© Reuters. FILE PHOTO: A man walks past buildings in a commercial district in Hong Kong, China, Nov. 4, 2019. REUTERS / Kim Kyung-Hoon
By Alun John and Scott Murdoch
HONG KONG (Reuters) – Global banks and other financial institutions in Hong Kong are scrambling to figure out the details of China’s planned imposition of an anti-sanctions law in the city and trying to understand how it could affect their operations in the financial center. .
Beijing adopted a law in June under which individuals or entities involved in adopting or implementing discriminatory measures against Chinese citizens or entities could be placed on a government sanctions list.
Financial firms are closely watching a meeting this week https://www.reuters.com/world/china/chinas-top-legislature-discuss-adding-anti-sanctions-law-hong-kong-friday-media-2021 -08-17 from the Standing Committee of the National People’s Congress, China’s highest body of parliament, for signals on how and when similar legislation will be introduced in Hong Kong.
Hong Kong leader Carrie Lam said on Tuesday she did not have an explicit timetable for its implementation.
The move came as the US government imposed several rounds of sanctions on Chinese and Hong Kong officials for Beijing’s crackdown on the city’s freedoms under comprehensive national security legislation.
Under planned law, if financial institutions in Hong Kong implement US sanctions, they may be exposed to legal risk in Hong Kong for doing so, financial sector executives and lawyers said.
“Many foreign multinational companies are asking about the impact of the foreign sanctions law, especially international banks and financial institutions,” said Shaun Wu, a partner at the Hong Kong-based law firm Paul Hastings.
“It is significant because banks and international financial institutions can find themselves caught between a rock and a hard place.”
Concerns have been raised about the prospects for foreign financial institutions in one of its most lucrative markets since Beijing implemented the security law in the former British colony last year.
The anti-sanctions law now raises the specter of financial firms being caught in the crossfire as the confrontation between the world’s two largest economies intensifies.
While senior executives at Hong Kong’s largest financial firms have not voiced their concerns publicly, people familiar with the matter said there had been intense internal discussions about how to deal with it.
A senior executive told Reuters that Hong Kong Finance Secretary Paul Chan abruptly canceled a meeting with business groups scheduled for Thursday, without giving a reason.
The executive, who declined to be named due to the sensitivity of the matter, said the companies were struggling to obtain information and Chan had made no effort to allay concerns despite repeated requests for meetings.
Hong Kong and Chan government offices did not immediately respond to Reuters’ request for comment.
Hong Kong is the regional center for many global financial firms and accounts for most of the profits of firms such as HSBC and Standard Chartered (OTC :).
“Some of our financial institution clients are trying to plan different scenarios before the foreign sanctions law, trying to decide what they would do if someone is sanctioned by the US and subsequently risks being prosecuted in Hong Kong. for complying with such penalties, “said Rod Francis, director of the financial crime practice at FTI Consulting (NYSE :).
“But while scenario planning is helpful, there is a lot of that kind of navel watching that you can actually do.”
COMPLIANCE WITH THE LAW
Last year, the US imposed sanctions preventing US companies https://www.reuters.com/article/us-usa-china-hong-kong-sanctions-idUSKCN253215 and non-US banks https: // www.reuters.com/article / usa-hongkong-report-idUSKBN27008Q from doing business with various Hong Kong and Chinese officials who he said implemented Beijing’s national security law in Hong Kong.
A separate US ban on investments in companies Washington considers to be linked to the Chinese military forced US banks in Hong Kong https://www.reuters.com/article/us-china-usa-hkex-idUSKBN29F0EY to reduce the exhibition this year to various Hong Kong. Chinese listed telecommunications companies.
A lawyer for an international law firm in Hong Kong said they had been inundated with calls related to the anti-sanctions law, but were not in a position to provide advice, given the total lack of clarity.
“We are waiting, like everyone else, to see what the law contains … it is difficult to guess what will be there,” said a US bank executive, who also declined to be named.
Senior executives at two large foreign banks in China told Reuters they had not received any details about the law, even in mainland China, and their efforts to seek clarity from regulators had been unsuccessful.
Some financial and legal professionals hoped that Hong Kong would implement a softened version of continental law to ensure that the city can maintain its status as a financial center.
Paul Hastings’s Wu said a lot would depend on who will enforce the new rules and how. “That agency is going to determine, in practice, how wide the gap will be between the rock and the hard place.”