With Account Freezes and Sanctions, Financial Bodies Become Hot Front in Hong Kong Turmoil

On a month when hardly a day has gone by without new developments in Beijing’s campaign to crush resistance in Hong Kong, financial institutions have become the latest front in the conflict between Beijing and its pro-democracy opponents and their allies. Over the last four days, Hong Kong police have frozen the bank accounts of several figures linked to last year’s pro-democracy protests, including a church and a lawmaker who recently fled the city. Reuters’ Sumeet Chatterjee and Clare Jim reported that the account freezes have exacerbated fears in Hong Kong about asset safety:

The police asked banks to freeze the accounts of veteran activist Ted Hui and his family members last week, while the account of a local church was also blocked this week, all on suspicion of money laundering. The cases involved bank accounts at , among others.

The actions, while still limited, have triggered concerns that asset freezing could be used more widely against Beijing opponents in Hong Kong to crack down on dissent, the people said.

[…] Two senior bankers said some of their clients, who opened offshore accounts last year when pro-democracy protests rocked the city, have started the process of moving funds.

“The people who were sitting on the fence are starting to take action now,” one of them said. “They are worried that this (account freezing) could become more widespread and they have a lot to lose if all their savings are in Hong Kong.” [Source]

Last week, former lawmaker Ted Hui, who was out on bail pending prosecution over a raft of protest-related charges, announced that he was entering self-imposed exile in London, having left Hong Kong for Denmark, ostensibly to attend a conference on climate change. For South China Morning Post, Denise Tsang, Natalie Wong, and Clifford Lo reported that police from the National Security Department had asked three banks to freeze the accounts of Hui and his family members:

A day after the force first acknowledged they had frozen HK$850,000 (US$109,600) in accounts involving the money-laundering case of an unnamed “absconded Hongkoner”, Senior Superintendent Steve Li Kwai-Wah, of the police force’s new National Security Department, told the press on Monday afternoon that Hui had misappropriated funds from the campaign and transferred them to his relatives.

[…] A law enforcement source maintained that the sum had been transferred about a month ago into five accounts at three banks belonging to Hui, his wife and his parents. Of that amount, more than HK$400,000 was purportedly placed in the four accounts held by Hui’s parents and wife.

Police on Friday asked the three banks – namely HSBC, Hang Seng Bank and Bank of China – to take action on accounts believed to be linked to those funds, the source added. Hui said the following day that he and his family’s accounts had been inaccessible.

There was some confusion late on Sunday after Hui said some of the accounts had been unfrozen, and that he had swiftly moved funds out of HSBC. But in a Facebook post on Monday afternoon, Hui again said the HSBC accounts were “completely frozen”, and demanded the bank clarify its actions. [Source]

In the second incident this week, the Good Neighbour North District Church of Hong Kong announced that its HSBC bank account had been frozen following a request by the police. The church had helped to organize the “Protect the Children” campaign during the 2019 protests, wherein senior citizens and volunteers had tried to mediate police-protestor conflicts. An award-winning SCMP documentary by Dayu Zhang captured the work of ‘Protect the Children’ last year. The footage shows elderly residents, wearing barely any protective equipment, linking arms to form a blockade between riot police and young demonstrators.

On Tuesday, it was reported that officers from the financial investigation division of the Narcotics Bureau had raided the church and ordered the freezing of its funds. The church’s pastor, Roy Chan, disclosed that he had left the city with his family, and would not return for his own safety.

The Hong Kong Police Force has increasingly used money laundering and fraud investigations as a way to go after figures involved in the city’s pro-democracy protests. Last week, prosecutors successfully argued for holding pro-democracy media tycoon Jimmy Lai in prison on fraud charges while they pursued their investigation into him for national security law-related crimes. In November, the Narcotics Bureau’s financial investigations squad arrested a previously-convicted protestor on money laundering charges, after he appealed on social media for crowdfunding to financially support his family. And most controversially, last December, police froze an HSBC account with USD $9 million in funds raised by nonprofit Spark Alliance, a legal defense fund for arrested anti-government protestors, also on money laundering grounds. Dozens of protestors gathered outside HSBC’s Hong Kong headquarters to protest the bank’s decision to cooperate with police.

Simon Young, associate dean at Hong Kong University’s Faculty of Law, explained on China legal expert Jerome Cohen’s blog why Hong Kong’s police are readily able to freeze bank accounts during ongoing criminal investigations:

Under our anti-money laundering laws, the police have a wide power to effectively freeze funds in bank accounts by writing a letter to the bank. The letter will normally state the police reasonably suspect the funds to be proceeds of an indictable offence and, unless the police grant the bank consent, the bank may be guilty of money laundering if they allow the customer to deal with the funds. This effectively freezes the funds and the bank cannot tell the customer why (as there is a tipping off offence in the legislation). One might think this is a police power that could be abused especially since there is also a power for prosecutors to apply to a court to restrain property reasonably believed to be proceeds of crime. However, our Court of Appeal has upheld the constitutionality of this ‘no consent’ police power so long as it applies only during the investigatory stage, which must proceed without unreasonable delay and only on the basis of reasonable suspicion. [Source]

HSBC has come under particular pressure from both anti-government protestors as well as Beijing in the last two years. Protestors see the bank as complicit in Beijing’s ongoing repression in Hong Kong, and its freezing of bank accounts has sparked fears among residents about the safety of their assets. It was also heavily criticized by British and U.S. politicians after its Asia chief signed a petition in support of the National Security Law.  But the bank is also viewed with suspicion by Beijing for cooperating with U.S. authorities in their investigation of Huawei CFO Meng Wanzhou. A Global Times article warned HSBC would “face a dead end for conspiring with US against Huawei” in October this year, on the same day that it was left off a list of more than a dozen banks chosen to manage a Chinese bond sale, for the first time since 2017.

The case of HSBC highlights how Hong Kong’s institutions are increasingly hemmed in on both sides amid worsening U.S.-China relations. Washington has shown its willingness to use financial instruments to hurt Beijing, too. This week, the Treasury Department announced another tranche of against high-level officials involved in the crackdown in Hong Kong, sanctioning 14 senior Chinese officials, including members of the National People’s Congress Standing Committee (NPCSC). Last month, the NPCSC issued a decision that allowed the Hong Kong government to effectively fire four pro-democracy lawmakers from the city’s legislature, in a move that led to the mass resignation of the entire pro-democracy bloc. But as The New York Times’ Austin Ramzy and Tiffany May reported, analysts viewed the latest round of sanctions as fairly watered down, signalling Washington’s reluctance to escalate too far:

The sanctions targeted 14 vice chairs of the top legislative body, including Wang Chen, a prominent backer of the national security law Beijing imposed on Hong Kong this summer, and Cao Jianming, China’s former top prosecutor. But they did not target its chairman, Li Zhanshu, the country’s No. 3 leader. Going after Mr. Li would have sent too provocative a message to Beijing, said Sonny Lo, a Hong Kong-based political analyst.

“The Americans opted for a kind of watered-down version of sanctions without seriously undermining official interactions between China and America,” Mr. Lo said. [Source]

While Washington may have opted to curtail its provocation of Beijing this time, the pace of events in Hong Kong this month suggests that efforts in the city to quash dissent have entered a new phase of intensity. In an Advent calendar of repression, every day of December has brought new developments in the silencing of opposition voices. CDT reported on the firings and mass resignations from one of the city’s most reputed TV networks on December the 1st, the sentencing of Joshua Wong and Agnes Chow on the 2nd, and jailing of Jimmy Lai and Tam Tak-chi pending their trials on the third. Reports of the freezing of Ted Hui’s accounts emerged over the weekend. Monday the seventh brought the arrests of three college graduates on national security law-related charges, after they chanted “Liberate Hong Kong” and “Hong Kong independence, the only way out,” on their graduation day last month. Tuesday the eighth saw the arrest of eight former activists and legislators, including “Long Hair” Leung Kwok-hung and former Democratic Party chairman Wu Chi-wai for their involvement in an unauthorized protest on July 1.

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