Management Summary
- Purpose / Background:This Annex sets out additional HKMA measures for registered institutions (RIs) when opening and managing investment accounts of “Chinese Mainland investors,” defined as individual investors using a PRC resident identity card and/or PRC passport according to RI records or at account opening. The measures aim to address risks from questionable/forged documents, dormant zero-balance accounts, and potentially unlawful funding sources, while ensuring investor protection, safeguarding client assets, and compliance with existing HKMA/SFC/AML requirements.
- One-line conclusion (what changed / what needs to be done):RIs must immediately tighten onboarding of new Chinese Mainland investor accounts, review and close specified risky/dormant accounts within prescribed timelines, and be prepared for HKMA-directed reviews and supervisory restrictions if execution is inadequate.
- Key Changes (3-8 bullets):
- New accounts for Chinese Mainland investors must now include a written client declaration covering lawful offshore funding, no prior closure/suspension for forged/questionable documents, obligation to update changes within 7 business days, and consent to regulatory/law-enforcement disclosure.
- Settlement for new accounts must be restricted to bank accounts in the client’s own name held with Hong Kong licensed banks or banks supervised in SFC-recognized eligible jurisdictions.
- RIs must ensure all future deposits and withdrawals for such investment accounts flow exclusively through those designated bank accounts.
- HKMA may require selected RIs to perform an independent Account Opening Review of accounts opened since January 2023 (or other HKMA-specified period) to identify accounts opened with questionable/forged documents.
- Identified accounts using questionable/forged documents must be restricted, reviewed for suspicious activity, reported where necessary, closed, and the relevant clients permanently barred from opening future investment accounts with the RI or affiliates.
- RIs must review and identify zero-balance dormant investment accounts of Chinese Mainland investors and either reactivate them through updated KYC/CDD plus new Measure 3 checks or close them.
- HKMA may request review reports and may impose risk-mitigation/supervisory action, including restrictions on solicitation and account opening, if RI handling is unsatisfactory.
- Existing arrangements under joint Hong Kong/Mainland schemes, such as Southbound Wealth Management Connect, are carved out and continue under existing rules.
- Key Dates / Deadlines:
- Measures 2 and 3: effective from the date of the circular.
- Dormant Account Review: must be completed within 3 months from the date of the circular.
- Closure of identified zero-balance dormant accounts: within 6 months from the date of the circular if reactivation steps cannot be satisfactorily completed.
- Reference date for zero-balance dormant status: 22 May 2026; account must have no asset balance as of that date and no client-initiated activity in the preceding 12 months.
- Account Opening Review under Measure 1: for selected RIs upon HKMA request; must be completed within 3 months of request.
- If unable to complete the Account Opening Review on time: RI must notify HKMA immediately upon becoming aware, and no later than 1 month after HKMA’s request unless reasonably justified.
- Closure of accounts identified under Measure 1: within 6 months from completion of the Account Opening Review.
- Declaration updates by client: within 7 business days of changes.
- Applicability / Impact scope:Applies to all RIs handling new and existing investment accounts of Chinese Mainland investors, except accounts opened under regulator-jointly developed cross-boundary schemes/arrangements that already follow separate rules. Measure 1 applies on a risk-based basis to RIs specifically selected by HKMA. Impacts onboarding, KYC/CDD, settlement controls, account lifecycle management, surveillance, complaints handling, recordkeeping, and regulatory reporting.
- Recommended management actions (3-7 actionable bullets):
- Launch a gap assessment across onboarding, account maintenance, settlement controls, AML surveillance, and closure workflows for Chinese Mainland investor accounts.
- Implement mandatory declaration forms and system controls preventing account opening without compliant declarations and designated eligible bank accounts.
- Build/validate account screening to identify zero-balance dormant accounts and, if requested by HKMA, accounts opened since January 2023 with questionable/forged documents.
- Establish formal closure playbooks covering advance client notice, transaction suspension, asset unwind/return, escalation for exceptional cases, and affiliate blacklisting where required.
- Strengthen suspicious activity review and reporting triggers for identified accounts, including forged-document and unlawful-funding scenarios.
- Ensure accessible record retention for reviews, declarations, reactivation procedures, and closure justifications for audit/compliance inspection.
- Allocate sufficient staffing for client communications, complaints handling, and management oversight to avoid supervisory restrictions.
Detailed Summary
- Document overview (nature, purpose, scope)
- Nature:
- Annex 1 to an HKMA circular setting additional measures for opening and managing investment accounts of Chinese Mainland investors.
- Purpose:
- Reduce risks associated with forged/questionable identification documents, dormant accounts that may be misused, and unlawful funding/capital control concerns.
- Reinforce investor protection, proper safeguarding of client assets, and compliance with existing legal/regulatory obligations.
- Scope:
- Applies to “Chinese Mainland investors,” defined as individual investors who use either or both a PRC resident identity card and a PRC passport as identification according to RI records or at account opening.
- Measures 2 and 3 apply to all RIs from the date of the circular.
- Measure 1 applies only where HKMA separately requests selected RIs, using a risk-based approach.
- Related compliance framework expressly referenced:
- Client Securities Rules.
- SFC Code of Conduct.
- Banking Ordinance.
- Anti-Money Laundering and Counter-Terrorist Financing Ordinance.
- Code of Banking Practice.
- Relevant SFC/HKMA guidance, including HKMA’s 23 February 2017 circular on selling investment products/handling client securities and the AML Guideline.
- Exclusion:
- Accounts opened under jointly developed Hong Kong/Mainland schemes or arrangements, e.g. Southbound Scheme clients under Cross-boundary Wealth Management Connect in the GBA, continue under existing requirements and do not follow this Annex 1.
- Main requirements (group by topic; state what must be done)
- A. Measure 1: Closure of investment accounts opened using questionable or forged documents
- Trigger:
- HKMA may require selected RIs to conduct an “Account Opening Review.”
- Review scope:
- Identify client investment accounts opened since January 2023, or another HKMA-specified period, that used questionable or forged documents, including proof of identity.
- Identify:
- party/parties responsible for providing the questionable/forged documents; and
- person(s) responsible for the control failings.
- Review governance:
- Must be conducted by an independent party, internal or external.
- Must follow HKMA-prescribed scope and methodology.
- Completion deadline: within 3 months from HKMA request.
- If not feasible, RI must notify HKMA immediately upon becoming aware and in any case no later than 1 month after request, unless reasonably justified.
- Carve-out for proof of identity review:
- Documentation generated by certification authorities whose electronic certificates have obtained mutual recognition status accepted by the HKSAR Government may be excluded, as this is considered low risk.
- Actions for identified accounts:
- Give advance written notice to client.
- Suspend new client-initiated transactions, except those required to close positions or reduce balances for settlement of obligations/liabilities.
- Allow reasonable time for clients to unwind positions and transfer funds, particularly back to the original source bank accounts to the extent possible.
- Close accounts as soon as practicable once assets are withdrawn/disposed of.
- Expected closure deadline: within 6 months from completion of the Account Opening Review, unless exceptional circumstances such as court orders.
- Maintain records if closure is delayed.
- Continue safeguarding client assets and protecting client interests until formal closure.
- Allocate sufficient resources for enquiries/complaints.
- Review transactions for suspicious activity red flags and make relevant law-enforcement reports, including suspicious transaction reports, where necessary.
- Prohibit those clients from opening future investment accounts with the RI or any affiliated firms.
- B. Measure 2: Closure of zero-balance dormant investment accounts
- Definition:
- A “zero-balance dormant investment account” is an investment account held by a Chinese Mainland investor that:
- has no asset balance as of 22 May 2026; and
- had no client-initiated activity in the 12 months preceding that reference date.
- Review requirement:
- Conduct a “Dormant Account Review” within 3 months from the date of the circular to identify all such accounts.
- Initial treatment:
- Give advance written notice regarding suspension and intended closure if reactivation procedures cannot be satisfactorily completed.
- Suspend accounts from any new transactions unless/until reactivation is satisfactorily completed.
- Reactivation procedures:
- Contact clients and confirm KYC/customer due diligence information is up to date and relevant, with reference to paragraph 5.2 of the AML Guideline.
- Perform Measure 3(i) and 3(ii):
- obtain the required written declaration; and
- ensure use of compliant own-name bank accounts for settlement.
- Recordkeeping:
- Proper records of procedures for each account must be maintained and readily accessible for compliance and audit.
- Closure requirement:
- Close identified accounts within 6 months from the date of the circular if steps above cannot be satisfactorily completed, unless exceptional circumstances such as extenuating circumstances of clients.
- Keep records justifying delayed closure.
- Client protection:
- Act in accordance with client agreements and provide support as appropriate until closure.
- Allocate sufficient resources for enquiries/complaints.
- Special rule:
- If dormant accounts involved questionable or forged documents, RI must terminate the relationship by following Measure 1 steps (ii) to (vii), instead of Measure 2 steps (ii) to (v).
- C. Measure 3: Opening new investment accounts
- Applies irrespective of onboarding approach used by the RI.
- Mandatory written declaration from the investor must confirm:
- all funds supporting investment activities and related settlements are from lawful sources outside the Chinese Mainland;
- the investor does not have an account previously closed or suspended by any licensed corporation (LC) or RI due to use of questionable or forged documents;
- the investor will notify the RI within 7 business days of changes in declaration information; and
- the investor understands the RI may disclose personal and other relevant information to law enforcement agencies or regulatory authorities upon request.
- Settlement account control:
- Investor must use bank accounts in the investor’s own name with:
- banks licensed in Hong Kong; or
- banks supervised by banking regulators in eligible jurisdictions.
- Eligible jurisdictions are based on the list published by the SFC under “Acceptable account opening approaches.”
- All future deposits and withdrawals for the investment account must be conducted exclusively through those bank accounts.
- Subsequent adverse findings:
- If client funding sources are later found unlawful or in violation of PRC capital control regulations, the RI must close the investment account and follow Measure 1 steps (ii) to (vii).
- Recordkeeping and reporting:
- Maintain proper records of each account opening process, readily accessible for compliance checks and audit.
- Provide information to HKMA on request, including number/details of new accounts opened during a specified period and the written declarations.
- D. Supervisory expectations and consequences
- RIs must provide Account Opening Review and Dormant Account Review reports to HKMA upon request.
- If HKMA finds review execution, account closure handling, or client enquiry/complaint handling unsatisfactory, it may impose risk mitigation measures and supervisory action restricting regulated activities, including solicitation and account opening.
- Key changes (vs previous requirements)
- Introduces China Mainland investor-specific onboarding controls beyond general KYC/CDD:
- mandatory investor declaration on offshore lawful funds, no prior forged-document closure/suspension, change notification, and information disclosure acknowledgment.
- Introduces a stricter settlement framework:
- only own-name bank accounts with Hong Kong licensed banks or banks in eligible jurisdictions may be used, and all account inflows/outflows must use those accounts exclusively.
- Creates a defined closure regime for:
- accounts opened with questionable/forged documents; and
- zero-balance dormant investment accounts.
- Imposes independent review requirements and prescribed timelines for HKMA-directed account opening reviews.
- Expands consequences:
- future account opening prohibition for clients linked to forged/questionable documents.
- potential HKMA restrictions on RI solicitation/account opening if implementation is poor.
- Important dates & transition
- Effective immediately from date of circular:
- Measure 2 and Measure 3.
- Within 3 months from date of circular:
- complete Dormant Account Review.
- Within 6 months from date of circular:
- close identified dormant accounts if reactivation cannot be completed satisfactorily.
- Reference date:
- 22 May 2026 for determining zero-balance dormant status, together with no client-initiated activity in previous 12 months.
- Upon HKMA request for selected RIs:
- complete Account Opening Review within 3 months of request.
- notify HKMA immediately if timing risk arises, and no later than 1 month after request unless justified.
- Within 6 months from completion of Account Opening Review:
- expected closure of identified accounts opened using questionable/forged documents.
- Ongoing:
- client must notify changes to declaration within 7 business days.
- Impact and risks (operations/compliance/IT/data/reporting)
- Operations:
- Need structured end-to-end workflows for notice, suspension, reactivation, asset unwind, closure, and affiliate-level account-opening prohibition.
- Compliance/AML:
- Higher scrutiny on source of funds, forged-document detection, KYC refresh, transaction red-flag reviews, and suspicious transaction reporting.
- IT/systems:
- System controls likely needed to:
- capture and store declarations;
- restrict settlement channels to approved own-name bank accounts;
- identify zero-balance dormant accounts;
- flag clients subject to future onboarding prohibition;
- generate HKMA management information/reporting.
- Data/records:
- Readily accessible records required for reviews, methodologies, notices, reactivation attempts, closure reasons, and exceptions.
- Customer servicing/reputation:
- Increased complaints/enquiry volumes expected from suspension/closure actions; insufficient support may heighten regulatory risk.
- Supervisory risk:
- Poor implementation may lead to HKMA restrictions on solicitation/account opening and other regulated activities.
- Compliance action checklist (practical steps)
- Governance and policy
- Update policies/procedures for Chinese Mainland investor account opening, maintenance, dormancy, suspicious activity review, and closure.
- Assign accountable owners across frontline, compliance, operations, AML, legal, and IT.
- Onboarding controls
- Implement mandatory declaration template satisfying all four prescribed confirmations/undertakings.
- Add control to block account opening if declaration is incomplete or absent.
- Validate settlement bank account eligibility and beneficial ownership in the client’s own name.
- Restrict all deposits/withdrawals to approved settlement bank accounts only.
- Existing account reviews
- Build inventory of Chinese Mainland investor accounts.
- Prepare dormant-account logic and evidence trail for identification and contact attempts.
- Prepare for possible HKMA-directed retrospective review since January 2023.
- Closure and remediation
- Establish standard notice language for suspension/closure.
- Define exceptions handling for court orders/extenuating circumstances and required approvals/documentation.
- Implement affiliate-level screening to prevent future account opening by clients linked to forged/questionable documents.
- AML and reporting
- Embed triggers for suspicious activity review where questionable/forged documents or unlawful funds are detected.
- Set escalation and reporting protocols to law enforcement and HKMA where appropriate.
- Prepare MI/reporting packs for HKMA requests, including review outputs and new account details.
- Training and customer handling
- Train frontline and operations staff on new declaration, settlement, and closure requirements.
- Allocate sufficient resources and scripts/processes for client enquiries and complaints.
- Record retention
- Ensure all documents and review evidence are stored in a manner readily accessible for compliance and audit.
- Appendices/attachments summary (if any; 1-3 sentences each; total <= 20%)
- This document is itself an Annex and contains no separate operational appendices requiring standalone implementation.
- It references Appendix A to an SFC Circular for examples of document irregularities and the SFC list of eligible jurisdictions for acceptable account opening approaches; these are supporting reference materials that help calibrate review scope and settlement-bank eligibility but do not change the core obligations set out in this Annex.