An applicant is required to have genuine intention and readiness to carry on the money service to which it was proposed in the licence application

Applicants may refer to the Ordinance and section III of the Licensing Guide for the licensing exemptions. The Commissioner will not accept any application for grant of licence if an applicant has been exempted from the MSO licensing requirements.

As prescribed by the Ordinance, in determining whether a person is a fit and proper person, the Commissioner must have regard to whether the applicant, including the sole proprietor/ ultimate owner(s)/ director(s)/ partner(s) of the company, has been convicted of offence, within or outside Hong Kong, related to the money laundering or terrorist financing (“ML/TF”) or any offence for which it was necessary to find that the applicant had acted fraudulently, corruptly or dishonestly.

Have the sole proprietor/ ultimate owner(s)/ director(s)/ partner(s) of your company previously failed to comply with any requirement or licensing condition imposed under the Ordinance?

Have the sole proprietor/ ultimate owner(s)/ director(s)/ partner(s) of your company been an undischarged bankrupt or the subject of any bankruptcy proceedings under the Bankruptcy Ordinance (Cap.6)?

Have your company and / or the director(s) of your company been in liquidation or the subject of a winding up order (or there is a receiver appointed in relation to it)?

Have your company and / or the sole proprietor/ ultimate owner(s)/ director(s)/ partner(s) of your company been subject to any administrative sanction (including revocation/ suspension of licence, disqualification/ restraint order), legal proceeding, disciplined, issuance of written warning by any competent authority in any jurisdiction?

Has your company devised an effective AML/ CFT/ CPF Systems to ensure compliance with all applicable requirements under the MSO regulatory regime? An MSO must take all reasonable measures to ensure that proper safeguards exist to mitigate the risks of money laundering/ financing of terrorism/ financing of proliferation of weapons of mass destruction (“PF”) and to prevent a contravention of any requirement under the Ordinance.

Does your company have adequate financial resources for the nature and scale of its operations, and the financial position or solvency of the company would not undermine the interest of the customers and the members of the public?

An MSO licence applicant is required to submit a business plan, so that the C&ED can have a comprehensive understanding of the applicant’s proposed money service business and its mode of operation in order to apply risk-based supervision. Applicants may refer to the Guidelines for Submission of BP for key elements and required information.

Examples of the third party:
- intermediary
- principal/agent
- third party’s payment platform
- cash courier

With regards to supporting documents on bank account, an applicant is required to furnish the C&ED with (i) proof of bank account ownership issued by bank concerned and (ii) acknowledgement from bank that the account held by applicant is used for operating money service business.

It is important for applicant to put in place a set of policy and procedures to mitigate the risks of ML/TF/PF. The AML/CFT Policy must be based on the applicant’s risk assessment and meet its particular business risk profile. Applicants may refer to the Guidelines for Submission of AML/CFT Policy for key elements and required information.

The principal function of the CO is to act as the focal point within an MSO for the oversight of all activities relating to the prevention and detection of ML/TF/PF, and providing support and guidance to the senior management to ensure that risks are adequately identified, understood and managed. Applicants may refer to the AML/CFT Guideline (For MSOs) for the requirements of CO.

An MSO should appoint an MLRO as a central reference point for reporting suspicious transactions and also as the main point of contact with the Joint Financial Intelligence Unit (“JFIU”) and law enforcement agencies. Applicants may refer to the AML/CFT Guideline (For MSOs) for the requirements of MLRO.

To comply with relevant statutory and regulatory requirements, the senior management, i.e. sole proprietor/ partner(s)/ director(s), of an MSO should have a clear understanding of risks to which it is exposed and be capable of implementing effective AML/CFT/CPF Systems that can adequately manage the relevant risks identified. In this connection, senior management of applicant is required to attend a competence assessment organised by the C&ED.

An MSO is required to develop an effective mechanism in order to comply with prior approval and notification requirements specified in Part 5 of the Ordinance.

Applicant may refer to section IV of the Licensing Guide for the examples of operation mode with and without using particular premises.

Applicant is required to provide the information of a LPS in Hong Kong, which is a physical place for keeping the full set of books and records in respect of its money service transactions.

The IRA forms the basis of the risk-based approach (“RBA”), enabling an MSO to understand how and to what extent it is vulnerable to ML/TF/PF. MSO is required to identify, assess and understand the risks to which they are exposed and take AML/CFT/CPF measures commensurate with those risks in order to manage and mitigate them effectively.

An MSO should adopt a RBA in the design and implementation of its customer risk assessment framework, and the complexity of the framework should be commensurate with the nature and size of the MSO’s business, and should be designed based on the results of MSO’s IRA.

The Ordinance defines what CDD measures are and also prescribes the circumstances in which an MSO must carry out CDD. The AML/CFT Guideline (For MSOs) provides guidance to MSOs on how they comply with the Ordinance and put in place procedures for this purpose.

An MSO should apply RBA when conducting CDD measures and the extent of CDD measures should be commensurate with the relevant risks associated with a business relationship. Where the relevant risks are high, the MSO is required to conduct EDD measures. The extent of EDD measures should be proportionate, appropriate and discriminating, and be able to be justified to the Commissioner.

An MSO must continuously monitor its business relationship with a customer by reviewing from time to time documents, data and information relating to the customer that have been obtained by the MSO for the purpose of complying with the requirements imposed under Part 2 of Schedule 2 to the Ordinance to ensure that they are up-to-date and relevant.

An MSO must continuously monitor its business relationship with a customer by— (a) conducting appropriate scrutiny of transactions carried out for the customer to ensure that they are consistent with the MSO’s knowledge of the customer, the customer’s business, risk profile and source of funds; and (b) identifying transactions that are complex, unusually large in amount or of an unusual pattern, and have no apparent economic or lawful purpose; and examining the background and purposes of those transactions and setting out the findings in writing.

An MSO is required to establish and maintain effective policies, procedures and controls to ensure compliance with the financial sanctions imposed by the United Nations Security Council and relevant legislations. The legal and regulatory obligations of MSOs and those of their staff should be well understood and adequate guidance and training should be provided to the latter.

It is vital that an MSO should be able to identify politically exposed persons (“PEPs”), terrorist suspects and possible designated parties, and detect high risk or prohibited transactions. To this end, an MSO should ensure that it maintains a database of names and particulars of PEPs, terrorists and designated parties, which consolidates the various lists that have been made known to the MSO.

It is a statutory obligation that, once knowledge or suspicion has been formed, an MSO should file an STR with the JFIU as soon as reasonably practical.
To this end, an MSO should implement appropriate AML/CFT/CPF Systems in order to fulfil its statutory reporting obligations, and properly manage and mitigate the risks associated with any customer or transaction involved in an STR.

An MSO should establish an independent audit function which should have a direct line of communication to the senior management of the MSO. The function should have sufficient expertise and resources to enable it to carry out its responsibilities, including independent reviews of the MSO’s AML/CFT/CPF Systems.

In addition to complying with the relevant requirements on CDD and ongoing monitoring, an MSO must also comply with the requirements under Division 2 of Schedule 2 to the Ordinance, which includes special requirements for wire transfers and remittance transactions.

An MSO should maintain CDD information, transaction records and other records that are necessary and sufficient to meet the record-keeping requirements under the Ordinance, AML/CFT Guideline (For MSOs) as well as other regulatory requirements, which are appropriate to the nature, size and complexity of its businesses.

An MSO should have adequate and appropriate screening procedures in order to ensure high standards when hiring employees.

Ongoing staff training is an important element of an effective system to prevent and detect ML/TF/PF activities. It is an MSO’s responsibility to provide adequate training for its staff so that they are adequately trained to implement its AML/CFT/CPF Systems.