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Plans by the Hong Kong government to relax public disclosure requirements for companies operating in the city have sparked concerns over transparency and money-laundering, as well as dwindling press freedom.
Hong Kong chief executive Carrie Lam has previously told the city’s Legislative Council (LegCo) that the government will adjust legal requirements to make it harder to carry out an online Companies Registry search.
The Hong Kong Journalists’ Association (HKJA) said last month that it is extremely concerned about the measures and their impact on the ability of journalists to carry out investigations into corporate activity.
Estate agents have also expressed concerns that they won’t be able to carry out adequate due diligence to prevent property scams, as required by law.
Currently, it is possible to carry out an online search of the Companies Registry and find the residential addresses and ID card numbers of directors of Hong Kong companies. Similar information is available for company secretaries and liquidators called in to wind up a business.
The government is planning to ensure that only correspondence addresses and partial ID numbers will be accessible in future, in a bid to protect directors’ privacy.
Under new rules being implemented by the Bureau of Financial Services and the Treasury, companies can refuse to allow public access to the directors’ usual residential addresses and the complete ID numbers of the directors and company secretaries.
By next year, companies may withhold registration documents bearing the usual residential addresses and ID numbers of their officers, and they may withdraw such documents from the registry entirely in 2023.
The new rules are highly likely to pass in a LegCo that is controlled by pro-Beijing lawmakers.
Hong Kong has previously had an excellent international reputation for transparency that underpins its former status as an international trading city with a separate administration from China.
As late as 2017, the financial services bureau had followed recommendations from the Financial Action Task Force, ensuring public access to owner information for registered companies.
Hong Kong has been a member of the task force, which works to combat money laundering and terrorism financing, since 1991, before the 1997 handover to China.
Hong Kong’s Companies Registry website still has a special page dedicated to explaining how it complies with FATF regulations.
“Negative impact could be very large’
Simon Lee of the Chinese University of Hong Kong (CUHK) business school said many other people and organizations need to conduct Companies Registry searches as part of due diligence.
“I think the chief executive is taking an overly simplistic view of this,” Lee told RFA. “This isn’t just about journalism; it involves the security of a great many assets and is essential to the basic operations of the financial markets.”
“It should be handled with care, otherwise the negative impact could be very large.”
He cited the example of real estate agents who are required to carry out background research on companies involved in property deals.
He said the new restrictions could attract international organized crime groups to set up in the city to carry out money laundering, and would do nothing to improve the city’s reputation as a tax evasion hub.
Prominent economic Law Ka-chung said the move would undermine the public’s right to access information.
“Hong Kong banks may actually want customers to volunteer company registration information in future, as they take on the work of preventing money-laundering,” he said.
Real estate agents expressed concerns on Tuesday that new laws will prevent them checking the backgrounds of property owners and potentially preventing scams, The Standard newspaper reported on March 31.
Centaline Property Agency said the restriction makes it difficult for agents to meet regulatory requirements, the paper said.
A spokesperson for the Financial Services and Treasury Bureau said in a statement issued late on Wednesday that all searchers, including journalists, would continue to have access to Companies Registry information, but only to correspondence addresses rather than main residences of company directors, and only to a truncated version of their ID card number.
“There are no new restrictions on other currently available information,” the spokesperson said.
But it made no comment about the second and third phases of the proposed rule changes, which will begin curbing public access to companies registered after October 2022, and allow companies until December 2023 to apply to the Companies Registry to remove existing information from public view.
Reported by Gigi Lee and Chan Yun Nam for RFA’s Cantonese Service. Translated and edited by Luisetta Mudie.
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