To enhance Hong Kong's regulatory regime for combating money laundering and terrorist financing (ML/TF) in fulfilment of Hong Kong's obligations under the Financial Action Task Force, a new two-tier registration regime for dealers in precious metals and stones has been introduced under the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance 2022 for commencement on 1 April 2023.
Customs and Excise Department ("C&ED") would take charge of the regime and take enforcement actions against non-compliance cases.
Meaning of Dealers in Precious Metals and Stones ("DPMS")
Any person carries on any of the following activities by way of business:
- Those who produce precious metals or precious stones at mining operations;
- Intermediate buyers and brokers;
- Precious stone cutters and polishers and precious metal refiners;
- Jewellery manufacturers who use precious metals and precious stones; and
- Retail sellers to the public, to buyers and sellers in the secondary and scrap markets.
Articles covered in the regulatory regime
There are four types of articles:
Precious Metals
Gold, silver, platinum and 5 other metals in the platinum group, i.e. iridium, osmium, palladium, rhodium and ruthenium, in a manufactured or unmanufactured state;
Precious Stones
Diamond, sapphire, ruby, emerald, jade or pearl, whether natural or otherwise;
Precious Products
Any jewellery or watch made up of, containing or having attached to it, any precious metal or precious stone, or both.
Precious-asset-backed instruments
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 asset.
Two–tier registration regime for Dealers in Precious Metals and Stones
A two-tier registration regime for DPMS whereby any person who is seeking to carry on a business of dealing in precious metals and stones in Hong Kong and engage in transactions at or above HKD 120,000 (cash or non-cash) is required to register under either Category A or Category B with the C&ED.
For dealers who only conduct transactions under HKD 120,000, registration is not required.
Category A registrants
DPMS who intends to engage in non-cash transactions at or above HKD 120,000 in the course of business is required to register under Category A.
Register with the Commissioner of Customs and Excise
- Is required
- The registration is simple and straightforward, with an application accompanied by a business registration certificate, business addresses of all premises in Hong Kong and a declaration. The registration will remain valid for as long as the DPMS continues to stay in business, subject only to the payment of an annual fee.
AMLO’s AML/CTF requirements
- Not applicable
Category B registrants
Category B registration is applicable to DPMS who engage in any cash transaction at or above HKD 120,000.
Register with the Commissioner of Customs and Excise
- Is required
- Registrants will be subject to a fit-and-proper test for the application, and AML/CTF supervision.
- Registration will be valid for 3 years. Upon expiry, DPMS need to ensure that the fit-and-proper requirements are met in order to renew their registration.
AMLO’s AML/CTF requirements
- Need to comply with the AML/CTF obligations stipulated in Schedule 2 to the AMLO.
- DPMS are advised to have in place a set of policies and measures on AML/CTF as follows:
- Taking a risk-based approach
- Applying CDD
- Continuous monitoring of customers
- Record keeping
- Making STRs
- Internal controls
- Staff education and training
Transitional period and Penalty
Transitional period
To facilitate existing dealer's migration to the Regime, precious metals and stones dealers who have been in operation before commencement of the Regime are allowed to apply for registration within 9 months after commencement of the Regime (i.e. Apr – Dec 2023). Any person, who would like to start up a precious metals and stones business after commencement of the Regime and plan to carry out specified transactions and/or specified cash transactions, is required to register before carrying out any specified transactions and/or specified cash transactions.
Penalty
Any person, other than a registrant, carries out a specified transaction or a specified cash transaction, claims to be authorized to carry out a specified transaction or a specified cash transaction, or claims to be a registrant, commits an offence and is liable on conviction to a maximum fine of HKD 100,000 and imprisonment for 6 months.
Reference and Interpretation
The Financial Action Task Force
Financial Action Task Force on Money Laundering (FATF) was established by the G-7 Summit held in Paris in July 1989. It aims to specialize in researching the consequence of money laundering, preventing and combating money laundering as well as coordinating international actions against money laundering. Shortly after its establishment, the Task Force, being one of the most important organizations against money laundering, issued a report containing a set of Forty Recommendations which provides a comprehensive plan of action needed to fight against money laundering.
Reference: https://www.fatf-gafi.org/
AML/CTF
Cap. 615 The Anti-Money Laundering and Counter-Terrorist Financing Ordinance
Hong Kong Customs and Excise Department ("C&ED")
The Department is the primary agency responsible for the suppression of smuggling activities and is an integral member of the Joint Police/Customs Anti-smuggling Task Force formed to combat smuggling activities at sea. The Department also acts as the front-line agency to prevent importation and exportation of any articles which are prohibited by law concerning security, public health and environmental protection or in fulfilling international obligations; as well as to perform the regulatory functions of MSOs under the AMLO.
Meaning of non-Hong Kong precious metals and stones dealer
Means any person who deals in precious metals and stones in Hong Kong if:
- the person ─
- either ─
- is an individual who does not ordinarily reside in Hong Kong; or
- is a legal person, other than an individual, that is incorporated or established outside Hong Kong and is not a registered non-Hong Kong company as defined by section 2(1) of the Companies Ordinance (Cap. 622); and
- does not have a place of business in Hong Kong; and
- either ─
- the total number of days on which the person’s precious metals and stones business is carried on in Hong Kong does not exceed 60 days in a calendar year;
Specified Transaction
Means a transaction that:
- is a transaction carried out by a person, while carrying on a precious metals and stones business, in respect of which transaction a payment or payments, of at least the amount specified in Schedule 3I in total, is or are made or received in any way or combination of ways (other than in cash) in Hong Kong, whether the transaction is executed:
- in a single operation; or
- in several operations that are linked or appear to be linked; and
- is not a specified cash transaction;
Specified Cash Transaction
Means a transaction carried out by a person, while carrying on a precious metals and stones business, in respect of which transaction a payment or payments in cash, of at least the amount specified in Schedule 3H in total, is or are made or received in Hong Kong, whether the transaction is executed:
- in a single operation; or
- in several operations that are linked or appear to be linked;