Marco Zawar MBA (VWA)/ LLM (MCI, FSFM)
Hong Kong - AEoI regulations amended to meet OECD recommendation on BO's of partnerships and trusts.
Updated: May 27, 2020
The Secretary for Financial Services and the Treasury on 15 April released a LEGISLATIVE COUNCIL BRIEF (“Brief”) to revise the current implementation for the automatic exchange of financial account information in tax matters (“#AEoI”).
The Brief considers, as a result of the #OECD peer review, two recommendations on Hong Kong’s AEoI legislative framework.
The first recommendation from the OECD considers, “that the scope of beneficial owners of partnerships should not be subject to any thresholds on the stakes held”.
Section 50A(7) of the Inland Revenue Ordinance (“#IRO”) is amended to be reflect the OECD recommendation by reducing the applicable threshold for partnerships and trusts form currently 25% to 0%.
The second recommendation concerns the AML/KYC procedures in place to identify controlling persons. The OECD advised, that the AML/KYC procedures shall be consistent with the "FATF Recommendation 10: Customer due diligence and record-keeping" and "Recommendation 25 - Transparency and beneficial ownership of legal arrangements"
Section 5 of Part 6 of Schedule 17D of the IRO are amended “to specify that for the purpose of determining the controlling persons of an account holder of a new entity account, a reporting FI may rely on information collected and maintained pursuant to AML/KYC procedures if those procedures are consistent with Recommendations 10 and 25 of the FATF Recommendations.”
- These amendments comes into operation on 1 January 2021 -
Impact on Financial Institutions
With the amendments, the AEoI AML/KYC requirements on Financial Institutions Client on-boarding and maintenance procedures become more and more complex.
Financial Institutions, that currently rely on manual procedures to oversee the beneficial ownership of partnerships and trusts, are advised to re-visit that approach and to consider the evaluation of a RegTech Solution supporting their AEoI AML/KYC requirements and to protect the organisation and employees to face potential penalties not having adequate processes in place.
About the Author
Marco is a certified Banker and holds degrees as MBA (finance and accounting) and LLM (international business and tax law) with 30+ years of working experiences achieved within the operations, tax and compliance environment of leading Commercial Banking Institutions, Private Banking Institutions, Wealth Management Organisations and Financial Service Provider located in Europe and the APAC Region.
Marco provided advisory services in the field of
· AEoI, FATCA, EU-DAC6, OECD-CRS;
· U.S Qualified intermediary regime (QI); and
· Austrian, German, Hong Kong, Swiss and U.S. International Tax Law