Finance Business

How to Get a Money Service Operator License in Hong Kong as a Foreign Investor?

Hong Kong is widely recognized as a leading global business hub, known for its free-market economy, robust financial sector, and ease of doing business. With its strategic location, low taxes, and a simple, predictable legal system, it attracts businesses and investors from around the world.

This article provides a comprehensive guide to obtaining a Money Service Operator (MSO) license in Hong Kong as a foreign investor. It covers key aspects such as regulatory requirements, the current legal landscape, and the application process.

A money service refers to money changing services (currency exchange) and remittance services (sending or receiving money across borders). Anyone looking to operate a money service business in Hong Kong must obtain an MSO license from the Customs and Excise Department (C&ED), which has been the regulatory authority for MSOs since April 1, 2012.

The regulation of money service businesses falls under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), Chapter 615, which grants enforcement powers to the authorities. This framework ensures that businesses comply with strict financial regulations to prevent illegal activities such as money laundering and terrorist financing.

What is MSO License?

A Money Service Operator (MSO) is an individual or institution engaged in money changing or remittance services. In Hong Kong, anyone wanting to operate as an MSO must obtain a MSO license from the Customs and Excise Department.

MSO services include money transfers, currency exchange, cheque cashing, and electronic money (e-money) services. However, this does not include foreign currency exchange by tourists at hotel counters, as it is considered an incidental service.

Why Hong Kong for Money Service Operator (MSO) Business?

As a global financial hub, Hong Kong attracts investors from around the world with its strong regulatory framework, investor protection, and tax benefits. Here are some key reasons why businesses and investors choose Hong Kong to set up a Money Service Operator (MSO) business:

1. Business-friendly regulatory Environment

Hong Kong’s regulatory framework provides a business-friendly environment that supports international businesses. It maintains a balance between regulatory oversight and business flexibility, making it an attractive destination for foreign investors.

2. Strategic Location

Due to its strategic location as a gateway to Mainland China and Asia, Hong Kong provides access to a vast network of financial markets and customers.

3. Low Tax Rates

Low tax rates are highly beneficial for businesses, and Hong Kong offers a tax-friendly environment with exemptions for foreign income and no sales tax. This makes it an attractive destination for global investors and businesses engaged in cross-border transactions.

4. Strong Financial Infrastructure

A strong infrastructure is essential for business growth and success. Hong Kong offers a well-developed financial infrastructure, including banks, payment platforms, and financial service providers, ensuring smooth and efficient financial operations.

5. Prime Financial Hub

Hong Kong is one of the prime financial hubs thus providing businesses to enhance their business credibility and market reach across the globe.

6. Simplified Process

The MSO license application procedure is simple and straightforward, with minimum regulatory burdens.

Benefits of Obtaining an MSO License in Hong Kong

The list of benefits of obtaining an MSO license in Hong Kong is as given below:

Access to Global Markets

• Hong Kong’s strategic location as a gateway to Mainland China and Asia provides businesses with access to a wider customer base and international financial markets.

Legal Protection

• Holding an MSO license enhances business credibility and builds trust among customers and partners, ensuring compliance with Hong Kong’s legal framework.

Compliance with Global Standards

• Businesses with an MSO license operate under international regulatory frameworks, promoting trust and transparency in financial services.

Reduced Regulatory Risk

• An MSO license ensures compliance with Hong Kong’s legal and regulatory requirements, including Anti-Money Laundering (AML) laws, helping businesses avoid legal penalties and fines.

Enhanced Business Value

• An MSO license boosts business legitimacy and credibility, attracting more clients and investors in the financial sector.

Government Initiatives

The government of Hong Kong is also actively promoting and investing towards financial and fintech service innovation. This includes MSO startups focusing on blockchain, etc.

Eligibility Criteria for MSO License

To operate a Money Service Operator (MSO) business in Hong Kong, the following eligibility criteria must be met:

1. Individual Applicant – The person must be fit and proper to be the ultimate owner and operate an MSO business.
2. Partnership Firm – Each partner and ultimate owner must be fit and proper to run an MSO business.
3. Corporation – Each director and ultimate owner must be fit and proper to be associated with the operation of an MSO business.

Requirements to Apply for MSO License in Hong Kong

The list of requirements to apply for MSO license in Hong Kong are as given below:

• Incorporation Documents – A copy of valid incorporation and corporate registration documents registered with the Companies Registry in Hong Kong.
• Proof of Identity – Passports and proof of residential address for individuals involved.
• Minimum Capital Requirement – A minimum paid-up capital of HKD 100,000 is required.
• Business Premises – A suitable office for operating the money service business, along with a local management office and a designated place for record storage.
• Fit and Proper Requirement – Both the director and ultimate owner must meet the fit and proper criteria.
• Compliance Officers – Appointment of a Compliance Officer (CO) and a Money Laundering Reporting Officer (MLRO).
• Business Plan – A detailed business plan outlining the operational model, target market, risk management strategies, and compliance mechanisms.
• Financial Statements – A copy of audited financial statements for the past three years or since the business commenced.
• AML/CFT Policy – A documented Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) policy.
• Competence Assessment – Applicants must pass a written competence assessment.
• Bank Account – A bank account specifically for operating the money service business.
• Background Check – Applicants must undergo background verification, including a criminal record check and credit history review, to assess their integrity and financial standing.

Documents Required for Application for an MSO License

The list of documents required for application for an MSO license is as given below:

1. Sole Proprietorship
   • A copy of a valid business registration certificate in Hong Kong
   • A copy of the extract of information on the Business Register

2. Partnership
   • A copy of a valid business registration certificate in Hong Kong
   • A copy of the extract of information on the Business Register

3. Local Company
   • A copy of a valid certificate of company registration in Hong Kong
   • A copy of the Memorandum and Article of Association
   • A copy of the certificate of company incorporation
   • A copy of the latest Annual Return (Form NAR1) and all documents filed with the company registry after filing the latest annual return
   • A copy of the incorporation form NNC1 (for company limited by shares) or Form NNC1G (for company not limited by shares) for newly established company.
   • A detail information regarding the group structure and percentage of the shareholdings of each group member

4. Hong Kong Resident Applicant
   • A fit and proper declaration form 3A together with Appendices I and II.
   • A copy of Hong Kong Identity card

5. Non-Hong Kong Resident
   • A fit and proper completed declaration form 3A together with appendices I and II
   • A copy of the Biodata page of the Travel documents

6. Other Requisite Documents as Specified in the Licensing Guide
   • A business plan endorsed by sole proprietor or each partner or director
   • Anti money laundering and counterterrorist financing policy endorsed by sole proprietor or each partner or director or ultimate owner.
   • A copy of the agreement or contract with each local and or foreign third party involved in the process of money service
   • A copy of the Hong Kong Identity card of CO and MLRO
   • A copy of valid employment contracts for CO and MLRO
   • A copy of residential address proof of CO and MLRO e.g. utility bills and bank statements issued within the last three months from the application date
   • Proof of bank account ownership issued by the bank concerned.  Example- A copy of a statement of the bank account held by the applicant for money service business.
   • An acknowledgement from the bank that the bank account held by the applicant is used for operating a money service business.

Key Steps to Obtain the MSO License in Hong Kong

The stepwise guide to obtaining the MSO license in Hong Kong is given below:

• Understand the Requirements

Before filing an application, foreign investors must familiarize themselves with the mandatory requirements for obtaining an MSO license in Hong Kong. These requirements include submitting a duly completed application form, maintaining a minimum paid-up capital of HKD 100,000, and having a registered physical office in Hong Kong. Additionally, applicants must meet the fit and proper test criteria and comply with Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) regulations. Understanding and fulfilling these requirements is essential before proceeding with the application.

• Prepare and Submit Documents

 In this step, the applicant must prepare all the necessary documents required for obtaining an MSO license. These include identity proof of shareholders, directors, and key personnel, a comprehensive business plan, a compliance framework, and financial statements.

Once all the documents are ready, the applicant can submit the MSO license application form along with the required documents to the Hong Kong Customs and Excise Department.

• Wait for Review and Approval

This is the stage where Hong Kong’s Customs and Excise Department, after receiving the application form for MSO license, shall conduct a detailed evaluation and review the application accordingly. Generally, this process takes 1 to 2 months but can be extended depending on the nature and complexity of the business. In this stage, the department may ask for further clarification or additional information from the applicant if required.

• Granting of License

The Customs and Excise Department, after fully satisfied with the application documents and details, will accordingly grant the MSO license. The applicant can then start its money services in Hong Kong.

Post Licensing Obligations after Obtaining MSO License

After obtaining an MSO license, businesses must adhere to various post-licensing obligations to ensure smooth operations and compliance with regulatory standards. Some of the key requirements include:

• Complying with periodic audits or inspections conducted by the Customs and Excise Department (C&ED).
• Submitting regular Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) reports to the relevant authorities.
• Maintaining comprehensive transaction records as part of AML regulatory compliance.
• Renewing the MSO license before its expiration to ensure uninterrupted business operations.
• Staying updated with regulatory changes and conducting regular reviews of business compliance programs and operational procedures to maintain good standing with the authorities.

Meeting these obligations is crucial for ensuring long-term compliance and the smooth functioning of the business.

List of Notifications of Changes in Particulars

The list of notifications of changes in particulars of the MSO license holders that must be informed to the CCE (Commissioner of Customs and Excise) are as given below:

• Change in business or corporation name
• Change in principal (Correspondence) address
• Change in Contact Information
• Change in Business Premises Information
• Change in Telephone or Fax Number
• Change in Other Businesses Operated at the Same Premises
• Change in Occupants of Mixed-Use Buildings
• Change in Particulars of Sole Proprietor, Partners, Directors, or Ultimate Owners
• Change in Partners, Directors, or Ultimate Owners
• Change in “Fit and Proper” Status
• Change in Bank Account Used for Money Service Business
• Change in Local Management Office
• Change in Local Storage of Books and Records
• Change in Compliance Officer (CO) or Money Laundering Reporting Officer (MLRO)

Obligations of MSO Licensee in Hong Kong

Some of the list of obligations of MSO licensee in Hong Kong are as given below:

1. Reporting Suspicious Transactions – A licensee must report any suspicious transactions as required under AML regulations.
2. Developing and maintaining an AML Policy – A licensee must establish an effective Anti-Money Laundering (AML) policy to mitigate risks related to money laundering (ML) and terrorist financing (TF).
3. Maintaining Fit and Proper Status – The licensee, along with any partner, director, or ultimate owner, must always meet the “fit and proper” criteria.
4. Obtaining Consent for Inspections – If operating in a mixed commercial and residential building, a licensee must obtain written consent from occupants to allow authorized inspections.
5. Displaying the License – If operating from a specified business premise, the original MSO license must be displayed in a visible location.
6. Maintaining a Local Place of Storage (LPS) – A licensee must ensure the proper storage of records and documents as required by regulations.
7. Maintaining a Local Management Office (LMO) – If the business does not operate from a fixed premise, the licensee must maintain an LMO to serve as a point of contact with the Customs and Excise Department (C&ED).
8. Senior Management Training – At least one senior management member (such as a sole proprietor, partner, or director) must have attended the required assessment.
9. Submitting Periodic Returns – A licensee must submit periodic reports to the Commissioner of Customs and Excise (CCE) in the specified format and within the required timeframe.
10. Using Proper Bank Accounts – If a bank account is used for business operations, it must be in the name of the licensee’s company, sole proprietor, partner, director, or ultimate owner.

These obligations ensure that the licensee operates in compliance with Hong Kong’s regulatory framework and maintains transparency in business operations.

Conclusion

Obtaining a Money Service Operator (MSO) license in Hong Kong as a foreign investor presents a lucrative opportunity due to the city’s business-friendly regulatory environment, strategic location, and strong financial infrastructure. However, the licensing process requires strict adherence to regulatory requirements, including compliance with the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO).

Foreign investors must ensure they meet the eligibility criteria, prepare the necessary documents, and follow the licensing process carefully. After obtaining the MSO license, businesses must comply with post-licensing obligations, such as maintaining proper records, reporting suspicious transactions, and renewing the license on time.

By successfully navigating the licensing process and ensuring ongoing compliance, foreign investors can leverage Hong Kong’s status as a global financial hub to expand their money service operations while maintaining regulatory integrity and market credibility. To get expert guidance in securing a money service operator (MSO) license in Hong Kong, visit https://enterslice.com/. 

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