U.S. warns financial institutions of upcoming sanctions over Hong Kong security law

October 14, 2020.

Global banks and other financial institutions that serve people considered responsible for China’s crackdown on civil liberties in Hong Kong will soon face sanctions, the U.S. State Department said Wednesday. 

Any institution that conducts a significant transaction with any of 10 identified officials -- including Hong Kong’s Beijing-favored CEO Carrie Lam -- will be identified within 60 days, the State Department told Congress.

The department warned it will impose sanctions on any identified institutions including restrictions on loans from U.S. lenders, bans on involvement in U.S. foreign exchange, banking and property transactions, as well as bans on purchases of U.S. equities. 

The U.S. may also target individual executives of the banks, as outlined in the Hong Kong Autonomy Act, which was signed into law in July and supported by high-profile politicians from both the Democratic and Republican parties. 

The State Department did not identify any specific financial institutions on Wednesday, but many U.S. politicians have been highly critical of U.K. lenders and Standard Chartered for publicly supporting the national security law that China imposed on Hong Kong in June. 

The law dramatically curtailed civil liberties, free speech and the right to protest in the city-state. Several high-profile pro-democracy politicians, as well as the publisher of a pro-democracy newspaper, have been arrested following its passage. 

“The release of this report underscores our ongoing objection to Beijing’s actions that are intentionally designed to erode the freedoms of the people of Hong Kong and impose the CCP’s oppressive policies,” said State Department spokesperson Morgan Ortagus. 

All 10 individuals named on Wednesday were already targeted by U.S. sanctions in August, according to Ortagus. In addition to Lam, the list of targets includes Hong Kong Police Commissioner Chris Tang, high-ranking Hong Kong government security officials John Lee, Eric Chan and Yanxiong Zheng, as well as other pro-Beijing officials. 

Ortagus said the 10 named individuals “have undermined freedoms of assembly, speech, press or the rule of law.” or otherwise “reduced the high degree of autonomy of Hong Kong.” 

As tensions rise between the U.S. and China, banks operating in Hong Kong find themselves in an increasingly tight spot, trying to avoid angering both Chinese and U.S. authorities in a city that has long served as the economic conduit between the U.S., Europe and China. 

Bankers at Credit Suisse, HSBC, Julius Baer and UBS started more closely screening potential clients for ties to Hong Kong’s pro-democracy movement in order to avoid violating the new national security law, Reuters reported in July. 

HSBC may be especially vulnerable. The bank has staked its fortunes on Asia, implementing plans to slash 35,000 employees primarily in the U.S. and Europe while beefing up its presence in China. Yet Chinese state-run tabloid the Global Times reported last month that the bank may be placed on a government “unreliable entity” list, limiting its ability to do business in China. 

And in what could be seen as a sign of souring relations, HSBC was reportedly left off a $6 billion Chinese government dollar bond sale earlier this week, even as other banks including Standard Chartered, Bank of America and were included.