Plan to tighten regulation of money changers

PUBLISHED : Friday, 10 July, 2009, 12:00am
UPDATED : Friday, 10 July, 2009, 12:00am

A new licensing scheme is planned to regulate money changers and remittance agents under proposals to tighten anti-money-laundering measures and bring them into line with international standards.

Those who have criminal records or have gone bankrupt would not be qualified to be a foreign-exchange dealer or deal in money transfers, according to proposals aired yesterday.

The licensing system, if adopted, will be administered by the Customs and Excise Department and will replace the relatively looser registration regime now managed by the police.

The tightened rules form part of a package of anti-money-laundering proposals released yesterday for a three-month consultation. They include a plan for a law to give regulators more clout.

The proposals mainly deal with requirements for financial institutions to check on their customers and record-keeping of deals.

Such requirements currently fall under guidelines issued by regulators, including the Securities and Futures Commission, Monetary Authority and the Insurance Authority. But there is no specific provision for sanctions against non-compliance.

Acting deputy secretary for financial services and the treasury Angelina Kwan Yuen-yee said the move was intended to address the concerns of the Financial Action Task Force, which, in its report last year, highlighted Hong Kong's lack of legal backing and enforceable provisions against financial institutions over money-laundering activities.

The task force is an inter-governmental body that sets international anti-money-laundering standards. Hong Kong is one of its 34 members.

'We hope the new changes can help maintain Hong Kong's status as an international financial centre,' Ms Kwan said.

'We shall basically model [the licensing scheme] on the existing guidelines ... do not expect drastic changes or plentiful additional requirements when the new law is drafted. But the current registration system for money changers and remittance agents is rather loose and we want a more effective monitoring system.'

Under the proposed system, forex dealers and remittance agents will have to face a 'fit and proper' test. Customs officials will look at whether an applicant has a criminal or bankruptcy record when assessing whether to grant, renew, refuse, suspend or revoke a licence.

At present, anyone can open a shop to do forex or remittance dealings after completing business registration and registering with the police. There is no specific criteria for registration.

There are about 2,100 such dealers on the police's register.

Edwin Shiu Man-chak, chairman of the Hong Kong Money Changer and Remittance Association, expressed concern that costs may rise. He also said the government should be careful when defining what made a 'fit and proper' operator.

'We appreciate the need for Hong Kong to follow similar moves in other overseas countries. But more discussion is needed on the definition of being a fit and proper operator,' Mr Shiu said.

Ms Kwan said the government appreciated the difficulties some smaller dealers might face and it would consider allowing for a transitional period to ensure the sector was prepared before the new law took effect.

The consultation will end on October 8 and a second round is planned by the end of the year. The government aims to table a bill in the legislature in the middle of next year.

Taking note

The number of money changers registered with the police is about: 2,100