US lets major banks off for serving sanctioned officials in Hong Kong crackdown, providing relief for Citi, HSBC, and others

US lets major banks off for serving sanctioned officials in Hong Kong crackdown, providing relief for Citi, HSBC, and others

Martin Choi martin.choi@scmp.com
·4 min read
 

The United States government has decided to let some of the world’s biggest banks off for doing business with several officials on a US sanctions list over the Chinese government’s enactment of the national security law for Hong Kong.

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Illustration by Kuen Lau alt=Illustration by Kuen Lau

 

The Treasury report – required under the Hong Kong Autonomy Act – follows an October report which identified Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor and nine officials, all of whom were previously sanctioned by the US State Department, for their roles in “contributing to the failure of the Government of China to meet its obligations under the Joint Declaration or Basic Law”.

“The Treasury Department will only identify FFIs that knowingly conduct a significant transaction with a foreign person identified” to have undermined Hong Kong’s freedoms, it said, adding that under US law, the report on foreign financial institutions in violation will be completed within 60 days.

HSBC’s Asia-Pacific deputy chairman Peter Wong Tung-shun signing a petition to support China’s security law for Hong Kong on June 3, 2020. Photo: Handout alt=HSBC’s Asia-Pacific deputy chairman Peter Wong Tung-shun signing a petition to support China’s security law for Hong Kong on June 3, 2020. Photo: Handout

The sanctions block the US-based assets of the individuals, and US banks and businesses are generally prohibited from dealing with those officials. Hong Kong’s chief executive said she has been collecting her salary in cash to get around sanctions that limit her ability to conduct banking, in her video interview with South China Morning Post.

The Sino-British Joint Declaration on Hong Kong is the agreement under which the two governments paved the groundwork for China to regain its sovereignty over Hong Kong in 1997. The document, signed in 1984 guaranteed that Hong Kong would retain a high degree of autonomy for 50 years until 2047 after the handover of the former British colony to China.

Banks such as HSBC and Standard Chartered have had a tumultuous year. In April, the United Kingdom’s chief financial regulator asked the country’s biggest lenders to suspend dividend payments and share buyouts to investors in 2020.

HSBC’s minority shareholders holding a protest at the bank’s headquarters in Central on 8 April 2020 over the bank’s announcement to halt paying dividends. Photo: Dickson Lee alt=HSBC’s minority shareholders holding a protest at the bank’s headquarters in Central on 8 April 2020 over the bank’s announcement to halt paying dividends. Photo: Dickson Lee

The announcement wiped billions of dollars in value off the shares of HSBC and Standard Chartered. The decision was only reversed this week when the Bank of England’s regulatory arm made a policy U-turn and gave major lenders approval on Friday to resume dividend payouts as early as next year.

HSBC was also caught in the storm when Hong Kong’s former chief executive Leung Chun-ying criticised the bank – which traces its century-long roots to Hong Kong and Shanghai – for “[making] money from China while following other Western countries trying to damage the country’s sovereignty, dignity, and the feelings of the people.”

A few days after Leung’s criticism, HSBC’s Asia-Pacific chief executive signed a petition in support of the Chinese legislature’s proposed law for Hong Kong. That support drew a rebuke from US Secretary of State Mike Pompeo, who criticised HSBC for “corporate kowtow” to China. The bank’s 12th-largest shareholder Aviva also indicated its “uneasiness” with the decision.

Meanwhile, Hong Kong is still being pummelled by political upheaval. China’s National People’s Congress Standing Committee (NPCSC) passed a resolution last month allowing the removal of any Hong Kong lawmakers found to have violated their duty of allegiance or endangered national security. This prompted all 15 of the city’s opposition lawmakers to resign en masse.

With additional reporting by Bloomberg

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2020. South China Morning Post Publishers Ltd. All rights reserved.