Hong Kong TCSP Companies: Essential Responsibilities and Obligations You Must Know

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Table of contents What is a TCSP Licensed Company? Introduction to the Anti-Money Laundering and Counter-Terrorist Customer Due Diligence (CDD) Conclusion

In Hong Kong’s financial and business environment, Trust or Company Service Providers (TCSPs) play a pivotal role. With the Hong Kong government strengthening its regulations to combat money laundering and terrorist financing to maintain the city’s status as an international financial hub, the legal responsibilities of TCSPs have become increasingly significant. This article will delve into the definition and responsibilities of TCSPs, an introduction to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), and the key aspects of customer due diligence (CDD).

1. What is a TCSP Licensed Company?

A TCSP licensed company provides trust or company services, offering various services to clients, including:

• Company formation
• Acting or arranging for others to act as company secretary, director, or partner
• Providing a registered office, business address, correspondence address, or administrative address
• Acting or arranging for others to act as a trustee
• Acting or arranging for others to act as a nominee shareholder

Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), as of March 1, 2018, all trust or company service providers operating in Hong Kong must apply for a TCSP license from the Companies Registry to comply with the local legal and regulatory requirements.

Responsibilities of TCSP Licensed Companies:

Before establishing a business relationship with a client, a TCSP licensed company must conduct customer due diligence (CDD). If the client refuses to cooperate, the service provider has the right to terminate the service immediately. The CDD process must adhere to Hong Kong’s relevant laws, including the AMLO and the Companies Ordinance.

2. Introduction to the Anti-Money Laundering and Counter-Terrorist

Financing Ordinance (AMLO) The AMLO is one of Hong Kong’s primary laws aimed at combating money laundering and terrorist financing. It is designed to:

• Strengthen Hong Kong’s legal framework against money laundering and terrorist financing
• Enhance the transparency of the financial system
• Align with international standards, particularly the recommendations of the Financial Action Task Force (FATF)

Compliance with Regulatory Requirements: Licensed entities are required to assess the risks posed by all clients and implement appropriate due diligence measures accordingly. Violations of the AMLO may result in serious legal consequences for license holders, including fines and the revocation of licenses.

TCSP Licensees Must Comply with a Series of Regulatory Requirements, Including:

• Establishing and implementing effective anti-money laundering (AML) and counter-terrorist financing (CTF) policies and procedures
• Appointing a compliance officer responsible for overseeing the company’s operations
• Conducting regular risk assessments to identify and manage potential risks of money laundering and terrorist financing
• Maintaining comprehensive records for regulatory review
• Reporting any suspicious transactions to the appropriate authorities in a timely manner

3. Customer Due Diligence (CDD)

CDD is a core responsibility of TCSPs, designed to:

• Verify the identity of clients
• Understand the nature of the client’s business
• Assess the client’s background and source of funds
• Identify potential risks associated with transactions

During the CDD process, TCSPs must identify and verify the client’s identity, understand the purpose of the business relationship, and continuously monitor the relationship. Based on the risk assessment, simplified CDD measures may be applied to low-risk clients, while enhanced scrutiny is required for high-risk clients.

In Conducting CDD, TCSPs Must:

• Collect the client’s basic information
• Identify and verify ownership structures, company registration details, etc.
• Understand the client’s business activities, operating model, and industry characteristics
• Determine the source of the client’s funds

Risk Factor Analysis

A risk-based approach is adopted for CDD, with assessments based on factors such as:

• Client background (e.g., politically exposed persons)
• Complexity of the business nature
• Vulnerability of the client’s profession or industry to money laundering
• Geographical location (e.g., high-risk jurisdictions)
• Type of products or services offered
• Sanctions list checks

Based on the risk-based assessment, simplified or enhanced CDD measures are applied:

• Simplified Due Diligence: Applied to low-risk clients, such as publicly listed companies or government entities
• Enhanced Due Diligence: Applied to high-risk clients, such as politically exposed persons (PEPs) or clients from high-risk countries or regions

4. Conclusion

TCSPs play a critical role in Hong Kong’s business ecosystem and must comply with the AMLO, particularly in conducting customer due diligence. As global standards for AML and CTF continue to evolve, TCSPs must keep their knowledge and practices up to date to provide high-quality services while effectively managing risks. By implementing internal control systems, regularly training employees, and conducting periodic risk assessments, TCSPs contribute to the stability and prosperity of Hong Kong’s financial system. OneStart Business Centre is a licensed TCSP in Hong Kong . Entrepreneurs can choose from a variety of services, streamlining company registration, secretary services, business address leasing, virtual office services, and more. Please feel free to call or WhatsApp (852) 3575 6888 to our OneStart Business Consultant.