Page 2 of 2

Despite the reach of the all-powerful dollar, its extent is finite. A handful of local banks could bypass U.S. and global radars to support transactions and other financial needs for sanctioned individuals, save for direct access to the greenback.

«Risks for listed China banks are relatively muted, in our view, as the four China officials on the list may obtain banking services with local unlisted Chinese banks that do not have dollar or U.S. businesses,» according to note authored by Hong Kong-based J.P. Morgan analysts.

#4: Next List
Although it is much too early to speculate about the possibility of a second list and the potential individuals named, there are already signals from both pro-Beijing figures and banks nonetheless about the fears of being caught in Washington’s net.

Bernard Chan – a prominent member of a 16-strong council of advisors that serve Hong Kong’s Lam on her cabinet – in late July reportedly said that although he did to expect someone of his rank to be targeted by U.S. sanctions banks were turning away new business from him and that he heard similar experience from other government officials. Chan is one of the two out of 16 council members that have assets in the U.S. – a self-use property in San Francisco.

More recently, the credit union of Hong Kong’s police force – also widely accused for undermining the city's autonomy – said in was in the process of shifting around $1.4 billion in assets from foreign banks to mainland China-based banks over concerns about U.S. measures against the local administration. Hong Kong’s current police commissioner Chris Tang Ping-keung and retired predecessor Stephen Lo Wai-chung were amongst the 11 individuals on the sanction list.

#5: Compliance = Violation

Even upon successfully conquering compliance risk linked with U.S. sanctions, banks must address the issue of mutually exclusive compliance to Beijing's national security law.

According to Article 29 of the newly enacted legislation, «imposing sanctions or blockade, or engaging in other hostile activities against the Hong Kong Special Administrative Region or the People’s Republic of China» are one of five offences defined as «collusion with a foreign country or external elements» deemed a threat to national security.

«The most likely result – if China is serious about enforcing their own provision of the national security law prohibiting compliance with foreign sanctions – is that the banks will have to pick the U.S. or Hong Kong,” Julian Ku, a professor of constitutional and international law at New York-based Hofstra University, reportedly said. «But not both.»