewed for subsequent periods, usually for a duration of two years as well.
It’s important to note that the licensing regulations and requirements may be subject to change over time. Therefore, it is recommended to refer to the official website of the Hong Kong Customs and Excise Department or consult with relevant authorities for the most up-to-date and accurate information regarding the validity and renewal process of an MSO license in Hong Kong.
In most cases, an MSO license is valid for a period of two years in Hong Kong after which the license has to be renewed. All applicants who wish to continue operating their money service must apply for a renewal before the expiry date of their existing license.
However, there are certain cases where an MSO license cannot be renewed:
If the applicant is an individual, the license ceases to be valid in the case of the death of the applicant.
If the applicant is a partner, the license ceases to be valid if the partnership is dissolved.
If the licensee is a corporation, the license ceases to be valid if the corporation is wound up.
Conclusion
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 now to know more about how to register company in Hongkong and attain MSO license in Hong Kong. Imishore’s lawyers will revert within the next 24 hours.
