MSO and SVF licenses in Hong Kong

MSO or SVF license in Hong Kong

We assist in the full licensing process of obtaining a MSO (Money Service Operator) or SVF (Stored Value Facilities) license in Hong Kong

If you are looking to obtain an MSO (Money Service Operator) or a SVF (Stored Value Facilities) license in Hong Kong, Advapay can offer you its legal, technical and business expertise and consulting support.

01

Application preparation, communication with the regulator, business services

Filling out an application form

Communication with regulatory authority during the application phase

Assistance in the development of a business plan

Assistance in the opening of safeguarding accounts

Company formation, staffing services

02

Preparation of legal, financial and IT documents

Legal documents – AML, KYC, IT/Security policies, etc.

Financial documentation – 3-years financial forecast, P&L statement, the flow of funds

Company operational documentation – internal policies, risk operation policies, internal audit, etc.

IT documentation

MSO (Money Service Operator) licence in Hong Kong

Any person operating a money service should be licensed with the Commissioner of Customs and Excise pursuant to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.

MSO (Money Service Operator) licence allows to provide a money service in Hong Kong either a money changing service and/or a remittance service.

Money changing service

A money changing service means a service for exchanging of currencies that is operated in Hong Kong as a business, but does not include such a service that is incidental to the main business e.g. retail business accepting foreign currencies in transactions or that is operated by a person who manages a hotel if the service:

– is operated within the premises of the hotel primarily for the convenience of guests of the hotel;
– consists solely of transactions for the purchase by that person of non‐Hong Kong currencies in exchange for Hong Kong currency

Remittance service

A remittance service means a service of one or more of the following that is operated in Hong Kong as a business:

– sending, or arranging for the sending of, money to a place outside Hong Kong;
– receiving, or arranging for the receipt of, money from a place outside Hong Kong;
– arranging for the receipt of money in a place outside Hong Kong.

The validity period of a licence

Normally, the validity period of a licence granted will be 2 years. The licensee is required to apply for renewal of the licence before expiry if the applicant wishes to continue operating a money service.

Licence application fee

The license application fee is 4000-9000 HK$, depending on availability of physical premises, number of directors/shareholders etc)

Main requirements

Personnel
At least 1 Director required. There is no set minimum number of staff. A local Compliance Officer/MLRO highly recommended.

Office
The applicant must have a permanent place of business (particular premises) or registered office in Hong Kong.

Capital requirements
No minimum capital requirements for an MSO. The share capital of the company usually starts with HK$10,000.

Fitness and Properness to be Licensed as an MSO

To qualify for a MSO license, a money service operator must demonstrate that each of the following persons is fit and proper and whether any of these persons have been convicted in Hong Kong or otherwise of a financial or criminal offence involving anti-money laundering, anti-terrorism, drugs trafficking, organized and serious crime, fraud, corruption, or dishonesty, or is an undischarged bankrupt or is in liquidation or subject to winding-up proceedings:

– if the money service operator is an individual, that individual and each ultimate owner of the business (if any);
– if the money service operator is a partnership, each partner and each ultimate owner of the partnership (if any); or
– if the money service operator is a corporation, each director and each ultimate owner of the corporation (if any).

Documentation

The following documents are required:

1. Identity proof and proof of address for all directors and shareholders

2. CV for each Director;

3. Business plan;

4. Compliance Program;

5. Organisation Chart;

6. Application forms for each corporate partner/ director / ultimate owner (where applicable);

7. Company’s proof of address.

SVF (Stored Value Facilities) licence in Hong Kong

Following the commencement of the Payment Systems and Stored Value Facilities Ordinance, the issue1 of the stored value facilities (SVF) is subject to a licensing regime administered by the Monetary Authority (MA).

The Ordinance provides the legal basis for the powers of the MA in relation to the regulation and supervision of SVF business, and provides the general principles and requirements based on which the MA will determine whether an SVF licence should be granted.

Definition of SVF (Stored Value Facilities)

A facility is an SVF if:

1) it may be used for storing the value of an amount of money that:
– is paid into the facility from time to time; and
– may be stored on the facility under the rules of the facility; and

2) it may be used for either or both of the following purposes:
– as a means of making payments for goods or services under an undertaking (whether express or implied) given by the issuer.
– as a means of making payments to another person  under an undertaking (whether express or implied) given by the issuer.
 
The above definition covers both device-based SVF and non-device based SVF.

Licensing criteria and obligations

MA may grant an SVF licence to the applicant only if the MA is satisfied that all the minimum criteria applicable

Principal business
Under an SVF licence, the applicant must issue of SVF. The applicant should not engage in business not related to the issue of SVF unless the conduct of such business is necessary for the operation of the SVF business.
 
Financial resources
The applicant must satisfy either of the following:
– its paid-up share capital is not less than HK$25 million or an equivalent amount;
– its other financial resources are equivalent to or exceed those mentioned above.
 
‘Fit and proper’ person; ‘knowledge and experience’
Each chief executive, director and controller of the applicant must be a fit and proper person. The applicant must have in place adequate systems of control to ensure that each manager of the applicant is a fit and proper person to hold the position concerned.
 
Prudential and risk management
The applicant must have in place appropriate risk management policies and procedures for managing the risks arising from the operation of its SVF business that are commensurate with the scale and complexity of the business.
 
AML/CFT measures
The applicant must have in place in the SVF scheme adequate and appropriate systems of control for preventing or combating possible money laundering or terrorist financing (ML/TF) and ensure it complies with:

– the provisions of the AMLO that are applicable to the applicant; and
– the measures (if any) promulgated by the MA, whether in the form of rules, regulations, guidelines or otherwise, to prevent, combat or detect ML/TF.
 
Management of float and SVF deposit
The applicant must:

1) have in place adequate risk management policies and procedures for managing the float and SVF deposit to ensure that there will always be sufficient funds for the redemption of the stored value that remains on the facility;

2) implement those policies and procedures; and

3) ensure that at all times the float and SVF deposit:
– is kept separate from any other funds paid to or maintained or received by the applicant; and
– is adequately protected by the measures adopted by the applicant for
protecting the float and SVF deposit.
 
Redemption of outstanding stored value
The applicant must redeem in full the total of the stored value that remains on the facility as soon as practicable after being requested by the user to do so. In this aspect, the applicant should provide users with easy access for redemption. If the redemption process is through physical channels, they should be made available at convenient and easily accessible locations.
 
Operating rules
The operating rules of the SVF scheme must be prudent and sound, having regard to the purposes of the scheme and how it is to be operated and governed.
 
Purpose and soundness of relevant scheme
The applicant must satisfy the MA that the SVF scheme will be prudent and sound, and operated prudently and with competence and in a manner that will not adversely affect the stability of any payment system in Hong Kong or the interests of the user or potential user of the SVF to which the SVF scheme relates.
 
Pay license fee
A licensee must also pay licence fee in the amount of 113020 HKD.

Application procedure

STEP 1 – Preliminary consultation with the MA.

STEP 2 – Consultation with home regulator if the parent company of the applicant is also engaging an SVF business and regulated in its country of incorporation.

STEP 3 – Completing and submitting the application form.

STEP 4 – Processing of application.

STEP 5 – Approval of application.

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