Concise Guide to Money Service Operator (“MSO”) Licensing in Hong Kong

Concise Guide to Money Service Operator (“MSO”) Licensing in Hong Kong

Concise Guide to Money Service Operator (“MSO”) Licensing in Hong Kong 1400 788 Basil Hwang

Hong Kong’s vibrant financial landscape presents vast opportunities for businesses in the money service sector. Navigating the regulatory requirements for Money Service Operators (“MSO”) demands careful compliance with Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (“AMLO”).

This guide provides an overview of the key requirements, eligibility criteria, and procedures necessary for obtaining and maintaining a MSO licence.

Importance of MSO Licensing

Pursuant to the AMLO, persons engaged in remittance and currency exchange services, whether operating through physical premises, digital platforms, or mobile services, must hold a valid MSO licence. Remittance and currency exchange services are known as “money service”. A principal focus of licensing is to ensure that persons involved in these activities adhere to anti-money laundering and counter-terrorist financing (“AML/CTF”) standards.

The Commissioner of Customs and Excise (“CCE”) oversees the MSO licensing process, ensuring that operators comply with customer due diligence, record-keeping practices, and other statutory obligations.

Consequences of Non-Compliance

Operating a money service without a MSO licence constitutes an offence under the AMLO. Upon conviction:

  • On indictment, they are liable to a fine of up to HK$1,000,000 and imprisonment for up to 2 years.
  • On summary conviction, they are liable to a fine of up to HK$100,000 and imprisonment for up to 6 months.

Exemptions

Under the AMLO, certain entities and activities are exempt from the MSO licensing requirement. These exemptions include:

  1. Government Entities.
  2. Authorized Institutions under the Banking Ordinance (Cap. 155) to carry out banking businesses.
  3. Licensed corporations operating money services ancillary to their principal business, as defined in the Securities and Futures Ordinance (Cap. 571).
  4. Authorized Insurers operating money services ancillary to their principal business under the Insurance Companies Ordinance (Cap. 41).
  5. Authorized Insurance Brokers operating money services ancillary to their principal business under the Insurance Companies Ordinance (Cap. 41).
  6. Appointed Insurance Agents operating money services ancillary to their principal business under the Insurance Companies Ordinance (Cap. 41).
  7. Stored Value Facility Licensees operating money services ancillary to their principal business under the Payment Systems and Stored Value Facilities Ordinance (Cap. 584).
  8. System Operators and Settlement Institutions responsible for operating or settling transactions within designated retail payment systems under the Payment Systems and Stored Value Facilities Ordinance (Cap. 584).

 Eligibility Criteria for MSO Licence

Applicants for a MSO licence must meet the following requirements:

  • Fit and Proper Person Test: All individuals in key roles—directors, partners, and ultimate beneficial owners (holding more than 25% control), must pass this assessment to meet the required standards of integrity, competence, and compliance. Key considerations in this evaluation include whether individuals have a history of:
    • Convictions for financial crimes, money laundering, or terrorist financing.
    • Non-compliance with legal or regulatory requirements, particularly under the AMLO.
    • Personal bankruptcy or involvement in insolvency proceedings.
  • Suitability of Premises: The business must operate from premises deemed suitable for MSO activities. For mixed-use premises (both residential and commercial), written consent from all residents must be obtained to allow for CCE inspections.

Business Premises Standards

MSO operators must ensure that their business locations meet the following CCE compliance requirements:

  • Commercial Premises: Operations conducted from commercial premises must ensure unrestricted access for regulatory inspections.
  • Residential Premises: MSO may operate from residential addresses if consent is secured from all residents for inspections. Premises designated exclusively for residential use are generally ineligible.

 Note: These premises requirements form part of a broader compliance framework aimed at facilitating compliance with AMLO’s AML obligations, including due diligence and monitoring.

Application Timeline

While the CCE’s guidance is that MSO licence applications typically require approximately one month for processing, this is the CCE’s processing time only for an ideal application. Applicants should assume that the entire licensing process will take at least three months assuming all papers are in order. This timeline may vary based on documentation verification, on-site inspections, and the time needed for the Fit and Proper Person Test which ensures the applicants have no disqualifying criminal history related to financial crime, money laundering, or terrorist financing, as detailed in the Eligibility Criteria for MSO Licence section above.

Required Documentation

Applicants must submit a comprehensive set of documents as part of their MSO licence application:

  1. Completed Application Forms: Properly filled and signed.
    • Form 1: Application for a new MSO license.
    • Form 2: Application for renewal of an MSO license.
    • Form 3A/3B: Fit and Proper Person Declaration Form for individuals and corporations.
    • Form 4: Application for approval of changes, such as adding a director or ultimate owner.
    • Form 5: Application to add new business premises.
    • Form 6: Notification of changes in particulars (e.g., business name, address, or contact details).
    • Form 7: Notification of cessation of business or changes in operation at specified premises.
    • Periodic Return for Statement of Transactions: A mandatory report for licensed MSO to declare transaction data.
    • Supplementary Information Sheet for Licensed MSO: For providing additional information related to ongoing operations or compliance.
    • Application Form for Certified or Uncertified Copy of Licensee Register / Entry / Extract: To request copies of entries or extracts from the licensee register.
    • Application Form for Certification of Licensee from the Register: For obtaining official certification of licensing status from the C&ED.
  2. Business Plan: Detailed description of the business model, organizational structure, customer demographics, and AML/CTF measures.
  3. AML/CTF Policies: Policies addressing client verification, transaction monitoring, suspicious activity reporting, and high-risk client management.
  4. Tenancy Agreements: Valid proof of ownership or lease for the designated premises, with signed consent from residents for mixed-use properties.
  5. Fit and Proper Person Declarations: Confirmations from directors, partners, and key stakeholders validating their eligibility.

 Interview Process

The interview process for a MSO license involves the following key steps:

  1. Acknowledgment and Document Check: Upon submission of all requisite documents, the C&ED will acknowledge receipt and issue reminders for any outstanding items.
  2. Notice and Payment: Applicants receive a notice for an interview, along with a demand note for the application fee and the fit and proper person test. Eligible individuals will be nominated for an assessment.
  3. Interview Appointment: The applicant must attend the interview with the following:
    • Notice of appointment.
    • Payment receipt.
    • Relevant original documents.
  4. Verification and Clarification:
    • C&ED officers verify the provided documents and payment records.
    • Applicants sign the application form in the presence of C&ED officers.
    • Discussions may cover the business plan and AML/CFT policies.
  5. Briefing: Applicants are briefed on the statutory licensing and compliance obligations.

Failure to attend the interview or provide necessary clarifications may result in the rejection of the application.

 Fee Structure

Initial Application Fees as of 20 January 2025:

  • Base fee: HK$3,310
  • Additional fee per business premises: HK$2,220
  • Fit and Proper Person Test fee per individual: HK$860

Licence renewal Fees (every two years) as of 20 January 2025:

  • Base renewal fee: HK$790
  • Additional fee per business premises: HK$355
  • Fit and Proper Person Test fee per individual: HK$860

Note: Renewal applications must be submitted at least 45 days prior to licence expiry. All fees are non-refundable.

Capital Requirements

Current regulations under AMLO and guidance from the C&ED do not specify a mandatory capital requirement or minimum cash reserve for MSO operations. However, an applicant should have sufficient financial resources to carry out the money service business.

 Conclusion

Compliance with the requirements summarized above is critical for obtaining and retaining a MSO licence in Hong Kong.

Guidance from an experienced legal adviser is critical to make sure the application is properly done the first time, as a defective application on the first try could become an obstacle in subsequent attempts. Communication with the CCE by a reputable law firm will also help lend credibility to applicants and their case for licensing.

For bespoke assistance and support, contact us today.

 

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