Dilemma for multi-national financial institutions in Hong Kong: Can one meet the national security requirements of both the Chinese and foreign governments?
The latest development in relation to 11 senior Hong Kong and Chinese officials being added to the Specially Designated Nationals And Blocked Persons List (the “SDN List”) as published by the U.S. Office of Foreign Assets Control (the “OFAC”) by the U.S. Department of Treasury has turned the clash of conflicting regimes between local Hong Kong national security-related laws and foreign legislations on Hong Kong-related sanctions from a looming possibility to an immediate timed-bomb for banks and financial institutions with operations in Hong Kong. The wide scope of application of foreign legislations on Hong Kong-related sanctions (most notably, the Hong Kong Autonomy Act 2020 (the “Autonomy Act”) as enacted by the U.S Congress in July 2020), as well as Hong Kong’s own law on national security (most notably, the Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region (the “National Security Law”)) means that in complying with the provisions of one set of these legislations, banks and financial institutions are likely to be in the jeopardy of breaching the other. Against this background, this article takes the Autonomy Act and the National Security Law as examples to point out the technical difficulties in meeting the national security requirements of both the Chinese and foreign governments, while providing ways to mitigate the operational and legal risks faced by banks and financial institutions with operations in Hong Kong.