Hong Kong Monetary Authority: Embrace Opportunities, Respond to Account Opening

Original: 《Embracing Opportunities • Addressing Account Opening》

Author: Ruan Guoheng, Vice President of the Hong Kong Monetary Authority

As the pandemic subsides and economic activities become more vibrant, it is believed that many newly established or overseas companies are interested in opening bank accounts in Hong Kong to seize business opportunities. In response to the strong demand for account openings, banks are working hard to process applications, while there has been an increase in opinions regarding the "difficulty of opening accounts," with some suggesting that banks refuse corporate account applications on the grounds of "anti-money laundering" and "high risk."

In light of this, we have been actively discussing with banks in recent months and have clarified that there are no legal or regulatory requirements prohibiting banks operating in Hong Kong from providing banking services to virtual asset-related institutions. At the same time, we remind banks to adhere to the "risk-based" principle when conducting customer due diligence, avoiding unnecessary procedures, and not adopting a "one-size-fits-all" approach to reject account applications.

The so-called "risk-based" approach means distinguishing risks and taking commensurate measures, rather than handling them with a "one-size-fits-all" or "risk-averse" approach. Banks must "treat customers fairly" while effectively implementing anti-money laundering measures, providing transparent, reasonable, and efficient procedures for businesses to obtain basic banking services. A few years ago, the Monetary Authority encouraged banks to launch "easy accounts" services, which is a good example of applying the "risk-based" principle.

"Easy accounts" are a layer of accounts separated from traditional deposit accounts, focusing on providing the most basic account transaction services (such as deposits, withdrawals, local and cross-border remittances) to eligible corporate clients based on their actual business needs. Since the transaction and service scope involves relatively low associated risks, the requirements for customer due diligence are also relatively simplified. Since the launch of "easy accounts" in 2019, approximately 13,000 accounts have been opened, averaging over 3,000 accounts opened each year.

New Market Highlights

In addition to reminding banks to conduct customer due diligence based on the "risk-based" principle, as the market continues to evolve and innovate, many new business areas have emerged in recent years, and banks need to stay in tune with market trends to meet new business needs of customers.

Virtual Assets

Last October, the government issued a policy declaration on the development of virtual assets in Hong Kong, clearly stating the goal of promoting sustainable and responsible development of the industry. The Legislative Council also passed amendments to relevant legislation in December last year, establishing a comprehensive and balanced regulatory framework for virtual asset activities to protect investors. Undeniably, some virtual asset businesses may carry higher money laundering risks, and it is understandable that banks exercise caution when processing account applications from related enterprises. However, as the regulatory framework for virtual asset activities in Hong Kong is gradually implemented and various regions strengthen regulations based on international standards, banks' understanding of the virtual asset industry is also deepening. We anticipate that regulated virtual asset service providers will gradually succeed in opening bank accounts through reasonable procedures.

To address the demand for account openings and streamline processes, the Monetary Authority will issue a circular to banks later today to further clarify some industry questions regarding customer due diligence and share some processed cases and best practices for industry reference. Additionally, the Monetary Authority will hold a roundtable meeting tomorrow with the Securities and Futures Commission to engage directly with the banking industry and some virtual asset-related institutions to discuss the "difficulty of opening accounts" and share useful information.

Developing Potential Markets

In addition to emerging industries, the Hong Kong government has recently been actively "going out" to explore new markets, such as the Middle East and Southeast Asia. These markets have significant potential and are one of the highlights of future global economic growth. The Chief Executive visited Thailand last November and several Middle Eastern countries this February. To attract enterprises from new markets, it is essential to provide good financial support, and facilitating the opening of bank accounts is naturally an important part of this.

As we have had relatively little contact with these markets in the past, frontline bank staff may feel unfamiliar when handling account applications from enterprises in these regions, making it complicated to assess the relevant information of these enterprises. Some frontline staff may even attempt to dissuade customers to avoid trouble. We understand that banks value customer experience and also focus on opportunities in these new markets. We hope that banks will continue to enhance staff training on account applications and allocate more resources to establish dedicated teams or hotlines when necessary to help enterprises streamline account opening procedures, thereby capturing new business opportunities.

I firmly believe that banking services will evolve with market developments. As a regulatory body, the Monetary Authority will actively participate in the formulation and implementation of international standards, regularly provide guidance to assist banks in implementing anti-money laundering work in a balanced and commensurate manner, and will continue to maintain close communication and cooperation with the industry, listen to societal voices, and engage with different stakeholders to enhance customer experience.

Hong Kong Monetary Authority

Vice President

Ruan Guoheng

April 27, 2023