The landscape for financial advisers operating in Hong Kong has evolved significantly in recent years, largely due to legislative changes and global economic shifts, and advisers working in the region, or even working with clients based there, need to keep on top of regulatory changes.
This is the view of the chief executive of the deVere Group, an advisory company which operates across the globe.
Nigel Green, who also founded the company, said: "Staying compliant with regulatory changes in Hong Kong is crucial.
"Financial advisers should closely monitor updates to laws like the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO) and ensure their clients’ portfolios adhere to these regulations."
Also, due to its unique geopolitical positioning, he said that assessing domestic and international geopolitical risks was "vital to ensure viability of clients’ financial planning strategies".
According to Green, advisers should work closely with their clients to evaluate the impact of events such as trade disputes, political tensions, and economic fluctuations on their portfolios. Diversifying assets across multiple jurisdictions can, of course, mitigate risk.
Advisers operating in, or working with international advisers based in Hong Kong should also make sure they keep abreast of regulatory developments.
We need to prioritise client education, risk mitigation, and the development of strategies that accommodate clients’ global financial interests.Nigel Green, deVere GroupFor example, the National Security Law, which was implemented in Hong Kong in 2020, contained clauses that strengthened the management of foreign non-governmental organisations and news agencies.
In October 2020, sister title the Financial Times reported that the Hong Kong Monetary Authority—the statutory authority for banks in Hong Kong for which membership is compulsory—had advised banks (both local and international lenders) to report any transactions suspected of violating the national security law to police.
According to a statement from the UK government, the document posted by the HKMA said reporting obligations under the law would be triggered when a bank 'knows or suspects that any property is offence-related property'.
Because the NSL grants authorities in Hong Kong broader powers to regulate and oversee activities related to national security, this does involve the movement of money.
A legal summary from City law firm Baker McKenzie explained: "An incorporated or unincorporated body such as a company or an organisation that commits an offence under the National Security Law would be imposed with a criminal fine.
"Its business operation will be suspended or its license / business permit will be revoked if the body has been convicted under the National Security Law."
Green said: "This includes financial transactions and investments. Financial advisers must now be more vigilant in their operations, as their activities may be subject to closer scrutiny."
Education and risk mitigation
Financial advisers with cross-jurisdictional clients based in Hong Kong may therefore find they are under greater pressure to ensure the privacy and security of their clients’ financial information and communications.
They must also be cautious when handling sensitive client data, as it could be subject to surveillance or investigation, according to Green.
Moreover, there are compliance issues that differ across regions, so financial advisers with clients who have assets or investments in Hong Kong may need to navigate international compliance issues.
They must ensure their clients’ financial activities are in compliance with both Hong Kong’s NSL and the laws and regulations of their home countries, which may have restrictions on dealings with Hong Kong.
In short, Green said, navigating cross-jurisdictional financial advising in Hong Kong will require a deep understanding of international regulations, a proactive approach to compliance, and adaptability in the face of changing legislation.
Working with international advisers or those based in the region may help overcome some of these complexities and mitigate potential risks.
Green added: "As financial advisers, we need to prioritise client education, risk mitigation, and the development of strategies that accommodate clients’ global financial interests.
"By doing so, we can continue to provide valuable services and help clients safeguard and grow their wealth in a dynamic and evolving financial landscape."
Simoney Kyriakou is editor of FTAdviser.com
