Management Summary
- Purpose / Background:This Annex provides HKMA FAQ guidance on how registered institutions (RIs) and authorized institutions (AIs) should implement the circular’s expected controls for account opening and ongoing relationship management for clients with investment accounts, especially Chinese Mainland individual investors. It clarifies operational handling for three measures in Annex 1: closure of accounts opened with questionable/forged documents, treatment of zero-balance dormant investment accounts, and controls for opening new investment accounts, plus expectations for internal reviews.
- One-line conclusion (what changed / what needs to be done):Banks/RIs must apply stricter, investment-account-specific controls to relevant individual Chinese Mainland client accounts, close or restrict higher-risk accounts, perform independent risk-based internal reviews for questionable/forged documents, and document exceptions or delays to HKMA.
- Key Changes (3-8 bullets):
- If forged/questionable documents are found and the client is uncontactable, the RI should suspend new client-initiated transactions, proceed to terminate the relationship per client agreement, continue trying to contact the client, and safeguard client assets until formal closure.
- If relevant accounts cannot be closed within the required timeframe, the RI must notify HKMA with reasons; HKMA will assess case by case.
- Measure 2 applies only to investment accounts/functions, including investment functions within integrated accounts; non-investment banking functions are out of scope.
- RIs may use a relationship-based approach: zero-balance dormant investment accounts do not need to be closed if the same client has at least one non-zero-balance or non-dormant investment account with the RI.
- If a zero-balance dormant investment account becomes active after the reference date but before suspension, the RI must still stop further deposits/acquisitions/new positions until reactivation procedures are completed within two weeks of identification.
- For new investment account opening, required client declarations must be obtained in writing, but can be electronic rather than paper.
- Internal reviews for forged/questionable documents must be conducted by suitably skilled personnel independent of account opening; scope may be risk-based but should expand if significant deficiencies are found.
- The additional measures apply to individual clients, not corporate or institutional clients.
- Key Dates / Deadlines:
- Circular / referenced SFC circular issue date: 22 May 2026.
- For zero-balance dormant investment accounts that show activity after the reference date, reactivation procedures should be completed within two weeks from identification.
- If account closure cannot be completed within the specified timeframe in Annex 1, RI should promptly notify HKMA and explain.
- Applicability / Impact scope:
- Applies to RIs/AIs handling investment accounts for individual clients, particularly Chinese Mainland investors.
- Covers standalone investment accounts and investment functions under integrated banking accounts.
- Does not extend the additional measures to non-investment banking functions, corporate clients, or institutional clients.
- Recommended management actions (3-7 actionable bullets):
- Confirm operating procedures for immediate suspension, client communication, asset safeguarding, and contractual termination where forged/questionable documents are detected.
- Review dormant-account logic to ensure scope is limited to investment functions and supports relationship-based exceptions across a client’s multiple investment accounts.
- Implement controls to block further deposits, product acquisitions, and new positions for identified dormant accounts pending reactivation.
- Ensure declaration capture for new investment accounts is available across paper and approved digital channels, with audit trail retention.
- Assign independent, competent compliance/internal audit/external reviewers for the internal review, with escalation criteria to widen scope where deficiencies are found.
- Establish governance for overdue closures and mandatory HKMA notification with documented justification.
- Reconfirm applicability boundaries: individual clients only; exclude corporate/institutional clients from these additional measures.
Detailed Summary
- Document overview (nature, purpose, scope)
- This document is an FAQ annex supporting the circular on expected controls for account opening and maintaining relationships with clients with investment accounts.
- It clarifies implementation of measures set out in Annex 1, focusing on:
- Closure of investment accounts opened using questionable or forged documents
- Closure/restriction of zero-balance dormant investment accounts
- Opening of new investment accounts
- Internal review of account opening documentation
- Other interpretive questions on servicing Chinese Mainland investors
- Primary target population:
- Individual clients, especially Chinese Mainland investors
- Excluded population:
- Corporate clients
- Institutional clients
- Product/account scope:
- Investment accounts, including investment functions embedded in integrated banking accounts
- Non-investment functions are expressly outside scope of the additional measures
- Main requirements (group by topic; state what must be done)
- A. Accounts opened with questionable or forged documents
- If an RI decides to terminate the relationship and the client is uncontactable:
- Suspend the relevant account from processing/executing any new client-initiated transactions.
- Exception: permit transactions necessary to close existing positions or reduce balances for settlement of obligations/liabilities.
- Terminate the business relationship according to the client agreement.
- Continue attempts to contact the client.
- Properly safeguard client assets until formal account closure.
- If the RI cannot close the relevant account within the specified timeframe:
- Notify HKMA.
- Explain why the account remains open.
- Expect HKMA to assess the justification case by case.
- B. Zero-balance dormant investment accounts
- Scope limitation for integrated accounts:
- Additional measures apply only to investment accounts/functions.
- Non-investment functions such as savings, current accounts, deposits, payments, loans, and credit cards are outside scope.
- Relationship-based approach:
- If the client has at least one non-zero-balance or non-dormant investment account with the same RI, the RI is not required to close the client’s zero-balance dormant investment account(s) held in that client’s own name.
- If dormant accounts become active after the reference date but before suspension:
- They are still subject to restrictions unless reactivation is completed.
- RIs should cease accepting:
- Further fund deposits
- Acquisitions of investment products
- Opening of new investment positions
- These restrictions remain until/unless the client completes reactivation procedures under Measure 2 step (ii).
- Reactivation requirements:
- Confirm client information is up to date and relevant.
- Obtain written client declarations.
- Ensure settlement / deposit / withdrawal bank accounts are in the client’s own name and held with:
- Hong Kong licensed banks, or
- Banks supervised by banking regulators in eligible jurisdictions
- Timeline: within two weeks from the date the zero-balance dormant investment account is identified.
- C. Opening new investment accounts
- For integrated banking accounts:
- Measure 3 applies only to the investment functions, not the non-investment functions.
- Existing requirements continue to apply for non-investment accounts/functions.
- Declaration requirement:
- Required declaration must be obtained in writing.
- Acceptable forms include:
- Paper
- Electronic means, such as website, mobile app, email, or other appropriate channels
- For Chinese Mainland investors opening accounts in person in Hong Kong:
- RIs can open new investment accounts and provide services, subject to:
- Implementation of Measure 3 in Annex 1
- Declarations and designation of bank accounts
- Compliance with KYC and customer due diligence requirements
- D. Internal review of account opening documentation
- Personnel requirements:
- Reviewers should have relevant knowledge and skills.
- They must be independent from the account opening process.
- Possible reviewers:
- Compliance staff
- Internal audit staff
- External consultants
- Review methodology and scope:
- HKMA does not prescribe a single methodology.
- RIs may adopt a risk-based approach with reasonable methodology and selection criteria.
- RIs may refer to the SFC circular for examples of irregularities in documents.
- If significant deficiencies are found, the RI should expand review scope, including sample size.
- If suspected questionable/forged documents are detected and the RI terminates the relationship:
- Follow Measure 1 steps (ii) to (vii) of Annex 1.
- Ensure proper disclosure and adequate communication with clients on handling of client assets.
- Act according to client agreements.
- Safeguard client assets appropriately.
- E. Ongoing servicing of existing Chinese Mainland investors
- RIs may continue to serve existing Chinese Mainland investors if:
- No questionable or forged documents were used at account opening;
- Relevant measures in Annex 1 are adequately implemented; and
- Services are conducted in compliance with applicable requirements under the referenced notice.
- If investors want to invest in Hong Kong securities, RIs may guide eligible investors to cross-boundary channels, including:
- Cross-boundary Wealth Management Connect (WMC) for eligible wealth management products
- Shanghai-Hong Kong Stock Connect
- Shenzhen-Hong Kong Stock Connect
- If there is doubt over interpretation/application of the Chinese Mainland notice or legality of activities carried out on the Mainland:
- Seek legal advice from a qualified legal adviser.
- Key changes (vs previous requirements)
- Clarifies that the additional measures are limited to investment accounts/functions and do not automatically extend to non-investment functions within integrated accounts.
- Introduces a practical relationship-based exception so that not all zero-balance dormant investment accounts must be closed if the client has another active/non-zero investment account with the same RI.
- Confirms electronic written declarations are acceptable for new account opening; paper is not mandatory.
- Provides a specific operational treatment for dormant accounts that become active after the reference date: freeze further deposits/acquisitions/new positions until reactivation is completed.
- Establishes independence and competency expectations for internal reviewers and expects expansion of review scope when deficiencies are significant.
- Confirms the enhanced measures target individual clients only, excluding corporate and institutional clients.
- Important dates & transition
- Reference circular date cited: SFC circular issued on 22 May 2026.
- Chinese Mainland authorities’ notice also referenced as issued on 22 May 2026.
- Operational transition point:
- For zero-balance dormant investment accounts identified as of the reference date, if activity occurs before suspension, reactivation controls still apply.
- Specific timing requirement:
- Reactivation procedures should be completed within two weeks from identification of the zero-balance dormant investment account.
- Exception handling:
- If closure cannot be completed within the Annex 1 timeframe, HKMA must be informed with reasons.
- Impact and risks (operations/compliance/IT/data/reporting)
- Operations
- Need workflows to suspend new client-initiated transactions while allowing transactions necessary for position closure/settlement.
- Need processes for continued client outreach and asset safeguarding where clients are uncontactable.
- Need relationship-level account assessments across multiple investment accounts held by one client.
- Compliance
- Need evidence that measures in Annex 1 are implemented consistently for affected individual clients.
- Need strong documentation around declaration capture, reactivation, and overdue closure justifications.
- Need legal/regulatory escalation where Mainland law applicability is uncertain.
- IT / systems
- Systems should distinguish investment vs non-investment functions in integrated accounts.
- Dormancy controls should support:
- identification as of reference date,
- suspension logic,
- reactivation tracking,
- restriction of deposits/product acquisitions/new positions.
- E-channel onboarding/document capture should retain auditable written declarations.
- Data / records
- Need current client information verification for reactivation.
- Need records of designated settlement accounts in client’s own name and eligible bank status.
- Conduct / client risk
- Risk of improper handling of client assets or inadequate client communication during account termination.
- Risk of inconsistent treatment of existing Chinese Mainland investors or inappropriate servicing channels.
- Compliance action checklist (practical steps)
- Map all impacted account types and ensure only investment functions are subject to the additional measures.
- Build/confirm controls to:
- suspend new client-initiated transactions for suspect/forged-document cases,
- permit only transactions necessary for closure/settlement,
- safeguard client assets pending closure.
- Define escalation and reporting for accounts not closed within required timeframe, including HKMA notification templates.
- Update dormant account procedures to:
- identify zero-balance dormant accounts at the reference date,
- apply relationship-based exceptions,
- impose restrictions pending reactivation,
- enforce the two-week reactivation requirement.
- Confirm onboarding procedures for new investment accounts require written declarations and support compliant electronic capture.
- Validate designated settlement account checks:
- client’s own name,
- Hong Kong licensed bank or bank supervised in eligible jurisdiction.
- Appoint independent internal reviewers with adequate expertise and document review methodology.
- Define triggers for expanding sample size/scope where significant deficiencies are found.
- Review client communications, termination notices, and asset-handling disclosures for consistency with client agreements and regulatory expectations.
- Establish legal escalation protocol for cross-border regulatory interpretation issues.
- Appendices/attachments summary (if any; 1-3 sentences each; total <= 20%)
- Annex 1 (referenced, not reproduced here):
- This FAQ repeatedly interprets Measures 1, 2, and 3 in Annex 1, which contain the core operational requirements on closure of suspect accounts, handling of zero-balance dormant investment accounts, and controls for new account opening. The FAQ mainly clarifies scope boundaries, exceptions, operational sequencing, and acceptable forms of compliance.
- SFC circular dated 22 May 2026 (referenced):
- The FAQ points RIs to the SFC circular for examples of document irregularities that may indicate questionable or forged documents. It is a supporting source for internal review scoping and risk indicators rather than a separate set of new requirements in this annex.