Dealers in Precious Metals and Stones Registration Regime

The articles include:

1. Precious metal
   • gold, silver, platinum, iridium, osmium, palladium, rhodium or ruthenium, in a manufactured or unmanufactured state;
2. Precious stone
   • diamond, sapphire, ruby, emerald, jade or pearl, whether natural or otherwise;
3. Precious product
   • any jewellery or watch made up of, containing or having attached to it, any precious metal or precious stone, or both;
4. Precious-asset-backed instrument¹
   • any certificate or instrument backed by one or more precious metals, precious stones or precious products that entitles the holder to such assets; but
   • does not include any securities, futures contracts, interest in a collective investment scheme, structured products or over-the-counter derivative products as defined by the Securities and Futures Ordinance (Cap. 571), or virtual assets.

Other than jewellery or watch, products containing or having attached to them small amount of precious metals or stones, for example, medical devices, industrial equipment, electronic products, food and beverages and stationery, are not covered under the definition of "precious product".

1 Examples: gold and silver contracts being traded in the Chinese Gold and Silver Exchange and redemption instalments for gold provided by some jewellery stores

Under Sections 53ZTZ and 53ZU of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), a person deals in precious metals and stones if the person carries on any of the following activities by way of business –

1. trading in (i.e. selling, offering for sale, purchasing, offering to purchase or possessing for the purpose of sale), importing or exporting precious metals, precious stones or precious products;
2. manufacturing, refining, or carrying out any value-adding work on precious metals, precious stones or precious products;
3. issuing, redeeming, or trading in precious-asset-backed instruments;
4. acting as an intermediary in respect of any of the activities in paragraph a, b or c.

Exception is provided for any person who carries on a logistics service business which only imports or exports precious metals, precious stones or precious products in the ordinary course of that business.

A specified transaction means a transaction that -

1. is carried out by a person, while carrying on a precious metals and stones business, in respect of which transaction a payment or payments, of at least the amount specified in Schedule 3I of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (i.e. HKD120,000 or equivalent amount in another currency) in total, is or are made or received in any way or combination of ways (other than in cash) in Hong Kong, whether the transaction is executed—
   1. in a single operation; or
   2. in several operations that are linked or appear to be linked; and
2. is not a specified cash transaction.

A specified cash transaction means a transaction carried out by a person, while carrying on a precious metals and stones business, in respect of which transaction a payment or payments in cash, of at least the amount specified in Schedule 3H of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (i.e. HKD120,000 or equivalent amount in another currency) in total, is or are made or received in Hong Kong, whether the transaction is executed—

1. in a single operation; or
2. in several operations that are linked or appear to be linked.

Payments other than in cash can be referred to different non-cash means of payments, for example, credit cards, bank transfers, cheques and e-wallets. Only non-cash payments, regardless of their combinations, are counted in determining whether a transaction is a specified transaction or not.

Any person who is seeking to carry on a business of dealing in precious metals and stones and engage in any specified transactions or specified cash transactions (please refer to Q.3 and Q.4 for definition) is required to register with the Customs and Excise Department.

Authorized institutions regulated under the Banking Ordinance (Cap. 155), pawnbrokers regulated under the Pawnbrokers Ordinance (Cap. 166), certain financial institutions² that are already regulated under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) and carries on a precious metals and stones business that is ancillary to their principal business, and Non-Hong Kong precious metals and stones dealers (please refer to Q.20 for definition) are exempted from the registration requirement.

2 A licensed corporation, an authorized insurer, a licensed insurance broker company, a licensed individual insurance agent or a licensed insurance agency, a Stored Value Facilities licensee and a system operator or settlement institution of a designated retail payment system.

To avoid regulatory overlap, certain financial institutions that are already regulated under the AMLO are exempted from the registration requirements, where they carry on the precious metals and stones business as an ancillary to their principal business. Unless the subsidiaries are exempted as stipulated in the Ordinance, the subsidiaries are still required to be registered in order to carry out any specified transactions or specified cash transactions.

If a dealer carries out only specified transaction (please refer to Q.3 for definition) but not specified cash transactions (please refer to Q.4 for definition), the dealer can apply for a simple and straightforward Category A registration. If a dealer is carrying out or expected to carry out specified cash transactions, the dealer must apply for Category B registration.

Like other designated non-financial businesses and professions regulated under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) ("AMLO"), application for Category B registration will be subject to the meeting of a fit-and-proper test in accordance with Sections 53ZUN and 53ZUO of the AMLO. Besides, if a dealer cannot fulfil the anti-money laundering and counter-terrorist financing requirements specified in Schedule 2 of the AMLO, such as conducting customer due diligence and keeping record, that dealer could only apply for Category A registration and must not carry out any specified cash transactions.

A person or a company holding a valid Business Registration Certificate or a licence issued under the Hawker Regulation (Cap. 132AI) is eligible to apply for registration.

There is a 9-month transitional period starting from the commencement of the related legislative amendment (i.e. 1 April 2023) to facilitate the trade's migration to the registration regime. A Dealer in Precious Metals and Stones ("DPMS") who has been operating before commencement of the regime will be allowed nine months to apply for registration, and be deemed to be a Category B registrant for carrying on a precious metals and stones business until such time when the DPMS's application is determined or withdrawn.

Any person, who starts operating a precious metals and stones business after the commencement of regime and plans to carry out specified transactions or specified cash transactions, is required to be registered before carrying out any specified transactions or specified cash transactions (please refer to Q.3 and Q.4 for definition).

If a dealer has branch(es) under the same company (i.e. same legal entity), the dealer should apply for one registration and provide the Customs and Excise Department ("C&ED") the addresses of all business premises at which the dealer carries on a precious metals and stones business. In addition to the certificate of registration issued by C&ED to the dealer for display at the principal place of business, branch certificate(s) will be issued for the dealer to display at the branch(es) where face-to-face transactions are carried out.

In relation to a person who is registered as a registrant or who applies to be registered as a registrant, and subject to Section 53ZVP of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (which applies to hawker), business premises means any premises at which the registrant carries on a precious metals and stones business, including any premises used by the registrant for the purpose of —

1. the carrying out of face-to-face transactions with customers;
2. the administration of the affairs or business of the registrant;
3. the processing of transactions; or
4. the storage of documents, data or records.

If a dealer has no physical shop for carrying on face-to-face precious metals and stones business with customers in Hong Kong, such as door-to-door sales or pure virtual shop, the dealer is also required to apply for registration with its valid business registration certificate or hawker licence.

To apply for a Category B registration, the dealer will be subject to the meeting of a fit-and-proper test in accordance with Sections 53ZUN and 53ZUO of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) and must further demonstrate its capability in meeting the relevant anti-money laundering and counter-terrorist financing statutory and regulatory requirements (please refer to Q.8).

An applicant is required to provide information of all business premises, including any premises used for the carrying out of face-to-face transactions with customers, administration of business, processing of transactions, or storage of records. Under normal circumstances, only the address(es) of the principal place of business and branch(es) where face-to-face transactions with customers are carried out would be shown in the register for public inspection.

The public can inspect the register maintained at Dealers in Precious Metals and Stones Supervision Bureau's website at https://www.drs.customs.gov.hk free of charge. The register contains relevant information of all registrants, including names, categories, addresses of the principal places of business and branches for face-to-face transactions (if any).

A registrant must display the certificate of registration and branch certificate(s) (if any) in a conspicuous place at the principal place of business and at each branch (if any) respectively.

A registrant, who carries on a precious metals and stones business on a website or by other electronic means, must provide on the website or other electronic means a means specified by the Customs and Excise Department for verifying the registrant's status as such.

If there is any change in the particulars that the registrant has provided to the C&ED for registration or renewal of registration, under Section 53ZVA of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), the registrant must notify C&ED of the change in writing, within 1 month of beginning on the day on which the change occurs.

According to Section 53ZVB, a registrant must notify C&ED in writing, in advance before the intended date of cessation of business, if the registrant intends –

1. to cease to carry on precious metals and stones business; or
2. to cease to carry out specified transactions (for Category A registrant); or
3. to cease to carry out specified transactions and specified cash transactions (for Category B registrant).

The registration fee of Category A registration is HKD260. Afterwards, the dealers have to pay an annual fee of HKD195 to maintain their status.

The registration fee and the subsequent renewal fee of Category B registration are HKD1,970 and HKD1,060 respectively, excluding the cost of fit-and-proper test for each person at HKD650. The certificate of registration is valid for three years in general. (Please also see Q.8 for information on application for Category A or Category B registration.)

For precious metals and stones dealers who have been operating before commencement of the registration regime on 1 April 2023, the registration and relevant fees are waived for first registration to be made within the 9-month transitional period.

Regardless of the application result, all paid application and related fees are not refundable.

A person is a "non-Hong Kong precious metals and stones dealer" if:-

1. the person is either an individual who does not ordinarily reside in Hong Kong; or a legal person, other than an individual, that is incorporated or established outside Hong Kong and is not a registered non-Hong Kong company as defined by Section2(1) of the Companies Ordinance (Cap. 622); and
2. the person does not have a place of business in Hong Kong; and
3. the total number of days on which the person's precious metals and stones business is carried on in Hong Kong does not exceed 60 days in a calendar year.

According to Section 53ZVK of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), "Non-Hong Kong precious metals and stones dealers" must give the Customs and Excise Department a cash transaction report when they engage in a specified cash transaction (please refer to Q.4 for definition) in Hong Kong, within one day upon completion of the transaction or before their departure from Hong Kong, whichever is earlier.

The statutory obligation of a non-Hong Kong precious metals and stones dealer to file a cash transaction report after carrying out specified cash transaction(s) in Hong Kong will take effect on 1 April 2023. The 9-month transitional period does not apply to non-Hong Kong precious metals and stones dealers.