Legal Update – Anti-Money Laundering and Counter-Terrorist Financing Review Tribunal and Competence Assessment for Money Service Operators

03Aug2021

The Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Chapter 615 of the laws of Hong Kong, (“AMLO”) (formerly known as Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance) came into effect on April 1 2012.  It aims to enhance the anti-money laundering (“AML”) and counter-financing of terrorism (“CFT”) regime in respect of the financial sector. It also seeks to better align Hong Kong’s AML/CFT regime with the prevailing international standards and helps to maintain Hong Kong’s status as an international financial centre.

Anti-Money Laundering and Counter-Terrorist Financing Review Tribunal

To provide for proper checks and balances, the Anti-Money Laundering and Counter-Terrorist Financing Review Tribunal (“Review Tribunal”) is established under the AMLO to review:

  • specified decisions made under the AMLO by a relevant authority, which includes the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), the Insurance Authority (IA) and the Customs & Excise Department (“C&ED”);

  • any decision of the Commissioner on licensing matters in respect of money service operators (“MSO”); and

  • any decision of the Registrar of Companies on licensing matters in respect of trust or company service providers.  

Schedule 4 of the AMLO sets out provisions relating to the Review Tribunal, which includes that the chairperson of the Review Tribunal may, after receiving a review application, direct that a preliminary conference be held for the purposes of enabling the parties to prepare for the conduct of review, assisting the Review Tribunal to determine issues for the purposes of the review and generally securing the just, expeditious and economical conduct of the review.  A formal hearing for the review may also be directed to be held by the Tribunal, which may be dealt with by the Chairman of the Review Tribunal alone.

The appointment of the Chairperson and a panel of 11 members to the Review Tribunal was made by the Secretary for Financial Services and the Treasury. 

Money Service Operators

One of the licenses reviewed by the Review Tribunal is a MSO license. 

The C&ED is the authority for regulating the MSOs, powers of which are provided under the AMLO.

If a person wishes to operate a money service, the person is required to apply for a MSO license from the C&ED.  A money service means a money changing service, including currency exchange; or a remittance service, including sending and receiving money to and from a place outside Hong Kong.  A person needs to maintain a MSO license for operating a money service.

Fit and Proper person

Pursuant to section 30(3) of the AMLO, the Commissioner of the C&ED (the “Commissioner”) may grant or renew a MSO license only if the Commissioner is satisfied that:

  • Where the applicant is an individual, the individual and each ultimate owner is a fit and proper person to operate a money service;

  • Where the applicant is a partnership, each partner and each ultimate owner in the partnership is a fit and proper person to operate a money service; and

  • Where the applicant is a corporation, each director and each ultimate owner of the corporation is a fit and proper person to operate a money service.

In determining whether a person is fit and proper, the Commissioner will consider a variety of factors, including but not limited to:

  • Whether the person has been convicted of any of certain offences under the AMLO, United Nations (Anti-Terrorism Measures) Ordinance, Drug Trafficking (Recovery of Proceeds) Ordinance and Organized and Serious Crimes Ordinance;

  • Whether the person has a conviction in a place outside Hong Kong for an offence relating to money laundering or terrorist financing, or for which it was necessary to find that the person had acted fraudulently, corruptly or dishonestly;

  • Whether the person has persistently failed to comply with any requirement imposed under the AMLO or any regulation made by the Commissioner under section 51 of AMLO;

  • Whether the individual is an undischarged bankrupt or is the subject of any bankruptcy proceedings under the Bankruptcy Ordinance;

  • Whether the corporation is in liquidation or is the subject of a winding up order, or there is a receiver appointed in relation to it; and

  • Any other matter that the Commissioner considers relevant.

C&ED has published a Guideline on Criteria for Determining Fitness and Propriety which sets out more details in this respect.

Competence Assessment

On 4 March 2021, the C&ED announced that it will commence to implement the Competence Assessment (“Assessment”) for MSO this year.  The Assessment aims at ensuring that the senior management of the licensed MSO is equipped with fundamental knowledge and clear understanding of AML/CFT), as well as uplifting the compliance level of the industry for safeguarding the integrity of the AML/CFT regime under the AMLO.

All MSO license applicants and licensees are required to attend the Assessment.  The result of the Assessment is one of the matters which the Commissioner considers relevant in determining whether the applicant or licensee is a fit and proper person to operate the money service business. 

The Assessment will be implemented in 2 phases:

  • The Assessment will be applicable to all applications for grant of an MSO license submitted to the C&ED on or after 1 June 2021; and

  • The Assessment for applications for renewal of an MSO license will commence in the third quarter of 2021.

C&ED has published a set of Guidance Notes on the Competence Assessment for Money Service Operators which provides details of the requirements, format and scope of the Assessment.  The Licensing Guide is also revised in light of the implementation of the Assessment. 

Failure to comply with requirements in the revised Licensing Guide can result in the new or renewal license application being deemed as invalid.  If an MSO license has been granted, the licensee could be subject to suspension and revocation of license.  Some other key points of the revised Licensing Guide are:

  • The sole proprietor, any of the partners and directors of an applicant or a licensee must pass the Assessment conducted by the C&ED.

  • If none of the senior management of an applicant attends or passes the Assessment, the Commissioner may refuse to grant or renew a MSO license.

  • A licensee must ensure at least one of the members of the senior management have attended the Assessment.

Suspension or revocation of license

Pursuant to section 34 of the AMLO:

  • The Commissioner may suspend or revoke an MSO license if the licensee, or any partner, any director and any ultimate owner in relation to the licensee, is no longer a fit and proper person to operate a money service or to be associated with the business of operating a money service after the grant of a license.

  • The Commissioner will inform the licensee of the suspension or revocation of license by written notice. 

  • The licensee shall be given an opportunity to be heard before suspension or revocation of license.

  • An MSO licensee whose license is suspended or revoked may appeal against the Commissioner’s decision to the Review Tribunal within 21 days after the notice informing the decision of suspension or revocation. 

How we can help

Tanner De Witt is experienced in handling civil and criminal matters, including liaising with the C&ED and the Review Tribunal, for cases involving a suspension or revocation of an MSO license.  We have built up considerable experience on handling cases in relation to the AMLO, including issues involving suspected money laundering or non-compliance of the AML/CFT laws and regulations.

We will shortly be publishing another article to discuss issues of other licenses, regulatory and disciplinary decisions reviewed by the Review Tribunal, in respect of which we can provide advice, assistance and preparation.

Philip Swainston / Michael Kot

For urgent criminal law advice including arrests in Hong Kong, please contact:

Philip Swainston

Consultant | E-mail | 852 9466 1700

Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.