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Clock Ticks For Banks to Comply With Trump’s Hong Kong Sanctions

Published 15/10/2020, 05:29
Updated 15/10/2020, 06:09
© Bloomberg. Buildings in the Central district are seen from Victoria Peak in Hong Kong, China, on Wednesday, Aug. 28, 2019. Hong Kong's hotel industry is struggling with a collapse in bookings after thousands of protesters shut down flights from the territory's airport in an escalation of months of clashes with police. Photographer: Paul Yeung/Bloomberg

© Bloomberg. Buildings in the Central district are seen from Victoria Peak in Hong Kong, China, on Wednesday, Aug. 28, 2019. Hong Kong's hotel industry is struggling with a collapse in bookings after thousands of protesters shut down flights from the territory's airport in an escalation of months of clashes with police. Photographer: Paul Yeung/Bloomberg

(Bloomberg) -- The countdown has begun on whether banks will be ensnared in the Trump administration’s sanctions on Chinese and Hong Kong officials, singled out for contributing to a clampdown on political freedoms in the Asian hub.

A U.S. report to Congress on Wednesday named 10 officials, including Hong Kong Chief Executive Carrie Lam and Xia Baolong, the head of China’s Hong Kong and Macao Affairs Office, over their role in implementing a new security law in the former British colony. The State Department list reinforced sanctions imposed in August under an executive order, which had included one additional name.

Officials in the U.S. now have 60 days to identify banks that have business with those on the list, putting lenders at risk of being sanctioned. Banks operating in Hong Kong, including Citigroup Inc (NYSE:C). as well as major Chinese lenders, have already been taking steps to ensure they are compliant with U.S. laws.

The follow up will identify “any foreign financial institutions that knowingly conduct a significant transaction with the foreign persons listed in this report,” the State Department said based on what’s laid out in the Hong Kong Autonomy Act.

Citigroup in August took steps to suspend accounts linked to some of the targeted individuals, a person familiar with the matter said at the time. Standard Chartered (OTC:SCBFF) Plc, based in London, has also reviewed whether it has relationships with any of the officials and will monitor their transactions, another person said.

Even China’s largest state-run banks moved to comply, seeking to safeguard their access to crucial dollar funding and overseas networks. Major lenders with operations in the U.S. including Bank of China Ltd., China Construction Bank (OTC:CICHF) Corp., and China Merchants Bank Co. have turned cautious on opening new accounts for the 11 officials, including Lam, people familiar with the matter have said.

China’s state-owned lenders need to preserve their access to global financial markets. The four largest banks had $1.2 trillion in dollar funding at the end of June.

©2020 Bloomberg L.P.

© Bloomberg. Buildings in the Central district are seen from Victoria Peak in Hong Kong, China, on Wednesday, Aug. 28, 2019. Hong Kong's hotel industry is struggling with a collapse in bookings after thousands of protesters shut down flights from the territory's airport in an escalation of months of clashes with police. Photographer: Paul Yeung/Bloomberg

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