On 25 April 2023, the Custom and Excise Department (“C&ED”) took disciplinary actions against a licensed Money Service Operator (“MSO”), Kwok Wui Group Limited, for breaching statutory requirements as stipulated in the Anti-Money Laundering and Counter Terrorist Financing Ordinance (Cap. 615 of the Laws of Hong Kong) (“AMLCTFO”).
Following an investigation, officers of the C&ED discovered that the MSO had:-
- failed to record the recipient’s address before carrying out sixty-nine remittance transactions;
- failed to record the identification document of an originator of one remittance transaction; and
- failed to notify the C&ED of a change in the particulars of an ultimate owner and director within the specified period of time.
For the above-mentioned contraventions, the C&ED prosecuted the MSO and took further disciplinary action against the MSO in order to send a deterrent message to the industry.
Separately, a woman was fined HK$40,000 on 28 April 2023 after being convicted of operating a money service without a valid licence. The investigation revealed that the woman was operating a remittance business without a licence using her personal bank account via a social media platform.
Another instance of enforcement actions concerning money service activities concerns a female owner of a grocery shop who was fined HK$27,000 on 12 May 2023 after being convicted of operating a money service without a valid licence. It was found that the store owner had been operating a remittance business after her application for a MSO licence was rejected.
In light of recent enforcement actions, we would like to remind readers that under the AMLCTFO, a person who wishes to operate a money service is required to apply for a MSO licence.
A “money service” is defined under Section 1 of Schedule 1 of the AMLO to mean (a) a money changing service; or (b) a remittance service. Under the same section, a money changing service means a service for the exchanging of currencies that is operated in Hong Kong as a business, but does not include such a service that is operated by a person who manages a hotel if the service:- (a) is operated within the premises of the hotel primarily for the convenience of guests of the hotel; and (b) consists solely of transactions for the purchase by that person of non-Hong Kong currencies in exchange for Hong Kong currency.
A remittance service means a service of one or more of the following that is operated in Hong Kong as a business:- (a) sending, or arranging for the sending of, money to a place outside Hong Kong; (b) receiving, or arranging for the receipt of, money from a place outside Hong Kong; and (c) arranging for the receipt of money in a place outside Hong Kong.
The maximum penalty for operators without a valid licence upon conviction is a fine of up to $1 million and imprisonment of up to two years.
The C&ED department maintains a register of MSO licensees which is accessible here: https://eservices.customs.gov.hk/MSOS/wsrh/001s1?request_locale=en
Separately, as a MSO licensee, there are numerous obligations that must be satisfied on an on-going basis. Some examples include:-
- Setting up and maintaining a local place of storage for keeping up to date records to facilitate access for inspection by C&ED officers.
- Keeping documents and records obtained as part of the customer due diligence process.
- Keeping screening records of customers and all relevant parties in a transaction including recipients and intermediaries.
- Keeping data and information obtained in connection with each transaction that the MSO carries out e.g. sending/receipt of instructions using instant messaging software, email or telephone.
- Keeping results of any analysis undertaken (e.g. enquiries to establish background and purpose of transactions that are complex and unusually large).
- Keeping records of any risk assessment undertaken.
- Keeping records and documents of all the steps, findings and results when identifying suspicious transactions.
- Keeping records of AML/CFT training provided.
Efficient and sufficient record-keeping is an essential part of effective AML/CFT compliance for MSOs, and the C&ED expects adherence with all applicable requirements under the MSO regulatory regime.
Contact us today to if you need help with an MSO licence application or if you would like to learn more about the on-going obligations of an MSO licence holder.