Global wealth managers are reportedly combing through comments publicly made by their clients – and their associates – as part of checks to ensure compliance with the newly enacted national security law in Hong Kong.
In order to ensure no violations against new legislation which prohibits what Beijing describes broadly as session, subversion, terrorism and collusion with foreign forces – the maximum sentence is life in prison – comments made in public, the media and social media posts are being carefully scrutinized, according to a «Reuters» report citing multiple unnamed sources.
According to one banker from a global wealth manager with over $200 billion in client assets, the audit traces as far back as 2014 «to gauge a client’s political stance» since the pro-democracy «Umbrella Movement».
In another instance, the top executive at a regional wealth manager said risk and compliance staff at the firm quickly created a list of 10 Hong Kong individuals considered the top pro-democracy sympathizers within days after the national security law’s enactment.
«Quite Relieved»
Under new legislation, authorities now have the ability to seize assets including through new police powers to freeze and confiscate funds and property as well as to obtain information. Banks could also be entangled as supporters of violators and could face penalties such as fines and the suspension or complete loss of licenses.
«[I was] quite relieved,» said the aforementioned top executive on his reaction when he discovered his bank did not have existing relationships with any on the top-10 list.
Banking a Democrat
According to the report, bankers at Credit Suisse, HSBC, Julius Baer and UBS were amongst the sources claiming to broaden scrutiny of politically exposed persons. It could not be confirmed who the clients were nor if banks would take action against these accounts.
«I think that if even a moderate democrat came through the door wanting to invest, you'd be thinking long and hard after this law,» said another unnamed Hong Kong-based hedge fund manager.
U.S.-Linked Contingencies Too
Banks are not only responding to Beijing’s legislation. Washington’s newly passed «Hong Kong Autonomy Act» will also target individuals implementing the national security law and banks that make significant transactions with them.
A handful of China's state-backed firms – including three of the «big four» state-owned banking giants – were reportedly preparing for various scenarios including lost access to U.S. dollars or U.S. government blacklisting of clients.
