Opening a Bank Account in Hong Kong

Regulatory framework

Opening a bank account in Hong Kong is often a vital first step to establishing a business presence.

Contributing Advisor

Gigi Wong

Manager, Business Advisory Services

However, financial regulations in the SAR have been tightened to combat the city's designation as a tax haven. 

The regulations are:

Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO)

Primary legislation governing AML and KYC practices in Hong Kong. It outlines the obligations of financial institutions and designated non-financial businesses and professions (DNFBPs) in preventing money laundering and terrorist financing. 

Guidelines on Anti-Money Laundering and Counter-Terrorist Financing

• Published by the Hong Kong Monetary Authority for Licensed Banks;
• Securities and Futures Commission (SFC) for securities and futures sectors;

By the Customs and Excise Department for Money Service Operators

Code of Practice on Consumer Credit Data

Issued by the Office of the Privacy Commissioner for Personal Data, this document provides guidance on the handling of consumer credit data, which is relevant in the context of KYC processes.

Financial Action Task Force (FATF) Recommendations

While not specific to Hong Kong, the FATF's international standards and recommendations serve as a critical benchmark for the development of local AML and KYC regulations.

The following institutions are regulators in the financial landscape in Hong Kong:

• Hong Kong Monetary Authority (HKMA) supervises banks and other financial institutions, ensuring that they comply with AML regulations. 
• The Securities and Futures Commission (SFC) enforces the regulations within the securities and investment industry. 
• The Financial Services and the Treasury Bureau (FSTB) formulates and implements policies on AML. 
• The Insurance Authority, Customs and Excise Department, and Hong Kong Police Force (HKPF) play a crucial role in investigating and combating money laundering and terrorism financing offenses in Hong Kong, collaborating with other regulatory bodies and intelligence agencies to address financial crimes.

To comply with the above regulations, investors need help producing the required documents and conditions for maintaining fixed deposits. Many banks are expected to impose a monthly charge for failing to maintain a balance above a certain minimum amount.

It is, therefore, important for foreign investors to understand the procedures and documents required. The internal practices of the bank may vary from one to another, but generally, the following procedures can be expected:

• Most banks will require an initial appointment via phone, email, or physical visit;
• Following this, a preliminary review is usually conducted by phone interview, electronic questionnaires, or physical meeting with directors, or by sending supporting documents to the bank manager;
• If the preliminary review is passed, both parties will meet to sign the relevant bank application forms and documents, as well as pay the initial deposit and application fee:
  • Deposit differs according to the bank and is subject to change occasionally.
  • Signatories also differ according to the bank and time. While some banks accept certified and actual copies of shareholders' IDs, others require the director/shareholder/ beneficial owner/ nominee to be physically present. In most cases, banks require the same number of people attending as that form quorum in a board meeting according to the Articles of Association to satisfy their Know Your Customer procedure.
• At this stage, the bank manager will send the application for the department review, which typically takes one to two months. It is typical for the review department to require further supporting documents before finally opening a new bank account on your behalf.

The following documents are required during the application:

When a company is labeled as a 'shell company,' it undergoes increased scrutiny. In this context, a shell company is defined as a corporation that doesn't engage in business activities but funnels funds for affiliated companies. It is essential to provide the identity documents of its beneficial owners to establish a bank account for a shell company.

Once the bank account has been approved, the investor will receive the bank account number, bank cards, and access codes.

Opening a bank account online

As Hong Kong’s financial regulations follow strict anti-money laundering rules, opening a bank account online is impossible if it’s the applicant’s first one in Hong Kong.

However, once the applicant opens a bank account in Hong Kong and sets up online banking, they can open other accounts online.

In any case, businesses are advised to engage a professional service provider in Hong Kong to get everything done in advance, considering the complexity.

Money service operators

Another digital banking solution is money service operators. They usually offer services such as dedicated payment instructions, the ability to receive money via domestic or international bank transfers, and links to third-party services or currency exchange.

Virtual banks could offer a more convenient and cheaper service for foreign SMEs operating in Hong Kong. This condition is particularly true for business owners who operate subsidiaries in Hong Kong that primarily function as holding companies. However, the virtual banking industry is still growing and may not be reliable enough for companies.

Opening offshore bank accounts for Hong Kong companies

Though most Hong Kong incorporated companies choose to open their bank accounts in the SAR, in theory, they are not mandated to own a corporate bank account in Hong Kong. Instead, they can register a bank account in other jurisdictions.

Hong Kong companies can open offshore bank accounts easily in most foreign countries. Each bank stipulates detailed protocols and requirements.

When it comes to bank account options for offshore companies in Hong Kong, companies have two primary choices:

• Open business bank account with local banks: If you're an offshore company looking to establish a local bank account, be prepared for several steps. These include interviews with your company's directors and shareholders, thorough inquiries into your business activities, scrutiny of the sources of your funds, and discussions about your transaction volumes. It's advisable to seek the assistance of experienced corporate service providers or accounting firms.
• Open business bank account with offshore banks: If you're an offshore company looking to establish an offshore bank account, be prepared for several steps. These include interviews with your company's directors and shareholders, thorough inquiries into your business activities, scrutiny of the sources of your funds, and discussions about your transaction volumes. It's advisable to seek the assistance of experienced corporate service providers or accounting firms.
  • Offshore bank considerations:
    • Security: Offshore bank accounts do not have the same protection as accounts under the Financial Services Compensation Scheme (FSCS). Alternative security measures may safeguard certain offshore accounts;
    • Taxes: It's crucial to remember that you must report your income to the appropriate tax authorities and disclose any interest earned from offshore accounts;
    • Costs: Certain offshore accounts might incur a monthly fee or impose charges for international transactions, while others may not. Additional fees and expenses could also be applicable, so it's important to carefully review the terms and conditions before deciding to open an offshore account.

International and national banking institutions

As one of the top international financial centers, Hong Kong has one of the highest concentrations of banking institutions in the world, with over 70 of the largest 100 banks in the world having a presence and over 29 multinational banks having their regional headquarters in Hong Kong.

Hong Kong maintains a three-tier system of deposit-taking institutions comprising:

• Licensed banks
• Restricted license bank
• Deposit-taking companies

They are classified according to the amount and term of deposits accepted and the nature of the business and are collectively known as authorized institutions. At the end of 2022, Hong Kong had 155 licensed banks, 15 restricted licensed banks, and 12 deposit-taking companies.

Virtual banks in Hong Kong

In addition to traditional banks, another emerging option is virtual banks, which have no physical branches and focus on digital services. This concept is still very new to Hong Kong, and the HKMA only granted eight licenses for virtual banking.