Published by Mary Swire on 13 January 2017
Hong Kong's Financial Services and the Treasury Bureau (FSTB) has launched public consultations on legislative proposals to increase the transparency of corporate beneficial ownership in the city, and to enhance its regulatory regime for combating money laundering and terrorist financing.
The two legislative proposals are intended to bring Hong Kong's regulatory regime up to date with international requirements, as promulgated by the Financial Action Task Force (FATF). According to a government spokesperson, "the proposals are pertinent to our fulfillment of the relevant FATF obligations.
This will safeguard the integrity of Hong Kong as an international financial center, and add to our credibility as a trusted and competitive place to invest and do business." The first proposal will amend Hong Kongs's Companies Ordinance to improve the transparency of beneficial ownership of companies incorporated in Hong Kong.
It was said that "there are increasing international concerns over the misuse of companies, particularly those with complex ownership and control structures, as a way to … facilitate money laundering, or serve illicit purposes such as tax evasion, corruption, or terrorist financing."
It was also noted that the current law in Hong Kong "does not require a company to ascertain, keep or file information about [a company's] ultimate beneficial owner, except in the case of a listed corporation, which is required under the Securities and Futures Ordinance to keep a register of those individuals or entities owning five percent or more interests in any class of voting shares (including any beneficial owner of such interests)."
The FSTB therefore intends to amend the Companies Ordinance to require companies incorporated in Hong Kong to obtain and hold up-to-date beneficial ownership information for public inspection upon request.
The requirement will apply to all companies incorporated in Hong Kong under the Companies Ordinance, including companies limited by shares, companies limited by guarantee, and unlimited companies.
A beneficial owner in relation to a company will be, for example, an individual who directly or indirectly holds more than 25 percent of its shares; directly or indirectly holds more than 25 percent of its voting rights; directly or indirectly holds the right to appoint or remove a majority of its directors; or otherwise has the right to exercise, or is actually exercising, significant influence or control.
For the purpose of keeping accurate and timely beneficial ownership information in accordance with the FATF recommendation, the FSTB also proposes that a company will be required to identify and keep a "register of people with significant control" over the company.
The second legislative proposal, to enhance Hong Kong's combating of money laundering and terrorist financing, will involve a regulatory extension of the current customer due diligence (CDD) and record-keeping requirements for financial institutions, also to designated non-financial businesses and professions.
It is therefore proposed to extend the scope of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance's CDD and record-keeping requirements to solicitors, accountants, real estate agents, and trust or company service providers, when they engage in specified transactions. Public comments on either consultation are invited by the FSTB, to be received by March 5, 2017.
See more here.