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Regulation of Trust or Company Service Providers in Hong Kong
Ms Ellen Chan
Deputy Principal Solicitor
Companies Registry, Hong Kong
9.3.2017
1
Introduction
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The Financial Action Task Force (“FATF”),
which is an inter-governmental body
established in 1989, sets international
standards on combating money laundering and
terrorist-financing.
Hong Kong has been a member of the FATF
since 1991.
The FATF Recommendations (1)
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The FATF has made 40 Recommendations.
• Recommendation 22
• Recommendation 28
• Recommendation 35
The FATF Recommendations (2)
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Recommendation 22
DNFBPs should be subject to customer due
diligence (“CDD”) and record-keeping
requirements when they engage in specified
transactions.
The FATF Recommendations (3)
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Recommendation 28
DNFBPs should be subject to effective
systems for monitoring and ensuring
compliance with AML/CFT requirements.
The FATF Recommendations (4)
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Recommendation 35
There should be a range of effective,
proportionate and dissuasive sanctions
(whether criminal, civil or administrative) to deal
with any non-compliance with AML/CFT
requirements by DNFBPs.
Proposed regulation of TCSPs
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To fulfill the FATF requirements, the Hong
Kong Government proposes to introduce a
licensing regime for trust or company service
providers (“TCSPs”) and to prescribe statutory
CDD and record-keeping requirements
applicable to TCSPs.
Main features of the Proposal (1)
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TCSPs will be required to apply for a licence
from the Registrar of Companies (“the
Registrar”) before they can provide trust or
company service as a business for the public.
Main features of the Proposal (2)
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The Registrar will keep a register of all
licensees, which will be open for public
inspection.
A person commits an offence if the person
carries on a trust or company service business
without a licence, and is liable to a fine and
imprisonment.
Main features of the Proposal (3)
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All licenced TCSPs will be required to comply
with statutory CDD and record-keeping
requirements.
The Registrar will be empowered to carry out
inspection and investigation and impose
disciplinary sanction for any non-compliance by
a TCSP.
Main features of the Proposal (4)
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The Registrar will also be empowered to
make regulations and issue guidelines in
implementing the licensing and disciplinary
regime for TCSPs.
Trust or Company Service (1)
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To provide “trust or company service” means to engage in the following specified transactions in Hong Kong:-
(a) acting as a formation agent of legal
persons;
Trust or Company Service (2)
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(b) acting as (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;
Trust or Company Service (3)
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(c) providing a registered office, business
address, correspondence or administrative
address for a company, a partnership or
any other legal person or arrangement;
Trust or Company Service (4)
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(d) acting as (or arranging for another person
to act as) a trustee of an express trust or
similar legal arrangement;
Trust or Company Service (5)
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(e) acting as (or arranging for another person
to act as) a nominee shareholder for a
person other than a company whose
securities are listed on a regulated market.
“Fit and Proper” Test (1)
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Applicants will be subject to a “fit and proper”
test. If the applicant is :
• a partnership, each partner has to be a fit
and proper person to carry on the business;
• a corporation, each director has to be a fit
and proper person to be associated with the
business.
“Fit and Proper” Test (2)
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If there is an ultimate owner in relation to the
applicant, the ultimate owner also has to be a fit
and proper person to be associated with the
business.
“Fit and Proper” Test (3)
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In determining whether a person is fit and
proper, the Registrar will take into account
factors such as :-
• whether the person has any criminal records,
in particular, those relating to money
laundering or terrorist financing or involving
fraud or dishonesty;
“Fit and Proper” Test (4)
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• whether the person is an undischarged
bankrupt, and if being a corporation, whether
in liquidation or in receivership.
Renewal of licence
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A licensee may apply to the Registrar for a
renewal of the licence.
Applicants for renewal of a licence are subject
to the same “fit and proper” test applicable to
an application for the licence.
Revocation or suspension of licence
22
The Registrar may revoke a licence or
suspend a licence for a specified period if the
Registrar considers that an individual licensee,
any partner or director or ultimate owner of a
licensee is no longer fit and proper to provide,
or be associated with, trust or company service
business.
Registrar’s approval (1)
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The Registrar’s approval is required in the
following circumstances:-
• For a licensee that is a corporation, a
person proposes to become a director of
the corporation.
• For a licensee that is a partnership, a
person proposes to become a partner in the
partnership.
Registrar’s approval (2)
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In considering whether to give the approval,
the Registrar will apply the same “fit and
proper” test as applicable to an application for
a licence.
A person who contravenes the above
requirements without reasonable excuse
commits an offence and is liable to a fine and
imprisonment.
Electronic Services
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All applications for licence, renewal of licence
and approval of prescribed matters may be
submitted to the Registrar in electronic forms.
In which cases, licences and approvals will be
issued in turn in electronic forms.
Licensee’s duty to give notifications (1)
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A licensee has the duty to notify the Registrar
if :
• there is any change in the particulars in
connection with the licensee’s applications;
• the licensee intends to cease the trust or
company service business.
Licensee’s duty to give notifications (2)
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A licensee who contravenes the above
requirements without reasonable excuse
commits an offence and is liable to a fine.
Inspection Unit
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There will be an inspection team from the
Companies Registry to carry out site visits
and inspections to monitor and ensure that
TCSPs are in compliance with the licensing
and statutory CDD and record keeping
requirements.
Disciplinary Sanction
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A licensed TCSP in contravention of the CDD
and record-keeping requirements or any
conditions of the licence may be disciplined
and subject to a range of civil sanctions,
including :-
• public reprimand;
• remedial order to remedy the contravention;
• payment of a pecuniary penalty.
Review Tribunal
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There will be a review tribunal to which any
person aggrieved by the Registrar’s decisions
in implementing the licensing and disciplinary
regime for TCSPs may appeal.
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Thank You
Companies Registry:
www.cr.gov.hk