Hong Kong Dealers in Precious Metals and Stones (DPMS) Registration Regime: What Are the Differences Between Category A and Category B Registration? Compliance Guide for Jewellers and Watch Dealers
Following the full implementation of the Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Ordinance on 1 April 2023, the mandatory registration regime for Dealers in Precious Metals and Stones (DPMS) came into effect in Hong Kong. Any person who carries on a business involving transactions with a total value of HK$120,000 or above must register as either a “Category A (non-cash transactions)” or “Category B (cash transactions)” dealer, depending on the nature of the transactions. The two categories differ significantly in terms of registration thresholds, fees and regulatory obligations. The key differences are summarised in the table below:
對比維度 Comparison Dimension | A 類註冊 Category A Registration | B 類註冊 Category B Registration |
|---|---|---|
Applicable Transaction Type | Non-cash transactions of HK$120,000 or above (e.g., bank transfers, cheques, credit cards) | Cash transactions and non-cash transactions of HK$120,000 or above |
Validity of Registration | Permanent | 3 years (subject to periodic renewal) |
Application Fee | HK$260 | HK$1,480 |
Annual / Renewal Fee | Annual fee of HK$195 | Prescribed fee payable upon renewal |
Compliance Obligations | Keep transaction records (no requirement to submit quarterly cash transaction reports) | Must comply with the full anti-money laundering obligations under Schedule 2 of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (see details below) |
Primary Target Operators | Jewellery retailers, watch dealers, precious metals and stones wholesalers (mainly non-cash settlement) | Gold shops, high-value cash transaction gemstone wholesalers |
Category A Registration: Basic Obligations for Non-Cash Transaction Dealers
Category A registration applies to dealers who, in the course of their business, only engage in non-cash transactions with a total value of HK$120,000 or above (for example, jewellery retail shops that settle by bank transfer, cheque or credit card). This category does not require the establishment of a complex anti-money laundering and counter-terrorist financing (AML/CFT) system. Applicants must hold a valid Business Registration Certificate (BR) or Hawker Licence and submit the application to the Commissioner of Customs and Excise. Once successfully registered, Category A registrants are required to keep proper transaction records for inspection by the regulatory authority.
Summary of Core Requirements for Category A Registration:
-
Eligibility: Hold a valid Business Registration Certificate or Hawker Licence
-
Application Documents: Completed application form together with a copy of the Business Registration Certificate / Hawker Licence
-
Ongoing Obligations: Keep transaction records (no requirement to submit periodic reports)
-
Fee Structure: Application fee of HK$260; annual fee of HK$195
Category B Registration: Full Anti-Money Laundering Obligations for High-Value Cash Transaction Dealers
Category B registration applies to dealers who, in the course of their business, engage in cash transactions with a total value of HK$120,000 or above. This covers jewellery and gold shops, precious metals wholesalers, and gemstone dealers involved in large cash receipts and payments. Because of the cash element, Category B registrants fall within the AML/CFT supervisory framework of the Customs and Excise Department and are subject to more stringent statutory obligations than Category A registrants.
Main Anti-Money Laundering Obligations of Category B Registrants
責任範疇 Obligation Area | 具體要求 Specific Requirements |
|---|---|
Customer Due Diligence (CDD) | Identify and verify the customer’s identity, understand the purpose of the business relationship, and identify beneficial owners |
Ongoing Monitoring | Periodically review customer transaction patterns and proactively identify unusual or suspicious activities |
Record Keeping | Retain customer due diligence records and transaction records for at least 5 years |
Suspicious Transaction Reports (STR) | Report suspicious transactions to the Joint Financial Intelligence Unit (JFIU) and strictly refrain from “tipping-off” |
Risk Assessment | Conduct institution-wide risk assessments to identify money laundering risks associated with customers, jurisdictions, and products/services |
Other Obligations of Category B Registration
-
Background Checks: Directors and shareholders must pass the fit and proper test
-
Appointment of Compliance Officer and Money Laundering Reporting Officer: Responsible for overseeing the implementation of the AML system
-
Periodic Renewal: Category B registration is valid for 3 years and must be renewed before expiry
-
Compliance System: Must establish an effective AML system and risk management framework
Important Note: The Customs and Excise Department may conduct random checks on the implementation of the AML system when considering renewal applications. Non-compliance may result in disciplinary action, including revocation of registration and fines. Offenders may be liable to a maximum fine of HK$100,000 and imprisonment for 6 months.
Core Differences Between Category A and Category B Registration at a Glance
區別維度 Difference Dimension | A 類註冊 Category A Registration | B 類註冊 Category B Registration |
|---|---|---|
Registration Threshold | Only non-cash transactions | Involves cash transactions |
AML System | No requirement to establish a comprehensive AML system | Must establish a complete AML system (including CDD, ongoing monitoring, record keeping and STR) |
Personnel Requirements | No requirement to appoint a Compliance Officer or Money Laundering Reporting Officer | Must appoint a Compliance Officer and Money Laundering Reporting Officer |
Risk Assessment | No requirement to conduct institutional risk assessment | Must conduct periodic institutional risk assessments |
Independent Audit | No requirement for independent audit | Periodic independent audit is recommended |
Validity Period | Permanent | Valid for 3 years; subject to periodic renewal |
Fee Difference | Application fee HK$260; annual fee HK$195 | Application fee HK$1,480; prescribed fee payable upon renewal |
Practical Compliance Guidance for Jewellers and Watch Dealers
Q1: Most of my jewellery shop’s transactions are settled by credit card, but I occasionally accept cash. Which category should I register under?
A: The primary business model should be the determining factor. If any single cash transaction or the aggregate cash amount reaches or exceeds HK$120,000, you must register as Category B. Even if the majority of transactions are non-cash, the involvement of high-value cash transactions triggers the full AML obligations of Category B. Recommendation: If the proportion of cash transactions is extremely low and the amounts are small, Category A registration may be maintained. However, if large cash amounts are handled frequently, you should proactively apply for Category B registration and establish an AML system to avoid compliance risks.
Q2: Why are the fees for Category B registration significantly higher than those for Category A?
A: Category B registration involves more comprehensive supervisory responsibilities — the backgrounds of directors and shareholders must be examined (fit and proper test) at the application stage; after registration, a Compliance Officer and Money Laundering Reporting Officer must be appointed, and a complete framework for customer due diligence, ongoing monitoring and suspicious transaction reporting must be established. The higher regulatory cost is reflected in the fees.
Q3: If my watch dealing business involves cross-border remittances, will this affect the registration category?
A: If the cross-border remittance constitutes a “transaction” in the course of business and involves the receipt or payment of cash, the total value of that transaction will be counted towards the HK$120,000 threshold. If the remittance is conducted on a non-cash basis (e.g., bank transfer) and the amount reaches or exceeds HK$120,000, it falls within Category A. If cash is involved and the amount reaches or exceeds HK$120,000, Category B registration is required. It should be noted that cross-border remittances are particularly susceptible to “layering” techniques used in money laundering. Category B registrants should therefore pay special attention to the screening and ongoing monitoring of such transactions.
Q4: If I currently only conduct small-value transactions (below HK$120,000), do I need to register?
A: No. The DPMS registration regime only applies to transactions with a total value of HK$120,000 or above. If all transactions in the course of business are below this threshold, and you do not engage in non-cash or cash transactions of HK$120,000 or above, registration is not required. However, you should still keep proper records of all transactions so that the lack of documentation does not hinder a future registration application when the business grows.
Q5: How can I ensure compliance as a Category B registrant?
A: It is recommended to establish the following mechanisms:
• Formulate written AML policies and procedures covering customer due diligence, ongoing monitoring and suspicious transaction reporting
• Provide regular AML training to staff to ensure frontline personnel understand their responsibilities
• Appoint a Compliance Officer and Money Laundering Reporting Officer and ensure they have sufficient resources and authority
• Periodically engage a third-party professional firm to conduct independent audits of the AML system
• Make use of technological tools (such as automated screening systems) to enhance compliance efficiency
Professional Services ComplianceOne Can Provide for DPMS
ComplianceOne Consulting Limited (“ComplianceOne”) has successfully assisted numerous jewellers and precious metals investment companies in completing DPMS registration, covering both Category A and Category B applications. We provide the following one-stop services:
-
Eligibility Assessment: Identify your business model and recommend the most suitable registration category
-
Application Preparation: Assist in compiling Business Registration documents, completing application forms and submitting them to the Customs and Excise Department
-
AML System Development (Category B): Draft customer due diligence policies and establish ongoing monitoring and suspicious transaction reporting mechanisms
-
Staff Training: Provide AML compliance training for management and staff
-
Independent Audit (Category B): Conduct periodic independent reviews of the AML system
-
Annual Renewal: Assist with Category B registration renewal applications
Note: ComplianceOne is a licensed Trust or Company Service Provider (TCSP Licence No.: TC007463) with extensive experience in handling various financial and non-financial compliance matters.
Conclusion
The core of Hong Kong’s Dealers in Precious Metals and Stones registration regime is “risk-based”: Category A registration targets lower-risk non-cash transaction dealers and imposes lighter requirements, while Category B registration targets higher-risk cash transaction dealers and requires a complete AML system. Operators should review their own business models, select the appropriate registration category and put in place corresponding compliance measures. Early registration and ongoing compliance not only satisfy regulatory requirements but also help build a strong industry reputation for the enterprise.