Hong Kong Publishes Consultation Paper on Proposed Regulatory Requirements

The Hong Kong Securities and Futures Commission (SFC) published a consultation paper on its Proposed Regulatory Requirements for Virtual Asset Trading Platform Operators Licensed by the Securities and Futures Commission inviting comments by 31 March 2023.

Travel Rule requirements are in Appendix B of Consultation Paper, Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Corporations and SFC-licensed Virtual Asset Service Providers) in section 12.11 Virtual Assets Transfers, which we have summarised below.

• Ordering institutions will need to collect, retain and submit the required Travel Rule information
• Above the de-minimis of HKD 8,000, Ordering institutions will need to collect, and submit additional information of physical address, identity number or date of birth
• Intermediary institutions must ensure that the required information above is retained and transmitted in accordance with the rules above
• Beneficiary institutions would need to retain the required Travel Rule information
• Above the de-minimis of HKD 8,000, Beneficiary institutions are required to verify the accuracy of the beneficiary information received.

The guideline requires that Technological Solutions enable the FI to:

• Identify counterparties
• Submit required information immediately and securely

Additional considerations that the FI should take are whether the Technological Solution:

• Offers interoperability with other solution(s)
• Can submit immediately and securely, and obtain the required information for large volumes of transfers in a stable manner
• Enables the FI to implement measures and controls for effective scrutiny of VA transfers and to report suspicious transactions
• Facilitates the FI in conducting counterparty due-diligence

Counterparty Due-diligence is mandated in 12.13 VA Transfer counterparty due diligence and additional measures. Essentially, prior to any VA transfers including evaluating the AML/CFT risks, anticipating expected volumes, Travel Rule obligations and adopting risk mitigation measures as necessary.

VerifyVASP ’s solution already meets all these requirements as they are largely aligned with FATF’s Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers. However, we will be engaging with our Hong Kong clients and the rest of the industry to chart the way forward on Travel Rule compliance in Hong Kong.