LCQ9: Restrictions on stored value of stored value facilities
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Question:
On April 7 this year, the Government disbursed a new round of electronic consumption vouchers with a total value of $5,000 to eligible members of the public. Some members of the public who chose to collect the consumption vouchers via Octopus have pointed out that since Octopus card is subject to a stored value limit of $3,000, they need to tap their cards several times before they can fully collect the consumption vouchers, which they find very inconvenient. Regarding the restrictions on the stored value of stored value facilities (SVFs), will the Government inform this Council:
(1) given that under the law, Octopus card is a device-based SVF, and the maximum stored value of such facility must not exceed $3,000, whether the Government will consider amending the legislation to relax the maximum stored value of such facility in order to facilitate members of the public to use such a SVF, thereby promoting the development and application of local e-payment platforms, and at the same time preparing for the mutual connectivity between the e-payment platforms and systems of Hong Kong and the Mainland; and
(2) given that at present, members of the public are required to provide their personal data when registering their Octopus cards through mobile application, whether the Government will consider discussing with the Octopus Cards Limited to relax the restrictions on the stored value of Octopus cards in phases, i.e. first allowing users who use Octopus cards through mobile application to choose to upgrade the stored value limit to above $3,000, then gradually allowing users of physical Octopus cards to upgrade the stored value limit, so that members of the public will have more flexibility in using Octopus cards for payment; if so, of the details and timetable; if not, the measures in place to reduce the impacts of SVFs being subject to a stored value limit on members of the public?
Reply:
President,
Having consulted the Hong Kong Monetary Authority (HKMA), my reply to various parts of the question raised by Hon Duncan Chiu is as follows:
(1) Stored value facilities (SVF) licensees, including Octopus Cards Limited, are licensed under the Payment Systems and Stored Value Facilities Ordinance (PSSVFO) and they are required to comply with applicable regulatory requirements. As SVFs may be subject to money laundering and terrorist financing (ML/TF) risks, licensees are required to comply with regulatory requirements including those relevant requirements under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and the PSSVFO, as well as the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Stored Value Facility Licensees) (AML/CFT Guideline) issued by the HKMA.
To mitigate the ML/TF risks of financial services including SVFs, regulated entities are required to conduct customer due diligence (CDD), including verification of customer identity and their background. Considering the actual circumstances of SVFs including the Octopus cards, the AMLO stipulates that CDD requirements are not applicable to SVFs when the maximum value that can be stored on the device-based facility does not exceed $3,000. The provision of this special arrangement aims to strike an appropriate balance between customer convenience and ML risk mitigation. The AML/CFT Guideline also sets out that the HK$3,000 stored value limit only applies to unverified customers, i.e. customers without due diligence, while such limit is not applicable to verified customers whose identities have been obtained and verified. The relevant arrangement is in line with international practices. It also ensures that Hong Kong can meet the international requirements on anti-money laundering (e.g. the requirements set by the Financial Action Task Force) while providing flexibility for financial institutions to meet different customer needs.
For the Consumption Voucher Scheme (CVS), it obviously does not present any ML/TF risks as the funds provided are originated from the Government. The HKMA has already informed all relevant SVF licensees that CVS funds need not be counted towards the HK$3,000 usual stored value limit. The decision of Octopus Cards Limited for not lifting the maximum stored value of Octopus cards to HK$3,000 above is not subject to any legal or regulatory restrictions.
(2) As mentioned above, under the AML/CFT Guideline, SVF licensees are already allowed to offer SVF products with maximum stored value exceeding HK$3,000 to verified customers. Therefore, each SVF licensee may determine the maximum stored value for relevant SVF products based on individual circumstances as well as commercial, technical and other operational considerations.
We note that the public has expressed different views on the maximum stored value of the Octopus cards under the CVS and we have already conveyed the relevant views to Octopus Cards Limited so that SVF licensees can continuously improve their services taking into account business, technical and other operational considerations while complying with the statutory requirements.
Ends/Wednesday, June 8, 2022
Issued at HKT 12:00
Issued at HKT 12:00
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