Hong Kong Monetary Authority Clarifies Cryptocurrency Customer Due Diligence

The Hong Kong Monetary Authority (HKMA) is set to issue a circular to banks to clarify the doubts surrounding cryptocurrency customer due diligence. The circular is expected to share case studies and best practices for reference, and the HKMA will hold a meeting with banks and crypto institutions to discuss the “difficulty of opening a bank account.”

Regulated virtual asset service providers (VASPs) are expected to successfully open bank accounts through reasonable procedures. Banks have been expediting the handling of account opening applications due to the increasing demand from newly established companies looking to explore business opportunities. However, there have been comments about the difficulty of opening an account, with some citing the rejection of applications due to anti-money laundering reasons and perceived high risks.

The HKMA has been reminding banks to adhere to a “risk-based approach” when conducting customer due diligence and avoid unnecessary processes. The Simple Bank Account (SBA) arrangement, launched a few years ago with the encouragement of the HKMA, is an example of a risk-based approach.

SBAs are a tier of accounts derived from traditional deposit accounts and focus on the provision of basic banking services to eligible corporates based on their actual operational needs. Since the launch of the SBA arrangement in 2019, about 13,000 such accounts had been opened by banks.

Besides reminding banks to adopt a risk-based approach in conducting customer due diligence, banks must also keep abreast of latest market trends in order to meet customers’ new operational needs. The Government set out its objective of promoting the sustainable and responsible development of the virtual asset (VA) sector in Hong Kong last October.

In December, the Legislative Council amended the relevant legislation for the establishment of a comprehensive and balanced regulatory framework for VA activities to protect investors. The HKMA will issue a circular today to clarify possible misinterpretations by banks in respect of customer due diligence and share some past cases and good practices. The HKMA and the Securities and Futures Commission will jointly organise a roundtable tomorrow for the banking industry and VASPs to exchange views on account opening and other useful information.

The Government has been exploring new markets, such as the Middle East and Southeast Asia, which have promising 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. However, frontline bank staff may be less conversant in handling corporate account applications from these places or reviewing the relevant documentation. Banks do attach importance to the quality of customer experience and are expected to continue stepping up staff training on account opening and allocating additional resources as needed to capture new business opportunities.

As a regulator, the HKMA will actively participate in the formulation and implementation of international standards and provide guidance to banks from time to time to help them carry out anti-money laundering 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.

Read more:

Join us on Telegram

Follow us on Twitter

Follow us on Facebook

Follow us on Reddit

You might also like