US lawmakers warn Hong Kong will become a financial crime hub

WE the legislators on Monday urged the government to rethink its banking ties with Hong Kong, citing its “growing role” in money laundering, sanctions evasion and the funneling of banned technology to Russia.

Since Beijing imposed a sweeping national security law on the semi-autonomous Chinese city in 2020, “Hong Kong has transformed from a trusted global financial center to a critical player in China’s deepening authoritarian axis.” the People’s Republic of China (PRC), Iran, Russia and North Korea,” the Chinese Communist Party’s US Special Committee said in a letter to Treasury Secretary Janet Yellen.

The bipartisan committee called on Yellen to reevaluate Hong Kong’s unique trade privileges, which treat the financial hub as separate from the rest of China.

The security law – put in place after huge democracy protests rocked the city – “effectively subjects Hong Kong to PRC control,” the lawmakers said.

“We must now ask whether long-standing U.S. policy toward Hong Kong, particularly toward its financial and banking sector, is appropriate,” the letter said.

According to the committee, Hong Kong has become a major player in the transfer of banned Western technologies to Russia, creating front companies to buy banned Iranian oil, facilitating the trade in gold of Russian origin and running “ghost ships” that engage in illegal trade with the North. Korea.

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It cites “recent research” estimating that “nearly 40% of goods shipped from Hong Kong to Russia in 2023” were on U.S. and European lists of banned goods, including semiconductors and other technologies that Moscow has needed for his war in Ukraine.

After the British handover of Hong Kong to China in 1997, the city was promised semi-autonomy, including judicial independence, for 50 years under the “One Country, Two Systems” agreement.

But Washington has repeatedly warned that the national security law — as well as a subsequent security law known as Article 23 — is eroding that firewall, silencing dissent in the city and restricting the freedoms that allowed it to function as a global financial center.

In September, the US State Department issued a warning of “new and increased risks” to businesses operating in Hong Kong due to Section 23.

China and Hong Kong, however, argued that the laws were necessary to restore order and protect the financial hub’s economy after massive and sometimes violent pro-democracy protests in 2019.