As a professional in Hong Kong’s financial services industry, I viewed with interest the recent consultation paper from the government that landed on my mat (or rather inbox). It aims to address the deficiencies in the region’s anti-money laundering and counter-financing of terrorism regime.
No doubt spurred on by the looming Financial Action Task Force evaluation due January 2018, this consultation was nevertheless a welcome chance to counter misperceptions, rectify true deficiencies in our regulatory landscape and catch up with competing financial hubs.
Firstly, there are many good things in the consultation.
The second paper looks to increase customer due diligence and record-keeping requirements for certain non-financial businesses and professions (for example, accountants, lawyers, trust providers and corporate service providers).
This also includes a “fit and proper” test for applicants operated by the Registrar of Companies and new licensing that will affect trust or corporate service providers.
While this will add further to the regulatory burden, these measures are acceptable and will help improve Hong Kong’s credibility and standing as an international financial center.
However, there are elements that, to put it mildly, need to be rethought.
The Financial Services and the Treasury Bureau want all companies incorporated in Hong Kong to make beneficial ownership information freely available upon request (for a fee).
The reasons behind this drive are understandable — concerns over misuse of companies to facilitate tax evasion, money laundering and terrorist financing.
But there are also entirely legitimate reasons behind the need for a certain amount of secrecy when it comes to beneficial ownership, and there are better ways of addressing the concerns that some people have.
Firstly, let me highlight some benefits the current beneficial ownership regime has. Our beneficial ownership rules allow anonymity for business owners who choose to incorporate their (non-listed) company in Hong Kong.
We have found that rather than any nefarious reasons, our clients do this because they operate in a market in Asia that does not have the same robust security and rule of law as Hong Kong, and by announcing that they own a company they open themselves up to blackmail, kidnapping for ransom or worse.
These business owners have a right to operate in safety and security, and — most importantly in my opinion — they have a right to privacy.
Not only do these recommendations put forward in the consultation violate this basic right to privacy, it goes far beyond any other competing jurisdiction, reducing Hong Kong’s competitiveness.
We need to address these concerns with a scalpel, not a sledgehammer. Rather than open up beneficial ownership information to anybody and everybody, we should ensure that only authorities are able to access the information when needed.
This will give heart to the honest business owners from the region who rely on Hong Kong to provide a stable, safe environment for them to grow their company and provide jobs, and dissuade those who intend to abuse the system for illegal purposes.
Hong Kong acts as a financial hub for Asia, a region in which many nations do not share Hong Kong’s enviable rule of law and stability.
We attract entrepreneurs and business owners from across the region who look to the SAR as a place where they can operate without the hassle of government corruption, criminal monopolies or threats to their safety.
The current beneficial ownership rules allow for this, and if we are to amend them, we need to ensure we do this without alienating the honest businessman — both Hong Kong and Asia will be poorer for it.
– Contact us at [email protected]