Hong Kong, a global financial hub, is expanding its anti-money laundering legislation to introduce a new registration regime for dealers in precious metals and stones (DPMS), effective from April 1, 2023. This move is part of the city's ongoing efforts to strengthen its robust regulatory framework and combat money laundering and terrorist financing.
The term "dealing in PMS" is defined as conducting business in any of the following activities:
It's important to note that logistics service providers, who import or export precious metals, precious stones, or precious products as part of their regular business operations, do not fall within the definition of DPMS. This ensures that businesses that merely handle the transportation of these items, without engaging in the trading, manufacturing, or other activities listed above, are not necessarily burdened by the new regulatory regime.
The new regime introduces two categories of registrants: Category A and Category B.
Non-compliance with the new licensing regime carries significant penalties. Any person who is not a registrant and carries out transactions with a total value at or above HKD120,000 in Hong Kong may be liable to a maximum penalty of HKD100,000 fine and six months’ imprisonment. Registrants who fail to display the certificate or report a change of particulars can be punished with a maximum fine of HKD50,000.
The new requirements also impact overseas DPMS, particularly those doing business for a short period in Hong Kong, such as transacting in jewellery and gems during trade shows. Overseas DPMS are those dealers who do not ordinarily reside in Hong Kong, are incorporated outside of Hong Kong and do not register as a non-Hong Kong company, do not have a place of business in Hong Kong, and the total number of days on which they carry on business in Hong Kong does not exceed 60 days in a calendar year.
Overseas DPMS must submit a cash transaction report (CTR) to the Department for cash transactions with a total value at or above HKD120,000 carried out in Hong Kong, before the expiry of 1 calendar day after the transaction or the earliest time when the DPMS leave Hong Kong, whichever is earlier. A CTR must include business and travel information about the overseas DPMS and their representatives, information of the transaction, the buyer and its representatives.
Failure to file a CTR promptly may result in a maximum penalty of HKD50,000 fine and three months’ imprisonment. Providing a statement that omits, is false or misleading in material particular may also lead to a maximum penalty of HKD50,000 fine and six months’ imprisonment.
The transitional period for existing DPMS to comply with the new licensing requirements ends on December 31, 2023. During this period, DPMS should:
The new regulatory regime for DPMS in Hong Kong is a significant step in the city's ongoing efforts to combat money laundering and terrorist financing. It is crucial for all DPMS, both local and overseas, to understand the new requirements and take the necess4ary steps to ensure compliance. Failure to do so can result in severe penalties. As the transitional period ends on December 31, 2023, DPMS should act promptly to adjust their business processes and prepare for the new regime.