Enhancing Anti-Money Laundering Regulation of
Designated Non-Financial Businesses and Professions
Consultation
Response from the Society of Trust and Estate Practitioners, Hong Kong branch.
3 March 2017
Division 5, Financial Services Branch
Financial Services and the Treasury Bureau
24/F, Central Government Offices
Tim Mei Avenue, Tamar
Central, Hong Kong
By email:
aml_consultation@fstb.gov.hk
Response to Consultation Paper on "Enhancing Anti-Money Laundering Regulation of
Designated Non-Financial Businesses and Professions"
We refer to the consultation paper (CP) and thank you for giving us an opportunity to comment on the
proposals contained in it.
Who are we?
By way of background, STEP was founded in the UK in 1991 to assist members who advise families
on wealth management issues generally and inter-generational wealth transfer specifically. It has
grown to more than 20,000 members from across 95 countries, affiliated with 100 branches and
chapters across the world. We have no corporate members, but our members work for corporates
such as trustees, corporate services providers, private banks as well as legal and accounting firms.
Members belong to a local branch/chapter that provides professional development and opportunities
to network at a local level. This includes the Hong Kong branch, which has 480 members who are
mostly employed by trust companies and corporate services providers. STEP’s global headquarters
are in London.
STEP's vision is to be the pre-eminent worldwide professional association for those advising families
across generations. Its mission is to help families plan their assets across generations by promoting
high professional standards, educating professionals, connecting advisors and families globally,
informing public policy and acting in the public interest. Its values comprise promoting professional
educational attainment, acting transparently, upholding professional standards, serving its members,
whatever their professional background, wherever based, and recognizing our responsibility to the
public interest.
STEP provides members with professional qualifications that are attained upon completion of courses
that require rigorous examinations. The aim is to ensure that members are appropriately qualified to
advise clients – principally high net worth individuals – with respect to investment and structuring as
well as compliance with tax, AML and CDD requirements.
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1
Do you agree with the application of a risk-sensitive approach, whereby the CDD
measures to be undertaken by DNFBPs should be commensurate with the risk
profiles of customers?
1.1
YES
2
Do you agree that DNFBPs should be subject to enhanced CDD measures when
dealing with customers presenting a high risk of money laundering or terrorist
financing?
2.1
YES
3
Do you think DNFBPs should be allowed the flexibility to undertake simplified
CDD measures on low-risk cases, with reference to the list of eligible customers
and products as specified in the AMLO?
3.1
YES
4
Do you think there are other justified addition to the specified list of
customers and products eligible for simplified CDD treatment under the AMLO by
DNFBPs? If so, what are they; and what are the justifications (please support with
statistics where applicable)?
4.1
For simplified CDD, consideration should be given to specify the "equivalent" jurisdictions
rather than rely on a "substantially similar" test.
4.2
[The AMLO will need to be amended to expand the definition of financial institution to include
registered TCSPs. Licensed money service operators are included.]
5
Do you agree that DNFBPs should be subject to a six-year record-keeping
requirement on a par with financial institutions?
5.1
YES
6
Do you agree with the proposed designation of the respective regulatory authority
for solicitors, accountants, real estate agents and TCSPs?
6.1
YES but see submission in Annex A.
6.2
We submit that the definition of TCSP (as supplemented by any guidance notes) needs to be
carefully thought out. For example we would urge that thought be given to:
(a)
TCSPs owned by solicitors and accountants;
(b)
Companies not offering services to "the public";
(c)
Executors of estates.
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7
Do you agree that, instead of introducing one new single regulatory body for
solicitors, accountants and estate agents, the prevailing investigation, disciplinary
and appeal mechanisms under the respective governing Ordinances of the
professions should be relied upon to enforce the statutory CDD and record
keeping requirements?
7.1
YES but see submission in Annex A.
8
Do you consider it necessary to introduce new criminal sanctions for noncompliance with the statutory CDD and record-keeping requirements under the
AMLO by DNFBPs?
8.1
YES
9
Do you think that the Law Society, the HKICPA and the EAA should be given
inspection and search powers similar to those available to AML regulatory
authorities for financial institutions under Part 3 of the AMLO?
9.1
YES – provided that the Law Society, HKICPA and EAA have sufficient resources.
10
Do you agree with the provision of a 90-day transitional period for existing TCSP
operators to migrate to the new licensing regime?
10.1
YES – provided that there are sufficient resources to approve the applications.
10.2
We do not think that this should be referred to as a licensing regime. Our preference is that
this should be referred to as a registration regime. See Annex A.
11
Do you think the criteria for determining the fitness and properness of TCSPs
appropriate? If not, what criteria should be included or excluded?
11.1
We think that this is appropriate for a registration system but not for a formal licensing regime.
11.2
See Annex A regarding the licensing of TCSPs.
11.3
For TCSPs which are companies, we note that the "fit and proper" test applies to each
director and the "ultimate owner" [ See section 30(3)(a)(iii) of the AMLO]. We would suggest
that "ultimate owner" be restricted to those treated as owning more than a certain amount –
say, 10%.
11.4
For TCSPs with a non-Hong Kong based corporate director we would assume that the "fit and
proper" test applies to any natural persons who are directors and /or ultimate owners of such
corporate director.[ A Hong Kong incorporated corporate director would itself be a TCSP.]
12
Do you agree with the three-year validity of a TCSP licence (renewable on
application)? If not, what should be the validity period?
12.1
We think that three year validity is appropriate – subject to available resources. Renewal
should be on a fast track basis.
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12.2
We do not think that this should be referred to as a licensing regime. This should be referred
to as a registration regime. See Annex A.
13
Do you agree that any persons operating TCSP business without a valid licence
should be liable to criminal sanctions (including a fine at level 6 and/or
imprisonment of up to six months)?
13.1
YES.
13.2
We do not think that this should be referred to as a licensing regime. This should be referred
to as a registration regime. See Annex A.
14
Do you agree with the proposed supervisory sanctions for TCSPs in respect of
non-compliance with statutory CDD and record-keeping requirements?
14.1
YES
15
Do you agree with the re-constitution of the Anti-Money Laundering and CounterTerrorist Financing (Financial Institutions) Review Tribunal to cover appeals
against future decisions of the Registrar of Companies in respect of the licensing
and disciplinary regime for TCSPs?
15.1
YES.
15.2
We do not think that this should be referred to as a licensing regime. This should be referred
to as a registration regime. See Annex A.
16
Do you agree that the threshold for determining controlling interest of beneficial
ownership under the AMLO should be revised from not less than 10% to more than
25%, to align with the future requirement under the Companies Ordinance?
16.1
YES
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ANNEX A : Licensing of trust companies in Hong Kong
1
Current position
1.1
Aside from specific provisions relating to MPF and ORSO, trust companies and companies or
individuals providing trust services in or from Hong Kong are not required to apply for
regulatory approval or licensing. We fully appreciate the timetable in respect of this CP.
However we wish flexibility to revisit this in Hong Kong.
1.2
We wish for trust business to be a licensed activity in Hong Kong. In this regard we wish the
supervision of TCSPs set out in this consultation to be referred to as registration – leaving no
doubt as to the meaning of licensed in this business sector.
1.3
There is also a registered trust company regime under Part 8 of the Trustee Ordinance
required for trust companies wishing to apply for probate or administration or to be eligible as
a court appointed trustee. This is a voluntary regime but is certainly capable of being
misconstrued as a licensing regime.
1.4
We submit that consideration be given to a consolidated licensing regime for trust companies.
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Proposal
2.1
With the exemptions set out below we would anticipate the following to apply to trust
companies:
(a)
Formal licensing;
(b)
Requirements for approval of significant shareholders;
(c)
Requirements for directors to be fit and proper to be directors of a trust company
(i)
(d)
Financial soundness and submission of accounts;
(e)
Systems and procedures to ensure proper business conduct and compliance
(i)
(f)
2.2
2.3
Looking at qualifications and experience of directors;
This is in addition to AML;
Ability of the [Regulator ] to supervise, inspect and investigate.
Possible Exemptions
(a)
Individual trustees;
(b)
Nominees;
(c)
Private trust companies [meaning companies which provide trust business to
connected persons and which do not hold themselves out to the public as carrying on
trust business].
We would suggest that a trust company be any company which acts as trustee of or which
administers an express trust.
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We hope you find our comments helpful.
queries@step.org.hk.
Please address all correspondence to
Yours sincerely,
Richard Grasby
Chairperson
Society of Trusts & Estates Practitioners, Hong Kong Branch
PO Box 8486
GPO
Hong Kong
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