Hong Kong has a well-deserved reputation as an easy place to do business. New arrivals are always impressed by how quickly they can register a company and set up business in the city. Faced with increasingly tight international regulations and know-your-client (KYC) requirements, banks have introduced several fresh steps to the process of setting up accounts, however.To ensure banking in the city retains its efficient, streamlined reputation, the Hong Kong Monetary Authority (HKMA) is encouraging banks to offer Simple Bank Account (SBA) services, where businesses which require basic banking services can open bank accounts with less paperwork. Here the Executive Director of HKMA's Banking Conduct Department, Alan Au, fields queries from the Hong Kong Trade Development Council on the ins and outs of SBAsThere are comments that the bank account opening process for companies is more complicated than say 10 or 20 years ago. What is the reason?
The global banking landscape has changed considerably in the past decade. International efforts to combat money laundering and terrorist financing have been strengthened progressively. Global sanctions regimes and other regulatory requirements have added to the complexity of the landscape. Financial institutions around the world, including banks in Hong Kong, are now subject to much tighter international standards and, therefore, have strengthened the related controls in general, including undertaking more comprehensive due diligence on new and existing customers.
We know the HKMA has encouraged banks to introduce SBA services, and some have done so. What is an SBA and how does it differ from traditional accounts?
“Simple Bank Account” services have been launched by some banks to eligible corporate customers based on their actual business needs. An SBA is in essence a tier of bank accounts derived from traditional accounts, focusing on provision of basic banking services such as deposits, withdrawals, local and cross-border remittances. SBAs offer a narrower service scope and transaction volume compared to traditional accounts, and correspondingly, the risks involved would be relatively lower and, hence, require less extensive customer due diligence (CDD) measures to be carried out at account opening. Why did the HKMA encourage the launch of a new tier of accounts and how would it benefit the business community?
We have been maintaining close dialogue with the business community. Based on feedback from the business sector, it came to our attention that some businesses – such as small and medium-sized enterprises (SMEs), start-up companies and companies from outside Hong Kong which are seeking to establish a presence in Hong Kong – do not require the full range of banking services generally offered by traditional bank accounts, particularly at the initial stage of banking relationships. The HKMA has thus been exploring with banks to introduce a new tier of bank accounts with a view to offering an additional option to address the needs of corporate customers at different stages, particularly when the customers cannot readily furnish certain CDD information-documents required for traditional accounts and yet do not indeed require the full range of services at the initial stage. We are glad that some banks have launched SBA services, and we encourage other banks to also support the initiative and introduce SBA services that fit their individual circumstances to further facilitate access to banking services of businesses.What can expanding companies which find the scope of SBA services no longer meet their growing needs, do?
As a company develops, it may naturally need more comprehensive banking services to suit its business needs. SBA customers looking for a wider range of banking services in the future may “upgrade” their SBAs to traditional bank accounts by completing the necessary CDD processes as required by the banks.What information and documents do start-ups incorporated in Hong Kong need to furnish to banks when opening an SBA, and approximately how long would they need to wait for the account to open?
When handling applications of corporate bank accounts, banks in general may obtain the following information or require the relevant original documents: (a) corporate identification documents (e.g. certificate of incorporation), and information of the address of registered office and principal place of business; (b) information of the beneficial owner(s); (c) purpose and intended nature of account; and (d) information of the person acting on behalf of the company. According to the actual circumstances (such as the backgrounds of the applicants, the requested banking services, etc.) and the banks’ risk assessments, banks may also require applicants to submit other types of or additional information and documentation. For SBAs, banks still need to obtain the above four categories of information, but they may carry out less extensive CDD measures by, for example, requiring less detailed information and supporting documents from the applicants. Individual banks design their own SBAs based on their business strategies and risk assessments and so the scope of services offered and the extent of CDD measures implemented by individual banks may vary. As SBAs involve streamlined CDD measures, it is anticipated that the account opening process for SBAs would be enhanced. The actual time needed would naturally depend on the circumstances of individual cases and the availability of the necessary information required of the applicants.There are also comments that the Foreign Account Tax Compliance Act (FATCA) of the United States has added to the complexity of the bank-account opening process. Would SBAs help in this respect?
SBAs do not involve streamlining of banks’ obligations under FATCA. FATCA is a US legislation that primarily aims to prevent tax evasion by US taxpayers using non-US financial institutions and offshore investment instruments. In line with the arrangements in many other jurisdictions, the governments of Hong Kong Special Administrative Region and the US signed an Inter-Governmental Agreement as a means of implementing FATCA in Hong Kong in November 2014. Banks are generally required to ascertain the US or non-US tax status of all new customers at account opening. General information on banks’ obligations under FATCA can be found on HKMA’s website.What is the feedback about SBAs since their launch?
We are pleased that all three note-issuing banks in Hong Kong have launched the SBA service. Through our ongoing engagement with the business community, we have learned that the SBA initiative is welcomed and considered a positive step towards enhancing customer experience. There are already quite a number of SBAs successfully opened, and more enquiries and new applications are being handled by the banks, which suggest that there exists demand for this new type of services.Do you see the launch of virtual banks will help SMEs?
The introduction of virtual banks in Hong Kong is a key pillar supporting Hong Kong’s entry into the Smart Banking Era. It is a major milestone in reinforcing Hong Kong’s position as a premier international financial centre. The HKMA has granted eight virtual bank licences in March to May 2019 and these virtual banks intend to launch their services within around six to nine months. We believe they will drive FinTech and innovation and bring about brand new customer experiences. Moreover, in targeting the retail public and SMEs as their main client base, virtual banks should help promote financial inclusion in Hong Kong.
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HKMA SBAs
