Shearman & Sterling LLP
Issue link: https://digital.shearman.com/i/1422677
2 emphasizes that financial institutions in particular should exercise increased caution to ensure compliance with U.S. anti-money laundering and counter-terrorism financing laws, including the Bank Secrecy Act. Second, on July 16, the U.S. Departments of State, Treasury, Commerce, and Homeland Security issued an advisory entitled "Risks and Considerations for Businesses Operating in Hong Kong," describing potential risks to U.S. persons related to the PRC's imposition of the so-called "National Security Law" (Law on Safeguarding National Security in the Hong Kong Special Administrative Region) in Hong Kong. According to the advisory, the National Security Law, which establishes vaguely defined offenses, including "secession, subversion, terrorist activities, and collusion with a foreign country or external elements to endanger national security," applies to U.S. businesses operating in Hong Kong. As a result, the advisory emphasizes that U.S. businesses and individuals operating in Hong Kong face increased risks, including: • electronic surveillance; • the surrender of corporate and customer data to PRC authorities; • PRC retaliation against non-U.S. companies that comply with U.S.-imposed sanctions; and • doing business with an ever-growing list of U.S.-sanctioned individuals or entities. To mitigate against reputational and other risks, the advisory encourages businesses to apply industry due diligence policies and procedures to address applicable and identified risks. Meanwhile, in August, Beijing announced that it would not impose its controversial anti-sanctions law on Hong Kong. The anti-sanctions legislation, currently operative in mainland China, authorizes the PRC government to impose a host of punitive measures against organizations who implement foreign sanctions laws, including asset freezes and the deportation of workers. After rumors of its extension to Hong Kong emerged, it was reported that Hong Kong business leaders and Chinese financial institutions raised alarms with the PRC that imposing the law in Hong Kong could wreak havoc on Hong Kong's economy, as international financial institutions faced with either complying with local legislation or the sanctions laws in their home jurisdiction. According to statements from Hong Kong Chief Executive Carrie Lam, the PRC government has not set a timetable for imposing the law on Hong Kong. OFAC Designates Chinese Officials for Culpability in Hong Kong Crackdowns In conjunction with the release of the Hong Kong business advisory, on July 16 the U.S. announced additional targeted sanctions against PRC officials in connection with perceived anti-democratic activities in Hong Kong. Specifically, OFAC designated seven individual members of China's Hong Kong liaison office, which is utilized by PRC to implement reforms in Hong Kong: Chen Dong, He Jing, Lu Xinning, Qiu Hong, Tan Tienui, Yang Jianping, and Yin Zonghua. Meng Wanzhou Returns to China, Ending Part of Long-Running Huawei Sanctions Saga As the quarter closed, so too did a long-running saga involving the Meng Wanzhou, the U.S.-indicted CFO of Chinese tech giant Huawei Technologies, whose arrest and detention ignited a years-long diplomatic dispute spanning two continents and three countries. On September 24, Meng was released from house arrest in Vancouver, Canada after reaching a deal with the U.S. Justice Department in which Meng entered a deferred prosecution agreement after being arraigned on charges of conspiracy to commit bank fraud and conspiracy to commit wire fraud, bank fraud, and wire fraud. Appearing virtually from Canada in a New York court, Meng pleaded not guilty to the fraud and conspiracy charges, but acknowledged having made "multiple material misrepresentations to a senior executive of [HSBC] regarding Huawei's business operations in Iran in an effort to preserve Huawei's banking relationship with [HSBC]." In public statements, DOJ officials said the agreement would "lead to the end of the ongoing extradition proceedings in Canada." Huawei itself has pled not guilty to a slate of U.S. criminal charges related to the Iran activities, which remain pending while Huawei remains on the U.S. Department of Commerce's Entities List and certain Huawei entities are on the U.S. Treasury Department's Chinese Military Industrial Companies list.