Regulation of Trust or Company Service Providers in Hong Kong

Ms Ellen Chan

Deputy Principal Solicitor

Companies Registry, Hong Kong

9.3.2017

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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

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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