Hong Kong is becoming a financial crime hub, US lawmakers say

Hong Kong CNN —

Hong Kong has become a hub of money laundering and sanctions evasion under Beijing's tightening grip, US lawmakers have warned, calling for a reassessment of America's close trade relationship with the Asian financial hub.

In a letter to U.S. Treasury Secretary Janet Yellen on Monday, bipartisan leaders of the House Select Committee on China demanded greater scrutiny from Washington of Hong Kong's prized financial sector. , a pillar of the economy that is home to many major American banks and represents more than a fifth of the Chinese territory's gross domestic product.

Hong Kong has become a world leader in illicit practices, he said, including the export of controlled Western technology to Russia, the creation of front companies to buy Iranian oil and the management of ghost ships. engaging in illegal trade with North Korea.

Since Beijing imposed a national security law on the city in 2020, Hong Kong has transformed from a trusted global financial center to a critical player in the People's Republic of China's deepening authoritarian axis. , Iran, Russia and North Korea, the lawmakers said. .

We must now ask whether long-standing US policy towards Hong Kong, particularly towards its financial and banking sector, is appropriate, they added.

The committee's letter cites a study published this year that shows nearly 40% of goods shipped from Hong Kong to Russia between August and December 2023 were high-priority items that could fuel Russian production of military goods such as missiles and planes.

The lawmakers asked Treasury Department officials to brief the committee on the current status of U.S. banking relationships with Hong Kong banks, how our policies have changed to account for changes in status and posture of Hong Kong, and the measures that the Treasury plans to implement to remedy this. these risks.

A U.S. Treasury spokesperson said the department had received the letter and would respond through appropriate channels.

In the letter, the Hong Kong government said it strongly disapproves and strongly rejects malicious smears aimed at Hong Kong's reputation as an international financial center.

A spokesperson said the Hong Kong government implements sanctions imposed by the United Nations Security Council, but does not implement unilateral sanctions imposed by other countries, which are a blatant violation of the international order .

Maintaining the integrity and robustness of our financial systems is high on the (Hong Kong) government’s agenda. Our banks and other financial institutions adhere to international standards and best practices, including those on anti-money laundering and anti-terrorism financing, the person said in a statement.

In 2020, then-President Donald Trump revoked the special treatment Hong Kong had long enjoyed under U.S. law, to punish Beijing for imposing the national security law on the once-franchised city. talk. The decree effectively ended the city's separate customs treatment from mainland China by suspending a 1992 law granting Hong Kong special economic status.

Since then, dozens of Hong Kong-based companies have been hit with US sanctions for evading extensive measures imposed on Russia in response to its invasion of Ukraine, including the supply of essential dual-use goods such as semiconductors.

Hong Kong officials have previously said the city has no obligation to implement unilateral sanctions imposed by other countries, including when a mega yacht linked to a Russian oligarch sanctioned by the United States, the European Union and United Kingdom anchored in the city in October 2022.

The lawmakers' letter, signed by Republican Rep. John Moolenaar, who chairs the committee, and Rep. Raja Krishnamoorthi, the panel's top Democrat, highlights the growing focus on Hong Kong amid the growing rivalry of major powers between the United States and China.

This comes as Trump prepares to return to the White House with a cabinet full of China hawks, including Marco Rubio, who has been named secretary of state.

Rubio, a staunch critic of Beijing's crackdown on Hong Kong, has sponsored legislation sanctioning Chinese and Hong Kong officials for alleged human rights abuses in the city. He also proposed a bill currently being considered in Congress to allow the Secretary of State to decertify Hong Kong's economic and trade offices to the United States.

Trump also nominated hedge fund executive Scott Bessent as Treasury secretary.

Isaac Stone Fish, CEO of Strategy Risks, a business intelligence firm that focuses on China, said that even if Yellen refuses to act on the letter, Bessent, who in a recent interview described Beijing as a despotic regime , should adopt a more hawkish approach towards China. China.

In fact, he appears to be the most hawkish Treasury secretary since the 1970s. That has huge implications for U.S. companies with heavy exposure to Hong Kong, Fish said.

Unfortunately, the idea of ​​Hong Kong being autonomous from China is now a farce. U.S. companies need to understand that their operations in Hong Kong will likely be subject to increased scrutiny.

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