The Anti-Money Laundering and Counter-Terrorist Financing Ordinance (“AMLO”) (Cap.615) has been amended to introduce a registration regime for dealers in precious metals and stones, aiming at enhancing the regulatory regime for combating money laundering and terrorist financing (“ML/TF”). The new amendment came into force on 1 April 2023. The Customs and Exercise Department takes charge of the regime to enforce the registration requirements and supervises the anti-money laundering and counter-terrorist financing (“AML/CTF”) conduct of registrants.
Newly set up companies intend to carry out DPMS activities or existing companies engaging in DPMS activities shall pay special attention to the new registration requirements.
Regulated Activities and Articles
“Dealing in precious metals and stones” would include the following activities by way of business: trading in, importing, exporting, manufacturing, refining or carrying out any value-adding work on precious metals, precious stones or precious products; issuing, redeeming or trading in precious-asset-backed instruments; and acting as an intermediary in respect of such activities. Exception is provided for any person who carries on a logistics service business which only imports and exports precious metals, precious stones or precious products in the ordinary course of that business.
Precious metals, precious stones, precious products and precious-asset-backed instruments are defined as follows:
- Precious metal: gold, silver, platinum, iridium, osmium, palladium, rhodium or ruthenium, in a manufactured or unmanufactured state;
- Precious stone: diamond, sapphire, ruby, emerald, jade or pearl, whether natural or otherwise;
- Precious product: any jewellery and watch that is made up of, containing or having attached to it, any precious metal or precious stone, or both;
- Precious-asset-backed instrument: any certificate or instrument backed by one or more precious metals, precious stones or precious products that entitles the holder to such assets (in entirety or in part); but does not include any securities, a futures contract, any interest in a collective investment scheme, a structured product or an OTC derivative product as defined by the Securities and Futures Ordinance (Cap 571); or a virtual
Categories of Registration
Any person who is seeking to carry on a business of dealing in precious metals and stones in Hong Kong and engage in any transaction(s) (whether making or receiving a payment) with total value at or above HK$120,000 in Hong Kong is required to register with the Commissioner of Customs and Excise.
There are two categories under the registration regime:
- Any dealer who intends to engage in non-cash transaction(s) with total value at or above HK$120,000 in the course of business is required to register as a Category A registrant.
- Any dealer who is seeking to engage in cash transaction(s) with total value at or above HK$120,000 and non-cash transaction(s) with total value at or above HK$120,000 in the course of business is required to register as a Category B registrant. A Category B registrant is subject to AML/CTF supervision.
AML/CTF Obligations of Category B Registrant
- Category B registrant, when engages in any cash transaction(s) with total value at or above HK$120,000, is subject to the requirements of Schedule 2 of the AMLO (Cap. 615), such as customer due diligence (“CDD”) and record keeping. The objective is to help the registrant to determine the ML/TF risks and take appropriate AML/CTF measures to address them.
- CDD is an approving process of obtaining customers’ identifying information (e.g. Hong Kong Identity Card, passport or other travel document), recording the information and verifying who they are before transacting with them.
- The respective records shall be kept for at least 5 years after the transaction completed or the business relationship with a customer ended.
Exemptions (Note 1) :
Entities exempted from the registration requirements include:
(b) certain financial institutions that are already regulated under the AMLO (Cap.615) and whose precious metals and stones business is ancillary to their principal business;
(c) pawnbrokers which are already subject to the regulation of the Pawnbrokers Ordinance (Cap. 166); and
(d) non-Hong Kong precious metals and stones dealers (Note 2)
Note 1: Please refer to section 53ZUA of the AMLO (Cap.615) for details.
Note 2: Please refer to Non-Hong Kong precious metals and stones dealers must file a cash transaction report to the Customs and Excise Department in respect of any cash transaction/s) (whether making or receiving a payment) with total value at or above HK$120,000.
Display of Certificate
Registrants must display the certificates of registration in a conspicuous place at the related premises.
Precious metals and stones dealers who have been in operation before commencement of the registration regime on 1 April 2023 are allowed to apply for registration within the nine-month transitional period (i.e. April to December 2023)
The transitional period is not applicable to any person who would start up a business of dealing in precious metals and stones on or after 1 April 2023. Registration is required before the carrying out of any transaction(s) with total value at or above HKD120,000 (cash or non-cash).
Penalties for Non-compliance
Any dealer, other than a registrant, claims to be a registrant, claims to be authorized to carry out, or carries out any cash or non-cash transaction(s) with total value at or above HKD120,000 is liable on conviction to a maximum fine of HKD100,000 and imprisonment for six months.
Apart from criminal penalties, any registrant not in compliance with the requirements stipulated in the AMLO (Cap. 615) or any registration condition may be subject to disciplinary actions or suspension/cancellation of registration.
The above information is for reference only and does not constitute our advice. Please refer to the AMLO (Cap. 615) for detailed requirements.
Please feel free to contact us if you need any assistance.