From brokerages to banks, Hong Kong intensifies efforts to clean up cross-border investment account openings

Author: Lawyer Liu Honglin

On the evening of May 27, a piece of news from Caixin quickly spread in social media circles.

The gist of the content is: In response to the requirement for some banks in Hong Kong to have mainland investors sign a declaration to open investment accounts, the Hong Kong Monetary Authority (HKMA) stated that the relevant regulatory requirements were issued to all recognized institutions on May 22. The HKMA requires registered institutions to take three additional measures when opening and managing investment accounts for mainland investors.

Lawyer Honglin carefully read the relevant content and couldn't help but sigh: Regulatory authorities are indeed concerned about preventing ordinary people from losing money in investments.

Recently, regulatory authorities have been quite active regarding cross-border finance. Just last Friday, the China Securities Regulatory Commission (CSRC) and seven other departments jointly issued the "Implementation Plan for Comprehensive Rectification of Illegal Cross-Border Securities, Futures, and Fund Operations," clearly stating that a two-year concentrated rectification will be carried out to completely ban illegal cross-border operations by foreign institutions.

On the same day, the Hong Kong Securities and Futures Commission (SFC) also issued a circular, requiring licensed corporations to strengthen monitoring measures in account opening and client relationship maintenance, focusing on suspicious or forged documents, dormant accounts, investment accounts for mainland investors, and compliance issues related to cross-border services.

This circular from the Hong Kong SFC is not a general reminder.

It mentions that the SFC recently reviewed the account opening operations of 12 licensed securities brokers and found that some institutions had significant deficiencies in due diligence for account opening documents, cross-border agency relationships, and ongoing monitoring; some brokers accepted suspicious or forged documents during the account opening process and failed to identify warning signs in overseas intermediary relationships. More critically, some accounts later experienced suspicious fund transfers without any trading activity.

These details indicate that the regulators are concerned not just about "incomplete account documentation." If an investment account is only used to deposit and transfer money, remains idle for a long time after funds are withdrawn, or if clients frequently change bank accounts, or even unrelated clients share bank accounts or addresses, it is no longer just a common account opening flaw but may become a conduit for cross-border capital flows and illegal financial activities.

Now, the HKMA's requirements for registered institutions in the banking sector have gained renewed attention in the market. Its significance lies in the fact that regulation has not stopped at the level of "illegal cross-border operations by brokers," but has further focused on investment accounts at banks, the investment functions within comprehensive accounts, declarations of fund sources, and settlement accounts under the client's name.

This means that, following Hong Kong brokers, Hong Kong banks have also been pushed to the forefront of cross-border financial compliance.

This is not simply about signing an additional declaration. What it truly reminds the industry is that when mainland investors participate in securities, funds, wealth management, or even future on-chain financial products through Hong Kong, institutions cannot just look at where the account is opened; they must also explain how the client arrived, whether the documents are authentic, where the funds come from, and whether the services touch upon the boundaries of illegal cross-border operations in the mainland.

Cross-Border Investment Tightens Again

Let's first summarize several recent regulatory documents and news in a chart.

Recent Regulatory Chain for Cross-Border Investment Accounts

A series of recent actions by regulatory authorities have led many friends to interpret it as "mainland investors can no longer open accounts in Hong Kong," but the reality is not entirely so.

From the HKMA's documents, the new measures target investment accounts for mainland investors, including the investment functions within comprehensive bank accounts; ordinary savings, current accounts, time deposits, payments, loans, credit cards, and other non-investment functions are not included in this set of additional measures. The relevant measures target individual clients and do not apply to corporate clients and institutional clients. The HKMA also mentioned in the FAQs that when mainland investors personally go to Hong Kong to apply for investment accounts or investment services from banks, banks can still process them, but they must complete the new declaration, designate a qualified bank account under the client's name, and fulfill KYC, which is the procedure for financial institutions to identify the client's identity, transaction purpose, and risk status.

Therefore, this does not block all mainland clients at the door. What is truly being restricted are those businesses that cannot clearly explain how the client arrived, how to verify the authenticity of documents, where the money comes from, and whether the transaction services touch upon the regulatory red lines in the mainland.

In the past few years, many people had a vague understanding of cross-border investment accounts: accounts opened in Hong Kong, institutions licensed in Hong Kong, clients operating online, seemingly having little to do with mainland regulation. This understanding is becoming increasingly difficult to maintain. Regulators will continue to ask along the service chain: Is marketing directed at the mainland? Are account openings and trading instructions driven by domestic links? Are funds going out through compliant channels?

Once these questions are viewed together, the so-called "people in the mainland, accounts in Hong Kong, services online" middle ground is no longer as comfortable as before.

What is the HKMA Tightening?

When looking at the documents from the Hong Kong SFC and the HKMA together, the logic becomes clearer.

The SFC first highlighted the issues from the broker side: Are account documents authentic? Is the account being misused? Is there ongoing monitoring of cross-border agency relationships? When providing services to investors outside of Hong Kong, are both Hong Kong and relevant jurisdiction laws being complied with?

The HKMA subsequently pushed similar requirements onto registered institutions in the banking sector, as investment accounts and investment functions within comprehensive accounts could also become part of this chain.

If we break down the handling actions for bank investment accounts, it can be illustrated in the following chart:

HKMA's Handling Actions for Investment Accounts of Mainland Investors

In this new set of measures, three actions are particularly noteworthy.

First, document verification. The Hong Kong SFC requires licensed corporations to conduct internal reviews as soon as possible according to the standards in the circular's appendix, identifying whether they have previously accepted suspicious or forged documents to open accounts and closing accounts involving such documents. The HKMA requires relevant banks to verify investment accounts opened since January 2023 or during a period designated by the HKMA under regulatory requirements. Upon discovering issues, it is not only about closing accounts but also identifying who provided the suspicious or forged documents and who should be responsible for internal control deficiencies.

Second, cleaning up dormant accounts. The so-called zero-balance inactive investment accounts refer to investment accounts for mainland investors that have no asset balance as of May 22, 2026, and have not had any client-initiated activity in the preceding 12 months. The regulatory consideration is very practical: These accounts may seem low-risk on the surface, but once they are used for fund bridging, account trading, or abnormal transactions, financial institutions find it hard to explain why they have been left there.

Third, new account declarations. When mainland investors open new investment accounts, they must confirm in writing that the funds used to support investment activities and related settlements come from legitimate sources outside of mainland China; they must also confirm that they have not had any accounts closed or suspended by any broker or bank due to the use of suspicious or forged documents; if there are changes in declaration information, they must notify the institution within 7 working days; in the future, when law enforcement or regulatory agencies request, institutions may disclose relevant personal information. Meanwhile, future deposits and withdrawals for investment accounts must be completed through bank accounts opened under the client's name by banks licensed in Hong Kong or regulated banks in qualified jurisdictions. This requirement appears in both the SFC's measures for licensed corporations and the HKMA's requirements for registered institutions in the banking sector, approaching a new baseline for industry-wide compliance.

These requirements may seem to be within the account opening process, but they actually govern the entire business chain behind the accounts. In the past, some businesses could simply bring clients to open accounts and then separate the funds and transactions, allowing institutions to claim they were merely providing a Hong Kong account. This explanation will become increasingly weak. Regulators will require institutions to consider client identity, documents, funds, settlement accounts, and service locations together.

In other words, if a business primarily relies on account opening convenience, remote diversion, and fund circumvention to scale, it will find it increasingly difficult to operate.

Hong Kong Banks Step to the Forefront

In the past, when discussing illegal cross-border securities business, people were more likely to think of roles such as internet brokers, account opening intermediaries, financial media, KOLs (Key Opinion Leaders) directing traffic, and domestic client managers. Banks were often seen as providers of backend funding accounts.

The recent actions of the HKMA precisely indicate that banks can no longer remain in the backend. The SFC's circular first clearly outlines the issues on the broker side: account documents, overseas intermediaries, client fund activities, and dormant accounts may all be linked on the same risk chain. Although banks do not directly engage in transaction matching, as long as they provide investment accounts, settlement accounts, and investment functions within comprehensive accounts, they will be scrutinized on the same diagram.

Investment accounts and investment functions within comprehensive accounts can inherently connect client identity, fund sources, securities trading, wealth products, and cross-border settlements. When mainland regulators clearly rectify illegal cross-border securities, futures, and fund operations, if Hong Kong banks' investment accounts are used to undertake similar services, it will be difficult for banks to claim they are merely a passive channel.

This is also why the HKMA specifically mentioned in the documents that if banks provide non-investment account services to individuals from mainland China, they must adopt a risk-based approach to implement anti-money laundering and counter-terrorist financing controls and pay attention to the applicable mainland rules for these clients. Here, AML refers to anti-money laundering requirements. The forms are merely for record-keeping; the real questions to answer are who the clients are, where the funds come from, what the transaction purposes are, and whether account activities align with the account opening purposes.

For Hong Kong banks and brokers, future compliance pressure will significantly increase. Institutions will need to re-examine account opening materials, client classifications, declaration texts, deposit and withdrawal accounts, employee scripts, cross-border partners, external diversion channels, and complaint handling mechanisms. The business teams that previously relied on explanations like "clients come on their own," "we only provide Hong Kong services," and "the online system completes automatically" will now need more concrete evidence.

From a business perspective, this will make some institutions more cautious. In the short term, it would not be surprising to see a suspension of investment account openings for some clients with mainland ID cards, requiring additional declarations to be signed, or suspending new buy transactions for clients who have not signed the declarations. Institutions certainly want to do business, but when regulatory boundaries are unclear, no one wants to put themselves at the forefront.

Gray Financial Intermediaries Become Difficult

The impact of this matter on the industry will extend beyond the experience of opening a bank window.

The first to be affected will be the gray account opening and diversion businesses. In the past, there were many marketing pitches in the market, centered around helping mainland investors more conveniently open Hong Kong and U.S. stock accounts, open Hong Kong investment accounts, or even package residential addresses, bank statements, income proofs, and fund sources. Such businesses could previously hide under the guise of "information services," "consulting services," and "client voluntary." Now that regulators have included suspicious documents, fund sources, personal bank accounts, and histories of accounts being suspended or closed within the declaration and verification scope, the space for such intermediaries will be greatly reduced.

The second category affected will be cross-border wealth management platforms. Future product designs cannot solely focus on yield, transaction convenience, and account conversion rates; they must first address client sources, service locations, marketing boundaries, fund paths, and applicable channels. For example, whether clients are physically in Hong Kong, whether funds come from legitimate sources outside of mainland China, whether transaction settlements are completed through qualified bank accounts under the client's name, and whether institutions have engaged in solicitation, account opening assistance, transaction instruction processing, or fund transfer services in the mainland. Any unclear explanation at any link may interrupt even the most attractive product experience.

The third category is that the value of compliant channels will increase. The HKMA mentioned in the documents that if relevant mainland investors intend to invest in securities in Hong Kong, banks can guide qualified investors to use cross-border investment channels between mainland China and Hong Kong, such as the Cross-Border Wealth Management Connect, Shanghai-Hong Kong Stock Connect, and Shenzhen-Hong Kong Stock Connect. This statement is crucial. Regulators acknowledge that mainland residents have overseas investment needs but will guide those needs into pathways that have been confirmed by the system. In the future, those who can truly scale in cross-border wealth management may not necessarily be the institutions that make the account opening process the smoothest, but rather those that can clearly articulate compliant channels, client suitability, fund paths, and product boundaries.

This will also change the competitive landscape of the Hong Kong market. Previously, some institutions competed on client acquisition speed and account opening convenience; in the future, it will be more important for institutions to translate mainland client needs into compliant pathways, which may be more valuable than institutions that only sell "Hong Kong accounts."

Conclusion

Recently, I have been traveling to Hong Kong for business every month, and each time I communicate with friends involved in finance in Hong Kong, it gives me a somewhat fresh perspective and insights into the term "doing finance in Hong Kong."

In the past, many businesses viewed Hong Kong as an "account entry point": clients come from the mainland, accounts are opened in Hong Kong, funds are routed through several turns, and then connected to securities, funds, Hong Kong and U.S. stocks, or financial products, with a plethora of variations.

However, with this wave of tightening regulatory policies from mainland China and Hong Kong, the days of doing finance in Hong Kong seem to be increasingly promising. After all, with a large market demand, opportunities in Hong Kong will arise.

But this opportunity, I think, is becoming increasingly irrelevant to the vast majority of people.

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