Exclusive: Global banks investigate their Hong Kong customers for pro-democracy relations

HONG KONG (Reuters) – Global wealth managers are investigating whether their clients in Hong Kong have ties to the city’s pro-democracy movement, in an effort to avoid getting caught in the crosshairs of China’s new national security law, according to Knowledge Six Of talk.

Banker of Credit Suisse Group AG (CSGN.S), HSBC Holdings plc (HSBA.L), Julius Bayer Group AG (BAER.S) And UBS Group (AG)UBSG.S), Among others, are broadening investigations under their programs that screen clients for political and government relations and subject them to additional due diligence requirements, these people said.

The designation, called a politically exposed person, can make it more difficult or completely prevent people from accessing banking services, depending on whether the bank is the person’s source of funds or financial What one finds about the transaction.

Some money managers have been reported to be involved in public and media comments by clients and their associates and through social media posts in recent times. The new law imposes sanctions that Beijing broadly describes as a prison sentence for criminals for separatists, sabotage, terrorism and collusion of foreign forces.

Sources, who requested anonymity due to their sensitivity to the situation, said the extensive scrutiny of customers also applied to Hong Kong and Chinese officials who applied the law in anticipation of any US sanctions against them.

A banker at a global wealth manager who holds more than $ 200 billion in assets said his client audit could go back as far as 2014 in some cases since Hong Kong’s 2014 pro-democracy “umbrella” movement The political stance of the customer can be inferred. At that time, the protesters used umbrellas to shield themselves from the tear gas and pepper spray deployed by the police.

Reuters could not learn the identities of any people who have faced increased scrutiny or whether banks have decided to take any action against politically identified people.

Albert Ho, a Democratic leader from Hong Kong who runs a law firm and helps organize an annual Candlelight Wise to commemorate the victims of the June 4, 1989 Tianmen Square crackdown, said he feared that people like him You may face difficulties in times to come. ”

Ho said, “In fact, there’s not much you can do until you cease all your financial and banking activities in Hong Kong”, adding that until last week he faced additional scrutiny from his bank did not do. He refused to disclose his bank’s name.

HSBC specifically declined to comment on any US move to approve security legislation or local authorities. In an emailed statement, it said, “We already have a rigorous set of policies and rigorous procedures that we implement globally.”

Credit Suisse, Julius Baer and UBS declined to comment.

In an email statement, the Hong Kong Monetary Authority stated that the financial hub implements anti-money-laundering requirements “based on international standards with respect to politically exposed individuals.”

“The respective international standards and our guidance for the banking industry have not changed,” the city’s de facto central bank said.

China’s Foreign Ministry, the Office of the Legion in Hong Kong and the State Council’s Office of Hong Kong and Macau Affairs did not respond to requests for comment.

Banks in focus

Global banks have long examined their customers’ backgrounds, including screening them for political relationships, meeting regulatory requirements. Politicians, government officials, and senior officials of state-owned enterprises, as well as their family members, are generally considered to be politically exposed individuals.

The rules are meant to enforce laws such as international sanctions and prevent people from using the banking system to obtain unqualified funds.

Banks ‘move for a similar review of supporters of Hong Kong’s democracy movement comes at a time when some firms’ stance on Chinese law has drawn scrutiny from Western legalists and activists.

HSBC and Standard Chartered PLC (STAN.L), Which has expressed support for national security legislation, for example, has faced criticism from UK officials that their actions enabled Beijing to undermine the rule of law in the former British colony.

Two London-headquartered banks have said they are confident that the law will restore stability in Hong Kong.

Both Hong Kong and Chinese officials have said the law was crucial to a hole in the national security stronghold, defying criticism from governments, including the United States and the United Kingdom, that China has given its promise to protect Hong Kong’s independence after 50 years Was violating 1997 handover.

Regulatory risk

Some Hong Kong money managers say they are concerned about the regulatory and reputation risks to their banks if charges are brought against some of their politically connected customers under the Sweeping Security Act, three sources said.

A top executive at a regional wealth manager said his firm’s Risk and Compliance team listed a list of the top 10 Hong Kong individuals identified as pro-democracy sympathizers in the local media within days of the law coming into force on 1 July Prepared. Handover anniversary

The executive said his firm checked his internal database to see if he had existing relationships with any of them and was “quite relieved” to see that they were not.

Several elements of the law relate to the confiscation of property, including the provision to provide a new police unit with greater powers to seize money and property and obtain information. Companies may also face fines and suspensions ranging from loss of business licenses.

An investment manager at a Hong Kong-based hedge fund said he hoped more people from his bankers would now come under scrutiny. The fund manager said, “I think even if a liberal Democrat wants to invest, you would think long after this law.”