Eltoma Corporate Services — Authorised Corporate Services Provider
Articles are provided for general informational purposes by an authorised corporate services provider and do not constitute legal advice.
After a Hong Kong company has been incorporated, compliance does not end. In practice, a private company limited by shares will often continue to rely on a Hong Kong trust or company service provider, commonly known as a TCSP, for company secretary support, registered office services, statutory filings, maintenance of company records and assistance with corporate changes.
This article builds on the earlier discussion of TCSP licensing and regulated company services. It explains what clients should expect when working with a Hong Kong TCSP and why document requests, ownership questions and periodic reviews are part of normal professional service delivery.
The article is written from the client’s perspective. Its central question is simple: why is the TCSP asking for these documents and why do compliance questions continue after incorporation?
Hong Kong’s AML/CFT framework is not limited to banks. The Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Cap. 615, imposes customer due diligence and record-keeping requirements on specified financial institutions and designated non-financial businesses and professions, including TCSPs. The Companies Registry is the regulatory body for TCSPs.
This matters because TCSPs provide access to important parts of a company’s legal infrastructure: incorporation, registered office, company secretary arrangements, statutory filings, nominee services and company records. Those services can be misused if the service provider does not understand who the client is, who controls the client, what the company is intended to do and whether the instructions are consistent with the known business profile.
For legitimate businesses, these procedures should not be seen as hostile. They are part of a regulated environment that protects the client, the service provider and the integrity of Hong Kong as a corporate and financial centre.
The fit and proper principle belongs primarily to the TCSP licensing regime. Hong Kong TCSPs must satisfy a fit-and-proper test before they can provide trust or company services as a business in Hong Kong. The test is directed mainly at the licence holder and relevant persons connected with the licensed business, such as ultimate owners, partners and directors.
In plain language, the question is whether the relevant persons are suitable to operate or control a regulated corporate services business. The licensing guideline refers to matters such as convictions under AMLO, offences relating to terrorist acts, drug trafficking, organised or serious crime, money laundering or terrorist financing, and other matters the Registrar considers relevant.
Clients are not normally subjected to the same fit-and-proper test as the TCSP licensee. However, the principle explains why a TCSP must operate cautiously, document its client acceptance decisions and decline relationships that cannot be understood, verified or safely monitored.
Customer due diligence, or CDD, is the core of the TCSP relationship. The TCSP must identify the customer, verify identity by reliable and independent documents, data or information, understand the purpose and intended nature of the relationship, and identify and verify beneficial owners where applicable.
For an individual client, the TCSP may request a passport or identity document, proof of residential address and information confirming authority to act. For a corporate client, the TCSP may request incorporation documents, constitutional documents, registers of directors and shareholders, business registration documents and information about persons authorised to instruct the TCSP.
Where the client is a company or other legal person, the TCSP must understand who ultimately owns or controls it. This may require an ownership chart and supporting documents for intermediate holding companies, shareholders and ultimate beneficial owners. Under the AML/CFT guideline, a beneficial owner of a corporation includes an individual who owns or controls, directly or indirectly, more than 25% of the issued share capital, controls more than 25% of voting rights, or exercises ultimate control over management.
This is why a simple shareholder register may not be enough. If ownership is indirect, held through offshore companies, trusts, nominee arrangements or family structures, the TCSP needs to understand the full chain of ownership and control.
The TCSP also needs to understand why the Hong Kong company exists and what services are being requested. It may ask about intended activities, key jurisdictions, expected customers and suppliers, anticipated transactions, source of funds, source of wealth where relevant, and whether nominee, registered office or company secretary services are required.
Hong Kong’s TCSP AML/CFT guideline is based on a risk-based approach. A TCSP should apply CDD measures in a manner commensurate with the money laundering and terrorist financing risks associated with the business relationship.
This means that not every client will be asked for the same documents or experience the same level of review. A simple local trading company with transparent ownership may be different from a multi-layered cross-border structure involving nominee arrangements, politically exposed persons, higher-risk jurisdictions or complex source-of-funds issues.
Enhanced due diligence should not be understood as an accusation. It is usually a proportionate response to risk. The more complex or sensitive the structure, business activity or jurisdictional exposure, the more evidence a TCSP may need before accepting or continuing the relationship.
Clients often ask why a TCSP needs to know where funds came from if the funds are already held in a bank account. The official guidance distinguishes between source of funds and source of wealth.
Source of funds refers to the origin of the particular funds or assets involved in the business relationship. It is not limited to knowing from which bank the money was transferred. The relevant question is the activity or event that generated the funds.
Source of wealth refers to the origin of an individual’s overall wealth and how that wealth was accumulated. It may be relevant where the client or beneficial owner presents a higher risk, for example because of PEP status, complex ownership, high-value transactions or unusual funding arrangements.
In practice, evidence may include sale agreements, dividend records, salary records, audited financial statements, bank statements, loan agreements, inheritance documents, business sale documentation or other credible records explaining the origin of the money.
A TCSP may also screen clients, beneficial owners, directors, authorised persons and connected parties for politically exposed person status, sanctions exposure and other adverse indicators. PEP status does not automatically prohibit a relationship, but it may require enhanced due diligence, senior management approval, source-of-funds or source-of-wealth review and enhanced ongoing monitoring.
Sanctions, terrorist financing and proliferation financing checks are also part of the control environment. A TCSP must be able to consider whether a proposed relationship or instruction presents unacceptable legal or regulatory risk.
CDD is not completed permanently on the day of incorporation. The TCSP guideline expects ongoing monitoring and periodic updating of customer risk assessments. The client’s risk profile may change over time, and the TCSP should review and update the assessment from time to time.
This explains why clients may be asked for updated documents, fresh proof of address, renewed passports, updated ownership charts or explanations of new business activities. Changes in shareholders, directors, beneficial owners, transaction patterns, countries of operation or the services requested from the TCSP may trigger further review.
For clients, the practical point is simple: a file that was complete at incorporation may need to be updated when the business changes.
A TCSP must keep records because records form the audit trail for compliance and potential investigation. The AML/CFT guideline describes record-keeping as essential for detecting, investigating and confiscating criminal or terrorist property or funds, and for demonstrating compliance with AMLO and regulatory guidance.
Typical records may include identification documents, CDD information, beneficial ownership evidence, company documents, correspondence, transaction records, risk assessments, internal approvals, screening results and source-of-funds or source-of-wealth evidence.
Good record-keeping protects the service provider, but it also protects legitimate clients. Where a transaction or ownership structure is questioned later, a properly maintained file can help show that the company and its advisers acted transparently and consistently.
This approach is especially important for cross-border clients. Where the shareholders, directors, counterparties or assets are outside Hong Kong, the TCSP may need additional information to understand the structure and satisfy its own regulatory obligations.
Hong Kong law does not mean that every business must appoint a TCSP for every advisory matter. However, in practice, many foreign-owned Hong Kong companies need a properly licensed or otherwise regulated local service provider to support registered office arrangements, company secretary services, annual returns, statutory registers, corporate changes, certified company documents, beneficial ownership records and liaison with banks, auditors and tax advisers.
A well-run TCSP relationship therefore supports more than incorporation. It helps maintain the company as a credible, bankable and properly administered Hong Kong entity.
Working with a Hong Kong TCSP involves more than sending forms to the Companies Registry. It is a regulated relationship requiring client identification, ownership verification, risk assessment, ongoing monitoring and record-keeping.
For clients, document requests should be understood in that context. A transparent ownership structure, credible source-of-funds explanation and timely response to compliance updates will usually make the relationship more efficient.
A well-run TCSP relationship is not an obstacle to doing business in Hong Kong. It is part of the framework that allows a Hong Kong company to remain credible, compliant and ready for review.
A Hong Kong TCSP must understand and evidence the client relationship. Documents may be required to verify identity, beneficial ownership, business purpose, source of funds and changes in risk profile after incorporation.
No. A TCSP is not a bank, but Hong Kong’s AML/CFT framework imposes customer due diligence and record-keeping obligations on TCSPs and other regulated professional intermediaries.
Customer due diligence is the process of identifying the client, verifying identity, understanding the purpose of the relationship, identifying persons acting for the client and verifying beneficial owners where applicable.
For a corporation, beneficial ownership generally looks to the individuals who ultimately own or control the client, including those who directly or indirectly own or control more than 25% of share capital or voting rights or exercise ultimate control over management.
Source of funds concerns the origin of the particular money or asset used in a relationship or transaction. Source of wealth concerns how an individual acquired their overall wealth.
Clients can prepare a clear ownership chart, provide complete identity and address documents, explain the business model, keep source-of-funds evidence ready, and promptly notify the TCSP of changes in directors, shareholders, beneficial owners, activities or jurisdictions.
Articles are provided for general informational purposes by an authorised corporate services provider and do not constitute legal advice.
Receive updates with practical insights on international business, law, tax, accounting, and compliance.
Be the first to hear about our latest discounts and special offers!
Follow our Telegram channel for offshore industry news:
Want updates by e-mail?
Enter your email address below to subscribe to our newsletter!