This month, politicians also floated a new anti-sanctions bill that would bar foreign entities and individuals in Hong Kong and Macao from complying with sanctions against China, which now controls the former British colony. Experts say this could create headaches for financial institutions in the city, due to the global nature of their work.
Its likely implementation means that “most people expect that financial institutions in Hong Kong are going to be on the front lines,” according to Nick Turner, a lawyer at Steptoe & Johnson who advises banks on economic sanctions.
“They’re integrated into the international economy. They handle a lot of transactions between the United States and Hong Kong and the rest of the world. And so they have some exposure to US law,” he said. “That’s where the real conflict could exist.”
A precarious position
The move effectively locked out those passport holders from cashing out their savings early if they wanted to move abroad.
AIA, Manulife and HSBC all told CNN Business that they would process applications to access such savings in accordance with regulatory requirements.
Banks are no stranger to the political melee.
Bracing for impact
Hong Kong has long been one of the world’s leading financial hubs. But businesses have found themselves in the difficult position of balancing rising tensions between the West and Beijing.
“There’s a push and pull here. And for sure, the banks are right in the middle of it,” said Paul Schulte, a former Hong Kong investment banker who now runs Schulte Research, a company that tracks banking and fintech.
Turner, who is based in Hong Kong, said that banks have been “paying close attention” to the matter, placing a “high” level of concern on how the law could reshape their compliance programs, among other scenarios.
“But they want to see exactly how the law will be implemented in Hong Kong before they take specific steps,” he noted. “For example: thinking about where they locate their compliance staff, how they carry on certain operational procedures, or whether or not they’re going to adopt different policies for their Hong Kong and Chinese entities, as opposed to their global entities.”
Those restrictions cut the city’s top leader off from the American financial system.
“I don’t have a bank account,” Lam told Hong Kong International Business Channel, a local TV station, in November. “I have piles of cash at home, because the government is paying me cash for my salary.”
Asked whether the new law could take aim at banks that restricted Lam and other officials, Turner said it was too early to tell.
“People are very interested to know [this], but that might not be the case,” he added.
Potential targets
Some banks, however, are already being seen as potential targets.
Schulte said that HSBC was “for sure” one of the biggest examples, primarily due to the size of its presence in Hong Kong, its biggest market. In addition to its own operations, the British lender has a controlling stake in Hang Seng Bank, a top local player.
HSBC, Hang Seng Bank and Standard Chartered all declined to comment on the anti-sanctions law.
Businesses are wary of possible countermeasures if they comply with sanctions against China, which could include deportations, the denial of visas and the seizure of company assets. The anti-sanctions law in the mainland already allows for such consequences, though officials haven’t indicated whether the same should be expected in Hong Kong.
Schulte floated another scenario, in which he suggested firms could risk losing their Chinese business licenses for certain divisions if their colleagues in other jurisdictions complied with sanctions against China.
“What about other parts of the world where Chinese and foreign incorporated banks located in Hong Kong are complying with American demands?” he said. “In Geneva, London, Zurich, Paris … Frankfurt. That’s where it can get very hot under the collar.”
The ongoing challenges are simply another sign of how banks in Hong Kong are navigating a new normal, according to Schulte, who previously worked with the White House National Security Council in the 1980s.
“There is a cold war that is intensifying very quickly in front of our eyes,” he said. “And really, [they’re being told,] ‘You got to pick a side.'”
— Jadyn Sham, Eric Cheung and Carly Walsh contributed to this report.