What Do US Sanctions Mean for Financial Institutions in Hong Kong?

Forensic & Litigation Consulting | Financial Services

August 11, 2020

Newton's Cradle

On Friday, 7 August 2020, the Office of Foreign Assets Control (‘OFAC’) of the US Department of the Treasury updated its Specially Designated Nationals and Blocked Persons List (‘SDN’), imposing economic sanctions on 11 current and former Chinese officials.

In response to these events, FTI Consulting’s Financial Crime Compliance (‘FCC’) practice highlights some of the advice and discussions we are having with our financial institution (‘FI’) clients, particularly surrounding:

  • Managing evolving sanctions risk from a programme standpoint; and
  • Undertaking specific review and investigations work that might be prompted by internal programme requirements.

Response of Hong Kong’s Regulators

In response to these “unprecedented circumstances”, the Hong Kong Monetary Authority (‘HKMA’) issued a formal communication on 8 August 2020, setting out its expectations on the management of economic sanctions risk by FIs under its purview. The HKMA stated unilateral sanctions imposed by foreign governments, in this case US OFAC-administered sanctions, have no legal status and, therefore, “no obligation is created for AIs (“Authorised Institutions”) under Hong Kong law”.1 The circular reminded FIs of the need to establish and implement policies, taking a balanced approach, and based on thorough assessment of applicable risks.

The circular concluded:

“In assessing whether to continue to provide banking services to an individual or entity designated under a unilateral sanction which does not create an obligation under Hong Kong law, boards and senior management of AIs should have particular regard to the treat customers fairly principles.”

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