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U.S. sanctions against Hong Kong and mainland China officials sent ripples across the industry, resulting in a rush to review businesses and tweak internal policies. finews.asia takes a look at the top operational and compliance risk in post-sanction banking.
Earlier this week, The U.S. slapped sanctions against 11 officials accused of undermining Hong Kong’s autonomy and restricting freedom of expression or assembly of its citizens. The sanctions prevent U.S. companies and persons worldwide, including financial institutions, from any dealings with the individuals.
Since then, banks have rushed to review their businesses with many reportedly tweaking internal policies to mitigate legal, compliance and even potential operational risks. What are the top 5 post-sanction banking risks to consider? finews.asia takes a look.
#1: The Basic 11
At the very least, many banks are at least flagging accounts owned by or linked to the 11 sanctioned individuals which include Hong Kong chief executive Carrie Lam.
Standard Chartered is reportedly suspending new account-opening for the sanctioned individuals and monitoring their transactions. America lender Citi is reportedly acting more conservatively by suspending the accounts of some of the sanctioned individuals.
#2: Not Just Global Banks
The effects of the sanctions have not been limited to foreign banks or their third-party partners such as correspondent or intermediary banks – entities supporting transactions involving the 11 individuals will also have violated the sanctions. Interestingly, even Chinese banks have opted to comply with Bank of China, China Construction Bank (CCB) and China Merchants Bank named amongst lenders that have reportedly turned cautious on dealings with the sanctioned officials.
The issue has attracted senior pro-Beijing figures to voice their concerns and urge banks to be better equipped for challenges ahead.
Earlier this week, Yu Yongding, a former monetary policy committee member with China’s central bank, said preparations must be made for the «worst-case scenario» including potential seizure of assets. Bank of China International chief economist Guan Tao said last month that Chinese banks should abandon the SWIFT system and adopt China’s Cross-Border Interbank Payment System (CIPS) to ease payment risks.
#3: Local Loophole