The first thing we need to understand before digging deep into the Money Service Operation license (MSO) is the general money service in Hong Kong.
In Hong Kong, the system of money service incorporates a money-changing service and remittance service.
The money-changing service creates an exchange of currency systems that run as businesses in Hong Kong.
On the other hand, the remittance service operates by sending money abroad to places outside Hong Kong.
It also arranges for the receiving of money from abroad.
However, to operate this money service, one must obtain an MSO license.
The Customs and Excise Department (C&ED) of Hong Kong normally deals with granting the license.
MSO License Exemptions
Any person who has any interest in money service and wishes to operate in money service is required to obtain a license before operating a money service.
The Anti‐Money Laundering and Counter‐Terrorist Financing Ordinance (AMLO) also clarifies bodies exempt from a license.
Other than the government itself, the following bodies are also exempt:
- (a) an authorized institution
- a licensed corporation that operates a money service that is ancillary to the corporation’s principal business
- an authorized insurer that operates a money service that is ancillary to the insurer’s principal business
- an authorized insurance broker that operates a money service that is ancillary to the broker’s principal business
- an appointed insurance agent that operates a money service that is ancillary to the agent’s principal business
- an SVF licensee that operates a money service that is ancillary to the licensee’s principal business
- a system operator or settlement institution of a designated retail payment system that operates a money service that is ancillary to its business as a system operator or settlement institution.
You can find the full list here.
The Importance of an MSO License
Hong Kong is one of the leading prospective countries for starting and owning/operating a business.
This is why the majority of global businesses have their host firms in Hong Kong.
Several factors make it even more appealing to operate in Hong Kong, which includes:
- Low tax regime;
- Easy and quick company registration;
- Free economy;
- A strategic entrance to mainland China markets;
- A logistics hub for expansion across all of Asia;
- A business-friendly cosmopolitan.
These are just some of the benefits that come along, making Hong Kong one of the leading centers in Asia.
Money needs to come and go.
Therefore an MSO license makes the operation easier, time-efficient, legal, and convenient.
There are not many requirements for obtaining the license and compared to other countries such as Canada, obtaining it is much easier.
To obtain a license in Canada, at least one director must have a Canadian residency or a work permit, whereas, in Hong Kong, it is not a requirement to have a local director.
Eligibility Requirements
According to the AMLO, an MSO license can be granted by the Commissioner of Customs and Excise to any applicant as long as the following conditions are met:
- If the applicant is an individual, each individual and the ultimate owner must be a fit and proper person to operate a money service.
- If the applicant is a business partnership, each partner and ultimate owner of the partnership must be a fit and proper person to operate a money service
- If the applicant is a corporation, each director and ultimate owner of the corporation must be a fit and proper person to be affiliated with the business and to operate a money service.
All applicants of the MSO License must complete a Form of Fit and Proper Person Declaration.
The applicants must submit this form along with all other supporting documents to the Customs and Excise Department in Hong Kong.
Key Stages of the Application Process
The key stages of the application process are as follows:
- Completion of the application form
- Completion of the relevant annexures
- Submission of documents
- Completed application being sent to the Customs and Excise Department
- Aknowledgement of the application being received by the Customs and Excise Department
- Notice sent for any other required documents to assist the application
- Notice sent for the interview and payment of fees
- Signing the MSO License application
The Application Process Explained
The Application Process for the license will firstly require the completion of the application form, supplementary information sheet, and relevant annexures.
The applicant should also submit an (i) Business Plan; and (ii) AML/CFT (anti‐money laundering and counter‐terrorist financing policies (hereafter referred to as “AML Policy”).
More information regarding a Business Plan and AML Policy can be found here.
Once the applicant has prepared the requisite information, they must submit them with photocopies of the documents to the (C&ED).
The applicant can access the form sheet, annex, and guidelines for submitting the business plan and AML policy from the C&ED’s website here.
If the application is for a new premise to operate a money service, it is important to note that the applicant must attach two or more photographs of the inner and outer part of the office/premise.
If the applicant also has another separate premise used as a local place for storage (LPS), two or more photographs of the area must be attached.
When the applicant has failed to submit the required information or documents, the application will not be processed by the C&ED.
Nevertheless, if it has been successfully processed, the applicant will be asked for an interview through notice.
The applicant will also receive a demand note for the payment of all required fees for the license.
Whilst being interviewed, the payments and original documents will be verified.
The applicant will go through a fit and proper person test, which is relevant in determining whether the applicant is fit to operate the money service business.
The applicant shall then sign the application and will be briefed on statutory licensing and compliance requirements.
It isn’t easy, however, to set a fixed time frame for the application process.
The process may take longer or shorter depending on multiple factors such as the collection of documents, performing the fit and proper test, etc.
How Long is an MSO License Valid in Hong Kong?
In most cases, an MSO license is valid for a period of two years in Hong Kong after which the license has to be renewed.
All applicants who wish to continue operating their money service must apply for a renewal before the expiry date of their existing license.
However, there are certain cases where an MSO license cannot be renewed:
- If the applicant is an individual, the license ceases to be valid in the case of the death of the applicant.
- If the applicant is a partnership, the license ceases to be valid if the partnership is dissolved.
- If the licensee is a corporation, the license ceases to be valid if the corporation is wound up.
What Happens if You Don’t Get an MSO License?
According to Section 29(1) of AMLO, it is a direct offense if an individual, partnership or corporation operates a money service without the appropriate license in Hong Kong.
Anyone who commits such an offense can be imprisoned for up to 6 months and be fined HK$100,000.
Can Your Application for an MSO License Get Rejected?
The Commissioner of Customs and Excise can refuse to grant an MSO license in the following cases:
- If the applicant fails to satisfy the fit and proper person test.
- If the premises used for the business are not suitable to operate a money service.
- If the application failed to provide information of a local management office and a local place of business for storage of books and records.
- If the application failed to provide information regarding the AML/CFT Policy and Business Plan.
- If the application is invalid or incomplete.
Can You Appeal a Rejection?
You can file an appeal against the Commissioner of Customs and Excise decision to the Anti-Money Laundering and Counter-Terrorist Financing Review Tribunal within 21 days of receiving the notice of rejection following an application for an MSO license.
You should also keep in mind that if your application is rejected, the fees cannot be refunded which is why you need to ensure that your first application is fully completed and that there is no missing information or documents.
What Happens After Receiving a Valid MSO License?
Once you receive your license there are certain requirements you must follow set out by the Anti-Money Laundering and Counter-Terrorist Financing Ordinance along with any other guidelines provided by the Commissioner of Customs and Excise.
These requirements include:
- Maintaining and developing an effective CFT/AML Policy to reduce Money Laundering and Terrorist Financing risks
- Ensuring that the individual, directors, partners, and all ultimate owners of the MSO License are fit and proper at all times and not just at the time of the application.
- Reporting all suspicious transactions
- Displaying the original form of the MSO License in a noticeable place at the specified premises
Final Words
Obtaining an MSO License is extremely important for anyone or any entity wishing to operate a money service.
The number one benefit of obtaining an MSO License in Hong Kong is that the country is one of the leading financial hubs in Asia and the rest of the world.
The process is extremely straightforward and quite fast compared to other licensing procedures.
Need help applying for an MSO license?
Reach out to Air Corporate at [email protected], and we’ll help your business get properly licensed ASAP.
