New Regulations for Jewelry Stores: Restrictions on Large Transactions

Starting from April 1, 2023, the Hong Kong Customs will implement the “Registration System for Precious Metal and Gemstone Traders” to strengthen control over money laundering and terrorist financing.

Existing companies engaged in the trading of precious metals and gemstones must complete the registration process before the end of the transition period (December 2023) if they are involved in transactions totaling no less than HKD 120,000.

● Which Items are Subject to Regulation?

Regulated items include precious metals, gemstones, diamonds, and jade, whether in processed or unprocessed form, such as gold, silver, platinum, or synthetic gemstones. Common examples include watches, jewelry, and decorative items embedded with precious metals and gemstones, where at least 50% of the value comes from precious metals or gemstones. Such items are subject to regulation under the new rules.

● Two Types of Registration Licenses

For non-cash transactions, such as bank transfers, credit cards, or other electronic payment methods, involving a total amount of HKD 120,000 or above, traders need to apply for Class A registration. On the other hand, if the buying and selling are conducted through cash transactions, whether in a single transaction or multiple related operations, traders must apply for Class B registration. It is important to note that even without a physical store, online shops or door-to-door sales still require valid business registration to apply for registration.

● Combating Money Laundering: Implementing Customer Due Diligence

After the implementation of the new system, all Class B registrations, which involve cash transactions of HKD 120,000 or above, require traders to conduct “customer due diligence” on their clients and buyers. To identify and verify the identity of customers, they need to provide personal identification and proof of address, as well as information on the company they represent. For long-term customers with ongoing business relationships, regular reviews must be conducted to monitor the source of funds and detect any recent abnormal or suspicious transaction activities.

● Exemptions for Non-Hong Kong Traders

Overseas companies that are not ordinarily resident in Hong Kong, do not have a local place of business, are not registered as non-Hong Kong companies under the Companies Ordinance, and have a total of no more than 60 days of regulated business activities in Hong Kong within a year, are exempt from registration. For example, overseas exhibitors participating in large-scale jewelry exhibitions in Hong Kong who meet the above conditions. However, according to the regulations, non-Hong Kong traders conducting cash transactions of HKD 120,000 or above in Hong Kong must submit transaction reports to the Customs before leaving Hong Kong or within one day after completing the transaction (whichever is earlier).

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