It is a surprising fact to many that bureau de change are regulated by the Customs and Excise Department (C&E) in Hong Kong.

The regulatory regime was introduced in 2011 in response of a report by an international body tasked with reviewing anti-money laundering regulation, Financial Action Task Force (FATF) on Hong Kong: see relevant LegCo Brief.

At the time of the report, money changers and remittance agents had to register with the Police. But there was no further regulatory mechanism (e.g. to refuse registration) and this was deemed defective.

It is not entirely clear why the responsibility was transferred to the C&E, but this is what was done under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615).

Source of law and regulation

Legislation

In licensing, the main source of law seems to be the legislation (as opposed to common law or equity). There seems to be little by way of case law gloss.

Cf. the Hong Kong Court of Final Appeal decision in HKSAR v Special View [2018] HKCFA 46; FACC16/2018; (2018) 21 HKCFAR 562; [2018] 6 HKC 477, where an important issue of continued effectiveness of licence after (1) application to renew the licence within time, (2) refusal to renew the licence and (3) appeal against the refusal is considered.

Is the licence to remain in effect pending the resolution of the appeal? It seems the answer will always depend on the proper construction of the relevant legislation without more.

See also the detailed interpretation sections at Schedule I, as well as immediately preceding the provisions on the Anti‐Money Laundering and Counter‐Terrorist Financing Review Tribunal.

Both Lexis and Westlaw have provided an annotated commentary on the Ordinance, which supply references within the Ordinance.

Soft law and policy

But in practice, C&E’s actual practice and policy matter much more. A lot of materials have been published on C&E’s website, including various

  • guidelines on application of licence,
  • renewal of licence,
  • (non-exhaustive) criteria for what counts as a fit and proper person
  • the statements of disciplinary actions taken made available on its website
  • circulars explaining matters such as the assessment that MSO must sit

These policies explain that the C&E takes a “risk-based approach”, i.e. the steps taken by the MSO must be appropriate to the money laundering and terrorist financing risks of the business.

Case law of the tribunal

The ordinance establishes a specialist tribunal to hear reviews (i.e. appeals) against decisions of the C&E. Chairmen of the Tribunal must be qualified to sit as a High Court judge: the 3 chairmen appointed so far are all senior counsel practising in commercial law (Andrew Liao SC, Paul Shieh SC, (incumbent) Bernard Man SC).

The legislation provides for an appeal to the Court of Appeal. But so far the volume of cases is low and according to the tribunal website, most cases eventually settle.