Implementing Risk-Based Customer Due Diligence and Staying Abreast of Market Trends to Facilitate Banking Services for Virtual Asset Service Providers (VASPs) and Emerging Markets in Hong Kong
The Hong Kong economy is showing signs of growth and many newly established companies are looking to open bank accounts in the region. However, some applicants have reported difficulty in opening accounts due to perceived high risks and anti-money laundering (AML) reasons.
The Hong Kong Monetary Authority (HKMA) has reminded banks that there is no legal or regulatory requirement prohibiting them from providing banking services to virtual assets (VA) related entities. Banks have been urged to adopt a “risk-based approach” when conducting customer due diligence (CDD) and avoid unnecessary processes that could lead to a “one-size-fits-all” approach to rejecting account opening applications.
The HKMA cites the Simple Bank Account (SBA) arrangement as a good example of the application of the risk-based approach. SBAs provide basic banking services to eligible corporates based on their actual operational needs, with lower risks associated with the lower transaction volume and narrower service scope, allowing banks to apply less extensive CDD measures.
With the emergence of new business segments, such as the VA sector and markets with promising potential, banks must keep abreast of the latest market trends to meet the new operational needs of their customers. The HKMA expects that regulated virtual asset service providers (VASPs) will be able to successfully apply for a bank account through a reasonable process, as the industry develops a better understanding of the VA industry over time.
To cope with the needs of opening accounts and to enhance related processes, the HKMA will issue a circular to clarify possible misinterpretations by banks in respect of CDD and share past cases and good practices. The HKMA and the Securities and Futures Commission will also jointly organise a roundtable for the banking industry and VASPs to exchange views on account opening.
The government has also been actively exploring new markets, such as the Middle East and Southeast Asia, which have good potential and are among the main bright spots in the global economy going forward. To attract businesses from new markets, it is crucial to have high-quality financial services, while enhancing corporates’ access to bank accounts would be one of the key priorities.
Banks are expected to continue stepping up staff training on account opening and allocating additional resources as needed to set up dedicated teams or hotlines to assist companies in the account opening process to capture new business opportunities.
As a regulator, the HKMA will actively participate in the formulation and implementation of international standards, provide guidance to banks from time to time to help them carry out AML measures in a balanced and proportionate manner. The HKMA will continue to work closely with the industry, gather feedback from the wide community, and exchange views with stakeholders to enhance customer experience.