ELIGIBILITY CRITERIA FOR MSO LICENSES IN HONG KONG

Businesses must fulfil certain qualifying requirements to apply for an MSO license in Hong Kong. These standards guarantee that MSOs follow the law and moral principles and aid in the prevention of financial crimes including money laundering and the funding of terrorism.

1. Legal Business Entity
   To apply for an MSO license in Hong Kong, the applicant must be a legally registered business entity. This means that the business must be incorporated in Hong Kong, and it must have a registered office within the city. Common types of entities that can apply include Limited Liability Companies (“LLC”), Public Limited Companies (“PLC”), or Private Companies. In addition to the incorporation requirements, the business must possess a valid business registration certificate issued by the Hong Kong Inland Revenue Department. This certificate serves as proof that the company is authorized to conduct business activities within Hong Kong.
   
   
2. Compliance with AML/CTF Regulations
   A fundamental criterion for obtaining an MSO license in Hong Kong is the company’s compliance with Anti-Money Laundering (“AML”) and Counter-Terrorist Financing (“CTF”) regulations. These regulations are crucial in ensuring that money services are not misused for illegal activities. The applicant must implement a comprehensive AML and CTF framework that includes procedures such as Customer Due Diligence (“CDD”) to verify the identity of customers (commonly through KYC checks), and Transaction Monitoring to detect and report suspicious activities. Additionally, MSOs are required to maintain detailed records of transactions for at least five years and promptly report suspicious transactions to the relevant authorities. To demonstrate compliance, the business must establish a compliance program that includes a dedicated compliance officer and ensure that employees are regularly trained in AML/CTF procedures.
   
   
3. Adequate Financial Resources
   Applicants for an MSO license must demonstrate that they have sufficient financial resources to operate their money services effectively. While Hong Kong does not have a fixed minimum capital requirement, businesses must show that they possess adequate funds to cover their operational expenses, manage cash flow, and address risks associated with their services. To support this, MSOs may be required to submit audited financial statements, which verify that the business has the financial stability necessary to fulfil its obligations and sustain its operations.
   
   
4. Operational and Technological Capabilities
   An MSO must have the necessary infrastructure in place to securely handle financial transactions and safeguard customer data. This includes having secure IT systems that are capable of processing transactions safely. These systems should incorporate encryption, fraud detection, and robust data protection protocols. Additionally, MSOs must establish effective risk management systems to identify, assess, and mitigate any operational, financial, or compliance-related risks. Internal controls, regular auditing procedures, and frequent operational reviews are essential components of a comprehensive risk management framework.
   
   
5. Fit and Proper Test for Directors and Key Personnel
   The directors and senior management of the business must pass a fit and proper test, which ensures that the individuals leading the MSO are reputable and competent. This involves conducting background checks on key personnel to assess their suitability for the role. The authorities will review whether the directors or management have any criminal records, especially related to financial crimes, or any history of financial misconduct. In addition to the background checks, the management team should possess relevant experience in the financial industry, with a deep understanding of financial services, the regulatory environment, and risk management practices.
   
   
6. Physical Office and Premises
   An MSO in Hong Kong must maintain a physical office in the city. The office location should be easily accessible for regulatory inspections and capable of handling the business’s operations. It must be equipped with the necessary facilities to conduct financial transactions and store customer records securely, in compliance with legal requirements. This ensures that the MSO has the infrastructure to meet operational needs while complying with regulatory standards.
   
   
7. Application Process and Fees
   Once the eligibility criteria are met, the business can proceed with the application process for the MSO license. The process involves completing the application form, which must be submitted to the Customs and Excise Department (“C&ED”). The form will require details about the business, including its ownership structure, management, and operations. Along with the application, the business must submit supporting documents, such as financial statements, business registration certificates, and compliance policies. An application fee is also required, and the amount may vary depending on the nature of the business. The C&ED will review the application and conduct due diligence checks before issuing the MSO license. If approved, the business will receive the license to operate as a money service provider in Hong Kong.
   
   
8. Ongoing Compliance and Renewal
   After the MSO license is granted, the company is required to maintain ongoing compliance with the regulatory requirements. This includes undergoing periodic audits and inspections by the C&ED to ensure continued adherence to the regulations. Additionally, the MSO must apply for license renewal before the expiration of the current license. Regular reviews and updates to the business’s compliance programs and operational procedures are essential to ensure that the MSO remains in good standing with the authorities.