Companies Registry provides answers to some frequently asked questions
In 2018 Hong Kong’s anti-money laundering and counter-terrorist financing regulatory regime will undergo mutual evaluation by fellow Financial Action Task Force member jurisdictions. In order to fulfil Hong Kong’s obligations as a member of the Financial Action Task Force and to enhance Hong Kong’s regulatory regime for combating money laundering and terrorist financing, a new licensing regime for trust or company service providers (TCSPs) and new requirements on the keeping of Significant Controllers Registers by companies came into operation on 1 March 2018 following the passage of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Ordinance 2018 (AML Amendment Ordinance) and the Companies (Amendment) Ordinance 2018 (the Companies Amendment Ordinance) on 24 January 2018.
This article will answer some frequently asked questions (FAQs) on these two pieces of legislation, which extend the reach of existing legislation, previously affecting financial institutions, to include accountants and TCSPs among other designated non-financial businesses and professions.
The AML Amendment Ordinance
Under the AML Amendment Ordinance, TCSPs are required to apply for a licence from the Registrar of Companies (Registrar) and satisfy a “fit-and-proper” test before they can provide trust or company services as a business in Hong Kong. The Ordinance also requires accounting professionals, legal professionals, estate agents and TCSPs conducting certain specified transactions to comply with the statutory customer due diligence and record-keeping requirements under the Anti- Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). To avoid regulatory overlap, exemption from the new licensing requirements for TCSPs is given to, among others, accounting professionals who are subject to the regulation of the Hong Kong Institute of Certified Public Accountants (the Institute) under the Professional Accountants Ordinance (Cap. 50) (PAO).
Companies Registry has prepared the following FAQs to facilitate a better understanding of the major requirements under the AML Amendment Ordinance.
Who are “accounting professionals”?
An accounting professional means:
a) A certified public accountant or a certified public accountant (practising), as defined by section 2(1) of the PAO;
b) A corporate practice as defined by section 2(1) of the PAO; or
c) A firm or certified public accountants (practising) registered under Part IV of the PAO.
When accounting professionals engage in certain specified transactions, they are required to comply with the anti-money laundering and counter-terrorist financing (AML/CTF) requirements, what are those transactions?
An accounting professional will have to comply with the AML/CTF requirements when they, by way of business, prepares for or carries out for a client a transaction concerning one or more of the following:
a) The buying or selling of real estate and/or business entities;
b) The managing of client money, securities or other assets;
c) The management of bank, savings or securities accounts;
d) The organization of contributions for the creation, operation or management of corporations;
e) The creation, operation or management of legal persons or legal arrangements; and
f) The provision of a trust or company service specified in section 1 of Part 1 of Schedule 1 to the AMLO.
What are the Statutory Customer Due Diligence and record-keeping (CDD) requirements?
The CDD requirements are set out in Schedule 2 to the AMLO and include, in essence, customer due diligence measures that require the identification and verification of customers’ identities and the keeping of customers’ information and transaction records for at least five years.
Are there any licensing exemptions for accounting professionals under the TCSP licensing regime?
Yes. An accounting professional as defined in section 1 of Part 2 of Schedule 1 to the AMLO (see question 1) is exempted from the TCSP licensing requirements and the fit and proper test prescribed under section 53H of the AMLO.
Is a corporation which is not a corporate practice as defined in the PAO, but with some of its directors being accounting professionals, providing trust or company services to its clients in Hong Kong required to apply for a TCSP licence?
Yes, the corporation is required to apply for a TCSP licence from the Registrar to carry on a trust or company service business that falls within the meaning of “trust or company service” as set out in section 1 of Part 1 of Schedule 1 to the AMLO. Even if all the directors of the corporation are accounting professionals, the corporation is still required to apply for a TCSP licence for carrying on such a trust or company service business. The corporation, being a TCSP licensee, is subject to the regulatory regime of the Registrar. However, the Registrar will not conduct a fit and proper test on an ultimate owner or a director of the corporation who is an accounting professional as the application of Part 5A of the AMLO to an accounting professional is excluded by section 53B of the AMLO.
The Companies Amendment Ordinance
The Companies Amendment Ordinance requires a company incorporated in Hong Kong to ascertain the individuals and legal entities that have significant control over the company, and maintain a significant controllers register which contains the required particulars of registrable persons and registrable legal entities, for inspection by law enforcement officers upon demand. The following FAQs are to facilitate a better understanding of the new requirements under the Companies Amendment Ordinance.
Is it necessary for a company to keep a significant controllers register if it has no significant controller?
Yes, if the company knows that it has no significant controller, it must state this fact in the significant controllers register.
In the case of a small private company with only one shareholder (also being the beneficial owner and sole director), if the person has informed the company that he/she is the significant controller and has provided all his/her required particulars to the company, is it still necessary for the company to send him/her a notice?
No, if the company has already been informed of the person’s status as being its significant controller and all the required particulars have been provided to the company by the person or with the person’s knowledge, it is not necessary for the company to issue a notice to the person.
Is it necessary to deliver the significant controllers register to the Companies Registry for registration?
No, it is not required to deliver the significant controllers register to Companies Registry for registration but the register must be kept at the company’s registered office or a place in Hong Kong.
Is it mandatory to deliver a Form NR2 to the Companies Registry to report the location of the significant controllers register?
No, a company is not required to deliver a Form NR2 for registration if since its significant controllers register came into existence, the register has at all times been kept at the company’s registered office.
Furthermore, an existing company is not required to deliver the Form NR2 if since 1 March 2018, the significant controllers register has been kept together with the company’s register of members and the company has delivered to the Registrar Form NR2 in respect of its register of members.
Can a significant controller of a company be appointed as the designated representative of the company?
Yes, a significant controller can be appointed as the designated representative of a company. The two can be the same person if that person is either:
a) A director, employee or member of the company who is a natural person resident in Hong Kong; or
b) An accounting professional, a legal professional, or a TCSP licensee (i.e. a person licensed to carry on a trust or company service business in Hong Kong).
If a person is appointed as the company secretary of the holding company of a group of companies and he/she is also the employee of the holding company, can he/she be appointed as the designated representative for all the other companies within the group?
A company’s designated representative must be either (i) a director, employee or member of the company who is a natural person resident in Hong Kong or (ii) an accounting professional, a legal professional or a person licensed to carry on a trust or company service business.
If the designated representative of the holding company is not a director, employee or member of the other companies within the group, he/she needs to be an accounting professional, a legal professional or a person licensed to carry on a trust or company service business for him/her to be appointed as the designated representative of all those companies.
If the registrable legal entity is an overseas company, is it required to trace further to see if there is any person having significant control over the company?
Yes, the company has to carry out an investigation to ascertain whether there is any person having significant control over the company through the overseas company.
Is a registered non-Hong Kong company under Part 16 of the Companies Ordinance (Cap. 622) required to keep a significant controllers register?
No, a registered non-Hong Kong company is not required to keep a significant controllers register. Only a local company formed and registered under the Companies Ordinance (Cap. 622) or a former Companies Ordinance, excluding a listed company, is required to keep a significant controllers register.
This article is contributed by the Companies Registry.