Hong Kong Consults On Beneficial Ownership Plans
Friday, January 13, 2017
Hong Kong's Financial Services and the Treasury Bureau (FSTB) has launched
public consultations on legislative proposals to increase the transparency of
corporate beneficial ownership in the city, and to enhance its regulatory regime
for combating money laundering and terrorist financing.
The two legislative proposals are intended to bring Hong Kong's regulatory
regime up to date with international requirements, as promulgated by
the Financial Action Task Force (FATF).
According to a government spokesperson, "the proposals are pertinent to
our fulfillment of the relevant FATF obligations. This will safeguard the integrity
of Hong Kong as an international financial center, and add to our credibility
as a trusted and competitive place to invest and do business."
The first proposal will amend Hong Kongs's Companies Ordinance to improve the
transparency of beneficial ownership of companies incorporated in Hong Kong.
It was said that "there are increasing international concerns over the
misuse of companies, particularly those with complex ownership and control structures,
as a way to … facilitate money laundering, or serve illicit purposes such
as tax evasion, corruption, or terrorist financing."
It was also noted that the current law in Hong Kong "does not require
a company to ascertain, keep or file information about [a company's] ultimate
beneficial owner, except in the case of a listed corporation, which is required
under the Securities and Futures Ordinance to keep a register of those individuals
or entities owning five percent or more interests in any class of voting shares
(including any beneficial owner of such interests)."
The FSTB therefore intends to amend the Companies Ordinance to require companies
incorporated in Hong Kong to obtain and hold up-to-date beneficial ownership
information for public inspection upon request. The requirement will apply to
all companies incorporated in Hong Kong under the Companies Ordinance, including
companies limited by shares, companies limited by guarantee, and unlimited companies.
A beneficial owner in relation to a company will be, for example, an individual
who directly or indirectly holds more than 25 percent of its shares; directly
or indirectly holds more than 25 percent of its voting rights; directly or indirectly
holds the right to appoint or remove a majority of its directors; or otherwise
has the right to exercise, or is actually exercising, significant influence
For the purpose of keeping accurate and timely beneficial ownership information
in accordance with the FATF recommendation, the FSTB also proposes that a company
will be required to identify and keep a "register of people with significant
control" over the company.
The second legislative proposal, to enhance Hong Kong's combating of money
laundering and terrorist financing, will involve a regulatory extension of the
current customer due diligence (CDD) and record-keeping requirements for financial
institutions, also to designated non-financial businesses and professions.
It is therefore proposed to extend the scope of the Anti-Money Laundering and
Counter-Terrorist Financing (Financial Institutions) Ordinance's CDD and record-keeping
requirements to solicitors, accountants, real estate agents, and trust or company
service providers, when they engage in specified transactions.
Public comments on either consultation are invited by the FSTB, to be received
by March 5, 2017.