Banks in Hong Kong have been suggested to report any transactions suspected of violating a controversial nationwide safety regulation to police, in accordance with a doc launched on-line by the town’s regulator.
The recommendation, printed by the Hong Kong Financial Authority, advised banks report breaches of the regulation as they’d any violation of money-laundering or terrorist financing laws. The steerage applies to each native and worldwide lenders within the metropolis.
Beijing imposed the regulation, which targets crimes similar to terrorism, subversion, secessionism and collusion with overseas components, on Hong Kong in June following pro-democracy protests final 12 months.
Critics say the safety regulation is just too far-reaching and vaguely outlined. They add that it violates freedoms assured to the town on its handover from the UK to China in 1997.
Worldwide banks that function within the metropolis, together with HSBC and Customary Chartered, have been criticised for brazenly backing the brand new guidelines.
Hong Kong regulators have but to publicly difficulty official pointers on how monetary establishments ought to implement the nationwide safety regulation.
However the doc posted by the HKMA mentioned reporting obligations underneath the regulation can be triggered when a financial institution “is aware of or suspects that any property is offence-related property”. The time period “property” refers back to the proceeds of a felony breach of the regulation.
Banks have been suggested to comply with procedures used for cash laundering, after they convey breaches to a police job pressure by what are often known as “suspicious transaction stories”.
The doc launched on the HKMA web site late final month, titled “Ceaselessly Requested Questions in relation to Anti-Cash Laundering and Counter-Financing of Terrorism”, was authored by the Hong Kong Affiliation of Banks. The affiliation is a statutory physique and membership is obligatory for all banks within the metropolis.
Banks have been instructed to be “absolutely conversant with these FAQs and to have regard to them in assembly their . . . authorized and regulatory obligations” underneath anti-money laundering and counter-financing of terrorism legal guidelines.
However banks might take the widest doable definition when reporting breaches of the regulation to make sure compliance with the brand new steerage and defend themselves from prosecution, in accordance with legal professionals and compliance consultants.
Nicholas Turner, a compliance lawyer at Steptoe, the regulation agency, mentioned the doc supplied extra readability however banks would nonetheless be “left to their very own units” in deciphering the regulation till they acquired official steerage from regulators.
“That could be a very troublesome dedication for a financial institution to make,” Mr Turner mentioned.
One Hong Kong-based worldwide financial institution compliance officer mentioned: “The most secure strategy for banks would doubtless be . . . report something barely associated to a breach.”
The financial institution compliance officer, who was not authorised to talk publicly, mentioned that if an outspoken pro-Beijing determine have been to accuse an individual in Hong Kong of violating the safety regulation, banks can be obliged to “look into it”.
“If we’re not certain, reporting is safer than not reporting,” the particular person mentioned.
Albert Ho, a pro-democracy politician, mentioned he had already acquired extra inquiries from his financial institution about his account for the reason that safety regulation was enacted. He mentioned he feared that the reporting system within the doc handed police “monumental energy to research” authorities critics.
Reporting shoppers for safety regulation breaches by this framework might additionally contravene requirements such because the UN Guiding Rules on Enterprise and Human Rights, mentioned Surya Deva, a regulation professor on the Metropolis College of Hong Kong.
“Banks ought to . . . conduct sturdy inner evaluation earlier than reporting any suspicious exercise, slightly than go for ‘over-inclusive’ reporting after which be accused of breaching the human rights of their prospects,” Mr Deva mentioned.
The HKBA didn’t reply to requests for remark.
The HKMA confirmed its “enter” into the doc however declined to touch upon issues surrounding it. “You will need to notice that the submitting of suspicious transaction stories relies on information or suspicion, with out the necessity to know the character of the underlying felony actions,” it added.