US leg­is­lat­ing to fine banks that do busi­ness with Chi­nese of­fi­cials

The Daily Telegraph - Business - - Business - By Lucy Bur­ton

WESTERN banks could be forced to con­duct sweep­ing re­views of their op­er­a­tions in China af­ter Amer­i­can politi­cians ap­proved sanc­tions linked to a con­tro­ver­sial se­cu­rity law im­posed on Hong Kong.

Non-US banks could be handed mul­ti­mil­lion-pound fines for do­ing busi­ness with cer­tain Chi­nese of­fi­cials un­der the new law, which has been signed off by the House of Rep­re­sen­ta­tives and must now face the US Se­nate be­fore be­ing sent to Don­ald Trump.

The Amer­i­can rule could pose a se­vere headache for Bri­tish len­ders such as HSBC, Stan­dard Char­tered and Bar­clays by forc­ing them to comb through client data­bases to en­sure they are not break­ing the rules. It will also likely con­cern firms such as Credit Suisse and UBS, which have vig­or­ously courted rich Asian clients as part of a push into wealth man­age­ment.

HSBC and Stan­chart are par­tic­u­larly ex­posed given their huge pres­ence in Hong Kong. Both face a sav­age back­lash be­cause they backed the se­cu­rity law, which al­lows po­lice to ar­rest dis­si­dents in the for­mer Bri­tish colony.

Ja­son Hunger­ford, a trade ex­pert at law firm Mayer Brown, said the sanc­tions could re­strict the sort of trans­ac­tions banks are able to en­gage in. He said: “The im­pact will be on the busi­ness they can con­duct. They may have to re­think some client re­la­tion­ships – if a gov­ern­ment min­is­ter [who has been sanc­tioned] is a ben­e­fi­cial owner of an in­dus­trial com­pany, and that com­pany banks with HSBC, that could be con­sid­ered a sig­nif­i­cant trans­ac­tion. HSBC will take a con­ser­va­tive view.”

How­ever one HSBC in­vestor said that share­hold­ers were not con­cerned that the sanc­tions would rat­tle banks as they would likely just be against some in­di­vid­u­als rather than putting their whole busi­ness mod­els at risk. Shares in HSBC and Stan­dard Char­tered rose 3.9pc and 2.6pc re­spec­tively yes­ter­day.

Sources said that bank lobby group UK Fi­nance is keep­ing a close eye on de­vel­op­ments both from the UK and via con­tacts in Hong Kong to see how the po­ten­tial sanc­tions might im­pact mem­bers.

Lon­don-listed HSBC was founded in Hong Kong in 1865 and makes al­most all of its money in Asia.

Michael O’Kane, a white-col­lar crime lawyer at Pe­ters & Pe­ters, said that banks are “ex­tremely ner­vous about falling foul of US law” and so will en­sure they are not deal­ing di­rectly with any­one who is sanc­tioned once the list comes out. In the worst case len­ders that anger the Amer­i­can author­i­ties could be stripped of their cru­cial dol­lar li­cences.

He said this puts banks in a dif­fi­cult po­si­tion be­cause they risk an­ger­ing the Chi­nese when fol­low­ing US or­ders.

Do­minic Raab, the For­eign Sec­re­tary, this week launched a fresh broad­side against HSBC over its sup­port for a bru­tal crack­down in Hong Kong.

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