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When can Hong Kong banks freeze accounts? Should you be concerned?
The freezing of bank accounts owned by individuals and a church in Hong Kong during anti-government protests last year has had a ripple effect on the sector, with critics warning that investor confidence may suffer in a city known for its position. as a financial center. The accounts of HSBC, Hang Seng Bank and the Bank of China belonging to former self-exiled opposition lawmaker Ted Hui Chi-fung and his family were frozen over the weekend, blocking HK $ 850,000 (US $ 109,000). Hui was charged by police with misappropriating money from a crowdfunding campaign, and saw his bank account, along with those of his parents and wife, frozen after he fled to Britain via Denmark last week, jumping bail of a series of criminal charges related to last year’s protest movement. the latest insights and analysis from our Global Impact newsletter on the great stories that originate in China. Separately, at least three HSBC accounts affiliated with Good Neighbor North District Church have been frozen, a move the organization called an “act of political retaliation” for its support of protesters during last year’s social unrest. Police said they were investigating the church on charges of money laundering and fraud, involving how it had received HK $ 27 million in donations for more than a year, but only publicly declared less than a third of the amount. The church ran a ministry known as “Protect the Children,” which mediated between the police and the protesters in an attempt to reduce the tensions of the protests. The church account, and those of Pastor Roy Chan Hoi-hing and his wife, who were on sabbatical in Britain, were frozen. Both the Hui and Chan cases stemmed from police instructions to banks as part of investigations into allegations of money laundering and misappropriation. Both men said they learned of their blocked accounts from abroad, without prior notification. They demanded explanations from HSBC. The banking giant was also embroiled in another high-profile investigation last year into money laundering and crowdfunding allegations against the Spark Alliance HK fundraising platform in December. The platform was known for funding protesters. Simon Lee Siu-po, co-director of the Chinese enterprise and international business program at the Chinese University, said that recent events involving banks had dealt a severe blow to Hong Kong as a global financial center. “These incidents have greatly undermined measure investor confidence in the Hong Kong banking sector. Investors will have doubts about putting their money in Hong Kong as they may fear that their assets will be easily frozen by banks under national security law, “he said. The Post discusses the implications and possible consequences of Hong Kong’s assets freeze. Kong banks. When can banks freeze assets and can they reject the police request to freeze accounts? Procedures for freezing assets are available under the Serious Organized Crimes Ordinance (OSCO), the Drug Trafficking Ordinance (Revenue Recovery) and Mutual Legal Assistance in Order finance of materials. Under the law, the Hong Kong police have powers to apply to the courts for a restraining order to freeze accounts suspected of being linked to proceeds of crime. Under the OSCO and with respect to money laundering, an obligation is imposed on all financial institutions, which requires them to Submit a “suspicious transaction” report to the Joint Financial Intelligence Unit (JFIU), without notifying the account holder, of any exchange of funds deemed questionable. Those who do not comply with this reporting mechanism are subject to a fine of up to HK $ 50,000 and three months in prison. After receiving the report, the JFIU may issue a “no consent” letter indicating to the bank that it does not have consent to manage the account in question. The JFIU will then pass the report on to the police for follow-up. The bank, in practice, will no longer deal with the transaction on the suspicious account, which is similar to freezing the funds. If a bank receives a letter from the police stating that the customer is involved in a criminal investigation and must provide assistance, the bank would normally file a report with the JFIU, to avoid breaking the law. Moreover, according to the implementing rules of article 43 of the national security law, the secretary For security reasons, may issue a written notice to freeze the assets if the authorities have “reasonable grounds” to suspect that the property is related to a crime that endangers national security. In addition, the clerk of justice may apply for a restraining order or indictment to the Court of First Instance to confiscate or forfeit such property. A financial industry insider said a bank could take action against accounts suspected of wrongdoing. What channels of appeal do asset holders have if they find their accounts frozen? Under OSCO’s “no consent” mechanism, account holders can bring civil actions against the bank if they are not satisfied. They can also request compensation from the government for retaining their property under various terms, even if a disclosure has been made in relation to that property, no proceedings are initiated against the person who owns the property, and there has been some serious breach in the investigation or prosecution. What are the international banking practices on asset freezing? In Great Britain, if a bank suspects that a person’s account is being used to commit a crime or money laundering, it will submit a suspicious activity report to the National Crime Agency (NCA), which can be investigated by the individual. The account will be frozen and all related bills and standing orders will be stopped. If the NCA believes that the bank account is being used illegally, it will petition the Magistrates Court for an order against the person to freeze that account for up to two years and the case it will be turned over to the police for investigation. The police can request the confiscation of the funds if they can show proof of criminal ownership. In the United States, banks have the authority and discretion to freeze accounts if they suspect that customers are engaging in illegal activities. Banking regulations in the US tightened after the 9/11 terror attacks to crack down on criminal companies using financial institutions to conduct their business. in bank accounts and moved. The alleged financing of terrorism is also another reason why US banks often freeze accounts. HSBC distances itself from police crackdown on protest fundraising If banks freeze accounts without legal basis, how will Hong Kong’s status as a financial center be affected? Simon Shen Xu-hui, an international relations scholar at Chinese University, said on Facebook that protest cases involving banks as police cracked down on groups across the city had affected financial institutions such as HSBC. “HSBC has obviously become one of the biggest victims,” he said, referring to what he saw as a loss of trust by Hong Kong people in the banking giant He noted that HSBC was caught between a rock and a hard place, already that it was difficult for the bank to reject requests from the police. However, he said the bank had apparently bowed to the authorities for fear of offending Beijing, and this discouraged many people. “As a result, his reputation in the international financial sector has gone downhill as he no longer earns the trust of Hong Kongers. “, Said. An HSBC spokeswoman said the bank could not comment on specific cases when asked about the action on Hui and Chan. The spokeswoman added that HSBC had to comply with the legislation and directed media inquiries to the related law enforcement agency. A senior banking executive with more than 30 years in the industry said he was surprised by the flood of frozen accounts. for reasons of investigations into money laundering and crowdfunding, claiming that the measures were politically motivated. “As the investigations continue, has anyone considered the implications for confidence in the financial system?” he said on condition of anonymity. What is the role of the Hong Kong Monetary Authority? As the regulator of 164 banks in Hong Kong, the authority – the de facto central bank in the city – told the Post that it was not involved in criminal investigations and that the laws did not authorize it. the power to freeze funds or property. Therefore, the authority has not issued guidelines on such matters, however, the city adopts standards and work arrangements in its framework to combat money laundering, which according to the authority were in line with international requirements and practice. . in charge of actions such as the investigation of crimes, as well as the location, restriction and confiscation of funds or assets, while the role of the authority was to supervise the compliance of the laws and regulations by the banks; For example, in the area of money laundering, the authority regulates banks by ensuring that they comply with the anti-money laundering law, exercising due diligence with clients and observing record-keeping requirements. “The freezing of funds or assets related to local or foreign criminal investigations is carried out by relevant law enforcement officials (such as the police, customs or the Independent Commission Against Corruption) and the Department of Justice under the relevant laws,” he said. The authority. “Financial institutions are expected to cooperate with law enforcement officers in investigations.” More from the South China Morning Post: * Hong Kong church that assisted protesters sees bank accounts frozen, allegedly in connection with crowdfunding campaign * Hong Kong police freeze bank accounts of former fugitive – Legislator Ted Hui’s family, accusing him of embezzlement, possible breaches of security law * Hong Kong protests: China’s Rebel City, in-depth documentary on the 2019 turmoil This article When can Hong Kong banks freeze accounts and should you worry? first appeared on the South China Morning Post For the latest news from the South China Morning Post, download our mobile app. Copyright 2020.
