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When can Hong Kong financial institutions freeze accounts, and must you be concerned?

The freezing of financial institution accounts belonging to individuals and a church in Hong Kong around last year’s anti-federal government protests has sent a ripple effect through the sector, with critics warning trader self esteem may perhaps be afflicted in a town renowned for its posture as a economic centre.Accounts less than HSBC, Dangle Seng Bank and the Financial institution of China belonging to self-exiled previous opposition lawmaker Ted Hui Chi-fung and his household were frozen about the weekend, locking up HK$850,000 (US$109,000).Hui was accused by police of misappropriating funds from a crowdfunding marketing campaign, and observed his bank account, along with these of his mothers and fathers and spouse, frozen following he fled to Britain by way of Denmark past 7 days, leaping bail on a raft of criminal costs relevant to very last year’s protest movement.Get the hottest insights and investigation from our Global Impact e-newsletter on the significant stories originating in China.Individually, at least three HSBC accounts affiliated with the Very good Neighbour North District Church have been frozen, a shift the organisation known as an “act of political retaliation” for its assist for protesters through previous year’s social unrest.Police claimed they have been investigating the church in excess of cash-laundering and fraud prices, involving how it experienced gained HK$27 million in donations around much more than a yr but only publicly declared fewer than a third of the total.The church ran a ministry regarded as “Protect the Children”, which mediated involving police and protesters with a bid to de-escalate protest tensions. The church account, and individuals of pastor Roy Chan Hoi-hing and his spouse – who ended up on sabbatical in Britain – ended up frozen.Both Hui and Chan’s instances stemmed from police’s guidelines to the banks as element of investigations into allegations of funds laundering and misappropriation.Equally males claimed they observed out about their locked accounts from overseas, with no prior notification specified. They demanded explanations from HSBC.The banking large was also embroiled in an additional high-profile investigation past calendar year in excess of money laundering and crowdfunding allegations towards fundraising system Spark Alliance HK in December. The platform was recognized for funding protesters.Simon Lee Siu-po, co-director of the international enterprise and Chinese organization programme at Chinese College, explained the the latest functions involving financial institutions had dealt a serious blow to Hong Kong as a world wide monetary hub.“These incidents have significantly undermined trader self-assurance in Hong Kong’s banking sector. Buyers will have 2nd ideas on no matter whether to set their funds in Hong Kong as they could panic their property will be effortlessly frozen by banking institutions beneath the countrywide security regulation,” he said.The Put up appears to be like at the implications and feasible implications of asset freezing by Hong Kong financial institutions. When can banking companies freeze assets, and can they reject police’s request to lock accounts?Methods for freezing property are out there less than the Organised and Serious Crimes Ordinance (OSCO), the Drug Trafficking (Restoration of Proceeds) Ordinance, and the Mutual Authorized Help in Prison Matters Ordinance. Beneath the guidelines, Hong Kong police have powers to use to court docket for a restraint order to freeze accounts suspected of becoming connected to criminal offense proceeds.Less than the OSCO and with regard to funds laundering, an obligation on all money establishments is imposed, requiring them to file a “suspicious transaction” report to the Joint Economic Intelligence Device (JFIU), without the need of tipping off the account holder, in excess of any money exchange thought of to be questionable.These failing to comply with this reporting system are issue to a high-quality of up to HK$50,000 and three months imprisonment.Soon after receipt of the report the JFIU may then concern a “no consent” letter directing the financial institution that it does not have consent to deal with the account in query. The JFIU will then move the report to law enforcement for follow-up.The bank, in exercise, will not deal further more with the transaction less than the suspected account, which is akin to the funds being frozen.If a financial institution receives a letter from law enforcement stating that the customer is concerned in a criminal investigation and it must offer help, the financial institution would generally file a report to JFIU, to stay clear of functioning afoul of the regulation.Separately, below the implementation guidelines for Write-up 43 of the national security regulation, the secretary for safety may possibly concern a published discover to freeze belongings if authorities have “reasonable grounds” to suspect the house is associated to an offence endangering countrywide safety. Moreover, the secretary for justice may perhaps use for a restraining order or charging order to the Courtroom of Initial Instance to confiscate or forfeit such assets.A finance sector insider explained a bank would be authorized to just take motion by itself in opposition to accounts suspected of irregularities. What attraction channels do asset holders have if they discover their accounts frozen?Beneath the “no-consent” system of OSCO, account holders can provide civil proceedings towards the lender if dissatisfied.They can also look for payment from the authorities for withholding their residence below various terms, like if a disclosure has been designed in relation to that residence, no proceeding is instituted from the man or woman holding the house, and that there has been some significant default in the investigation or prosecution. What are international banking practices on the freezing of property?In Britain, if a lender suspects that a person’s account is remaining applied to dedicate criminal offense or revenue laundering, it will make a suspicious action report to the National Criminal offense Company (NCA) who may well examine the individual. The account will be frozen and all related bills and standing orders stopped.If the NCA believes the financial institution account is being utilised unlawfully, it will apply to the Magistrates’ Court for an order against the particular person to freeze that account for up to two yrs and the circumstance will be handed over to law enforcement for investigation.Law enforcement can even more utilize for the cash to be forfeited if they can demonstrate proof of criminal house.In the United States, banking institutions have the authority and discretion to freeze accounts if they suspect shoppers of conducting illegal pursuits. Banking laws in the US turned stricter soon after the September 11 terrorist attacks to crack down on legal enterprises that use money institutions to perform their firms.US banks routinely watch accounts for suspicious activity these as dollars laundering, where enormous resources produced from criminal exercise are deposited into financial institution accounts and moved all over. Suspected terrorist financing is also yet another cause why US banking companies often freeze accounts. HSBC distances by itself from law enforcement crackdown on protest fundraiser If banks freeze accounts with out authorized grounds, how will Hong Kong’s status as a financial hub be impacted?Simon Shen Xu-hui, an international relations scholar at Chinese College, reported on Facebook that protest circumstances involving banking companies as law enforcement crack down on groups across the metropolis had taken a toll on money institutions these kinds of as HSBC.“HSBC naturally has become a single of the largest casualties,” he stated, referring to what he noticed as a reduction of trust from Hongkongers in the banking giant.He pointed out that HSBC was caught involving a rock and a tough location as it was tough for the lender to change down police’s requests. On the other hand, he explained the financial institution experienced evidently bowed to authorities out of fear of offending Beijing, and this turned off numerous people today.“As a end result, its track record in the global finance sector has been likely downhill though it no for a longer period wins the have faith in of Hongkongers,” he reported.An HSBC spokeswoman mentioned the financial institution was not able to remark on unique instances, when asked about the motion on Hui and Chan. The spokeswoman added HSBC experienced to comply with laws, and directed media inquiries to the similar regulation enforcement agency.A senior banking government with a lot more than 30 decades in the marketplace claimed he was amazed at the spate of frozen accounts on grounds of investigations into money laundering and crowdfunding, boasting the moves have been politically inspired.“While investigations go on, has any individual thought of the implications on the self-assurance in the financial technique?” he claimed on ailment of anonymity. What is the part of the Hong Kong Financial Authority?As the regulator of 164 banks in Hong Kong, the authority – the de facto central lender in the town – informed the Write-up it was not associated in criminal investigations and that regulations did not authorise it the electricity to freeze money or residence. As a result, the authority has not issued any recommendations on such matters.Nonetheless, the town adopts specifications and operate preparations on its anti-cash-laundering framework, which the authority explained were in line with worldwide necessities and apply.It said law enforcement agents had been accountable for actions this kind of as investigating crimes, as properly as tracing, restricting and confiscating funds or home, while the authority’s purpose was to supervise the compliance of banking institutions in laws and polices.For case in point, in terms of income laundering, the authority regulates financial institutions by making certain they comply with anti-revenue-laundering law by working out due diligence on clientele, and observing document-retaining prerequisites.“The freezing of cash or property relevant to neighborhood or abroad legal investigations is carried out by pertinent legislation enforcement agents (these as law enforcement, customs or the Independent Commission In opposition to Corruption) and the Section of Justice below the pertinent legal guidelines,” the authority said. “Financial institutions are predicted to cooperate with law enforcement brokers on investigations.”More from South China Morning Put up: * Hong Kong church that aided protesters sees lender accounts frozen, allegedly in relation to crowdfunding marketing campaign * Hong Kong law enforcement freeze financial institution accounts of fugitive ex-lawmaker Ted Hui’s family members, accusing him of embezzlement, attainable protection regulation violations * Hong Kong protests: China’s Rebel City, in-depth documentary on 2019’s upheavalThis write-up When can Hong Kong banks freeze accounts, and should really you be concerned? initial appeared on South China Morning PostFor the most current news from the South China Morning Post download our cell app. Copyright 2020.