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What Do Hong Kong-Related Sanctions Mean for U.S. Financial Institutions?

A Swiftly Changing Landscape

Developments in Hong Kong and the U.S.’s reaction have been swift since June 30, 2020, when China’s National People’s Congress Standing Committee (NPCSC) passed the national security law (NSL) -- promulgated by Carrie Lam, the Chief Executive of Hong Kong Special Administrative Region (HKSAR).

The U.S. considers the NSL another action by China to erode the autonomy and rights promised to Hong Kong in the 1984 Sino-British Joint Declaration on the Question of Hong Kong, an international treaty preserving Hong Kong’s freedoms for 50 years from 1997 to 2047.¹

Accordingly, on July 14, 2020, President Trump signed both the Hong Kong Autonomy Act of 2020 (HKAA) and The President's Executive Order on Hong Kong Normalization (E.O. 13936). The HKAA requires the President, under certain conditions, to impose sanctions against non-U.S. or “foreign” persons (i.e., entities and individuals) and financial institutions that contravene China’s obligations with respect to Hong Kong’s autonomy.

E.O. 13936 declares the situation in Hong Kong a threat to the national security, foreign policy and economy of the U.S., due to the broad power China has given itself under the NSL to control prosecutions in Hong Kong, conduct proceedings in secret, and expel journalists, human rights organizations and other outside groups, making it more difficult to hold China accountable for its treatment of the Hong Kong people.

In response, E.O. 13936 implements provisions of the HKAA and sets forth additional sanctions, including criteria for designating and blocking foreign persons and eliminating preferential treatment for Hong Kong in various areas of U.S. law, including immigration and export controls.

Footnotes:

1: “The NSL criminalizes four broadly defined categories of offenses: secession, subversion, organization and perpetration of terrorist activities, and ‘collusion with a foreign country or with external elements to endanger national security’ in relation to the HKSAR. Persons convicted of violating the NSL can be sentenced to up to life in prison.

China’s central government can, at its or the HKSAR’s discretion, exercise jurisdiction over alleged violations of the law and prosecute and adjudicate the cases in mainland China. The law apparently applies to alleged violations committed by anyone, anywhere in the world, including in the United States.” (https://crsreports.congress.gov/product/pdf/R/R46473)