Fintech in Hong Kong: A Guide to Compliance and Growth
Hong Kong is one of the largest cities that has embraced financial technologies and is increasingly progressive. Owing to the stable growth and advancements of the financial sector, Hong Kong has fostered a good fintech environment that can keep the financial industry on the right track. It is estimated that 1000 fintech companies and startups are approved in Hong Kong and the region, thus making it one of the largest fintech hubs globally. Several resources, developed infrastructure, and global connectivity have led to the creation of Hong Kong as a world financial city.
Global investors are establishing themselves in the fintech market of Hong Kong. Also, numerous business owners have confidence in the involved fintech environment of Hong Kong and have implemented their ventures in this area. People need to ensure that they are not violating any of the legal provisions of the Hong Kong legal system as it is possible to make very large amounts of money if one can pioneer a fintech business in Hong Kong,
Today, Hong Kong is a well-developed legal hub with different laws and regulations for fintech companies. Compliance with fintech is crucial in Hong Kong for startups because it ensures you are not piling up legal charges and penalties. Consequently, if the business owner does not wish to have his business entangled in any sort of legal suit, they must obey all legal provisions of the Hong Kong jurisdiction. For further details, you can read the complete article published on the website regarding the Fintech industry in Hong Kong.
Hong Kong Fintech Regulatory Body
As it turns out, fintech offers one of the biggest platforms anywhere in the world, so regulating this type of landscape is not always easy. Nevertheless, some regulatory bodies in Hong Kong have done this work, These are the SFC and HKMA. The SFC and the HKMA have stood up to the challenge and/ or have assumed the role of regulating fintech in Hong Kong. These regulations accrue transparency, security, and confidence to the customers, as given by the SFC and HKMA, to invest in the dynamic fintech market of Hong Kong.
Depending on the nature of the financial or related services you plan to deliver, fintech licenses must be obtained in Hong Kong according to the regulatory regime. Various fintech activities demand authorization from various regulators in Hong Kong, as indicated in the following tabulation. Stored value facility If your company provides payment facilities, for example, stored value facility, you must apply for an off license as provided under the payment systems and stored value facilities ordinance. If you run an enterprise involved in a money-changing business, your company and its operations must become compliant with the AMLO, and with this, it must be registered as a Money Service Operator known as MSO. Customer due diligence is also required; the transaction record must be kept.
Companies in the lending business must procure various unnecessary licenses for companies in the payment business. If you are a non-bank entity, you need a Money Lenders license as governed by The Money Lenders Ordinance. If you are operating a Peer-to-Peer (P2P) Lending platform involved in securities offerings, you must know that the securities laws will apply to you in Hong Kong.
The Securities and Futures Commission (SFC) manages Hong Kong’s virtual assets. Virtual Asset Service Providers (VASPs) must obtain a license under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO). VASPs must also adhere to record keeping, conduct customer due diligence, and comply with additional securities regulations.
The Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations are an essential part of Hong Kong’s regulatory framework. They aim to prevent the misuse of money in terrorist financing activities and money laundering. Non-compliance with the AML/CTF regulations may result in legal charges and company penalties.
The Hong Kong government has given special attention to data privacy and protection. It has introduced several data privacy and protection laws that ensure the security and privacy of data. The laws are governed by the Personal Data (Privacy) Ordinance (PDPO). Companies are obliged to comply with the laws, as repeated non-compliance may result in fines of up to HKD 1 million and imprisonment for up to five years.
Building a Strong Compliance Foundation
Another factor is that a comprehensive compliance function is a vital organ for the success and development of an organization. Compliance can, therefore, be said to be the backbone of any consequent running of a business and shield the business against possible law and image violations. Furthermore, a compliance program is something a business should have in its fundamental form because it determines the business’s position in the marketplace and the perception of it by investors and stakeholders. It enhances the probability of investments in the business and gives the business a competitive advantage.
Some of the other factors that make up a good compliance program include governance and leadership, compliance training and understanding, policies, and procedures, compliance risk evaluation, compliance monitoring and review, compliance audit, reporting, complaint and enforcement, legal compliance management, documentation and record retention and compliance program sustained and enhancement. These all together constitute a sound Compliance Model and aid a firm in operating successfully and thriving in the structure of the Hong Kong business environment. In addition, implementing the framework’s main components into the business means that the executive director and employees can manage the business’s operations while protecting the business and its reputation.
Steps Involved in Obtaining a Fintech License
Before we proceed, let me make one very clear: if you are planning to start a fintech company in Hong Kong, applying for a fintech license in Hong Kong is very straightforward. To acquire a fintech license for a company, the entrepreneurs have to attach all the necessary documents, fill in the necessary information, and pay the fee for the application. The documentation and information required for applying for a fintech license are a business plan and its summary, financial statements, certificate of incorporation, articles of association, particulars about the shareholders and directors, the products or services you offer, and many others. You may also be required to – and this depends on the type of products or services you are selling – fill in some additional documents and information to complete the registration process.
The period that is required and the cost incurred in the journey of obtaining the license in Hong Kong may in some way differ based on the structure of the business, the fintech activities, and, what is more, the products and the services being offered. The pre-application process involves market search, Business proposals, and preparations and may take 3 to 6 months. A license application may take 6 to 12 months or even more, depending on the load in the respective authorities and the specificity of your business. The local authorities may have about 3 to 6 months to consider the application, pay an inspection visit, and issue the license. It may take between one to two years and approximately 1,000,000 Hong Kong dollars to secure a fintech license in Hong Kong.
Some of the crucial aspects that need to be considered to enhance the likelihood of success of the license application include market research, business plan development, compliance program, documentation, monitoring, and the like. By following all these tips appropriately, you are in a position to effectively run the operation of your fintech startup in Hong Kong.
Growth and Expansion Strategies
Entrepreneurs must follow simple strategies to grow and expand in the competitive Hong Kong market. These strategies include identifying business opportunities, building strategic partnerships, leveraging technology for growth, and focusing on risk management techniques. These strategies can prove highly beneficial for a fintech business as they can help you capitalize on a great opportunity, meet like-minded people, use technology for technical advantage, and mitigate potential risks.
You can identify business opportunities in the Hong Kong market by conducting market research and consulting industry experts. Building strategic partnerships can help you eliminate the chances of errors in the market and provide you with what you lack in your business. Leveraging technology is important as it can save time and money for the business, which you can use for its growth in Hong Kong. Lastly, as a fintech business, it becomes necessary to focus on risk management techniques because of the potential financial fraud involved in the financial technology industry.
Start Your Fintech Company in Hong Kong
Detailed information about the fintech landscape of Hong Kong, required licenses, compliance framework, licensing process, and the timeline and costs involved in the process is given in the above article.
If you are ready to start a fintech company in Hong Kong, contact Startupr. It is one of the best in the business and offers many services to help you start and manage your fintech company in Hong Kong.