In Summer 2021, the Financial Services and the Treasury Bureau (FSTB) published the conclusions of its consultation on proposals to enhance anti-money laundering and counter-terrorist financing (AML/CFT) regulation in Hong Kong via amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). One of the goals of the amendments is compliance with the Financial Action Task Force (FATF) recommendations related to virtual asset service providers (VASPs).
The final proposal is set to be introduced to the Legislative Council in 2021; however, an exact date has yet to be set. If passed, Hong Kong's traditional AML obligations for wire transfers will be extended to all VASPs operating in Hong Kong.
Scope of the Travel Rule
The Security and Futures Commission (SFC) proposed framework covers “any person seeking to engage in the business of operating a virtual asset exchange in Hong Kong” In other words a new regulated activity (Regulated VA Activity) will cover the operation of a trading platform (VA Exchange) that:
is operated for the purpose of allowing an offer or invitation to be made to buy or sell any virtual assets (VA) in exchange for any money or any VA; and
comes into custody, control, power or possession of, or over, any money or any VA at any point in time during its course of business.
Furthermore, the above-mentioned framework mandates crypto businesses to acquire the SFC license. Businesses that are unable to obtain the license will be barred from actively marketing to the public.
To obtain the license crypto businesses will need to
Be incorporated in Hong Kong,
Complete and pass the “fit and proper” test that involves a criminal background check and AML/CFT performance history,
Appoint a minimum of 2 compliance officers.
This will not include peer-to-peer trading platforms to the extent that the actual transaction is conducted outside the platform, and the platform is not involved in the underlying transaction by coming into possession of any money or any virtual asset at any point in time.
Current regulations: USD 8000
Information to be exchanged
If the amount transferred is equal to or above $8,000 :
Originator's account number or, in the absence of such an account, a unique reference number;
Originator's address or, customer identification number or identification document number or date and place of birth;
Beneficiary's account number, in the absence of such an account, a unique reference number.
If the amount transferred is below USD 8000:
Originator's account number or, in the absence of such an account, a unique reference;
Beneficiary's account number or, in the absence of such an account, a unique reference number.
When do you need to comply?
AMLO amendments are planned to be introduced into the Legislative Council in the 2021-22 legislative session. There will then be a 180-day transitional period upon commencement of the regime to facilitate application by interested parties.