Having “piles of money” round the home is just not normally an admission a political chief is prepared to make.
However Hong Kong’s chief government Carrie Lam revealed late final yr that her wage was now being paid in money after she was focused by US sanctions and deserted by worldwide banks.
The US action in opposition to Chinese language and Hong Kong officers together with Ms Lam adopted Beijing’s imposition of a nationwide safety regulation on the territory in June. That not solely offered an issue for Ms Lam, but in addition a compliance nightmare for worldwide banks in Hong Kong.
These banks have been successfully pressured to decide on between entry to the US dollar-based monetary system and their need to remain in Beijing’s good books by maintaining open the accounts. They chose the US.
Initially, after informal assurances from regulators that they have been unlikely to fall foul of Beijing by slicing off the accounts, banks confidently instructed traders final yr they’d managed the battle.
However the freezing of a checking account of a former pro-democracy lawmaker over the brand new yr has proven the compliance issues are solely getting extra fraught for the banks, notably for HSBC, which is a dominant supplier of retail banking within the territory.
Hong Kong’s police requested that HSBC, the financial institution’s subsidiary Cling Seng and Financial institution of China freeze accounts owned by Hong Kong pro-democracy lawmaker Ted Hui and his household. Mr Hui, who has fled town for the UK, was out on bail over charges referring to his function within the 2019 anti-government protests.
The uproar over Mr Hui’s accounts pinged from Victoria Harbour to Westminster, the place there have been calls for the bank to be denounced and its executives hauled earlier than parliament.
“[HSBC] has behaved in a disreputable and appalling manner in freezing the accounts of a person fleeing for justice. Certainly that is an outrage that the federal government can now say ought to cease,” stated Iain Duncan Smith, a Tory MP and China critic. Mr Hui has urged the worldwide group to sanction monetary establishments that he believes are complicit in Beijing’s crackdown on Hong Kong.
Mike Pompeo, US secretary of state, had beforehand accused HSBC in August of aiding China’s “political repression” in Hong Kong.
Nonetheless, regulation consultants in Hong Kong say there have been few alternative options for HSBC.
“It’s fully regular to freeze the account of somebody accused of crimes,” Douglas Arner, a regulation professor and monetary regulation skilled on the College of Hong Kong, stated. “On this case . . . it’s a crime ample to get a freeze.”
Nick Turner, a compliance skilled at Steptoe, stated banks danger being held liable underneath native cash laundering legal guidelines in the event that they ignore police requests.
In the meantime, Hong Kong’s police and prosecutors have stepped up their crackdown on town’s pro-democracy opposition. Two high-profile activists, Joshua Wong and Agnes Chow, have been sent to prison final month. Individually, Jimmy Lai, the media entrepreneur and outspoken critic of Beijing, was detained by police and charged with fraud in early December over a dispute involving his workplace lease.
Weeks after his accounts have been frozen, Mr Hui — a relentless presence at 2019’s protests — additionally discovered that his and his households’ HSBC bank card accounts had additionally been closed. Mr Hui instructed the Monetary Instances that the financial institution didn’t “wish to do enterprise with me, with politicians and the household of politicians”.
HSBC stated: “We’re unable to touch upon issues regarding particular accounts. We have now to abide by the legal guidelines of the jurisdiction during which we function and this case is not any completely different.”
Attorneys say banks are more and more incentivised to keep away from providing companies to any Hong Konger who could get them into hot water.
One compliance officer at a world financial institution in Hong Kong stated staff are so fearful that they attempt to keep away from having their identify hooked up to selections on particular person accounts thought of political, even making an attempt to get closure selections signed off offshore. “We’re all on edge,” the officer stated.
With Hong Kong’s police focusing on the business and monetary pursuits of activists, and their critics within the UK and US simply getting louder, HSBC’s political issues are removed from over.