United States: US government advises on risks associated with Hong Kong business operations
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The United States Departments of State, Treasury, Commerce, and Homeland Security (collectively, the “Departments”) have advised U.S. businesses on the growing risks associated with operations in the Hong Kong Special Administrative Region of the United States. People’s Republic of China (“Hong Kong”).
In the joint opinion, the departments said companies and individuals doing business in Hong Kong should be aware of recent changes to its laws and regulations that could affect their operations. The departments stressed that these companies and individuals should be aware of the potential reputational, legal and financial risks arising from their activities in Hong Kong.
The departments pointed out that companies and individuals doing business in Hong Kong:
- are subject to the Hong Kong National Security Act (“NSL”), which has resulted in the arrest of foreign nationals for (i) publishing newspaper articles, (ii) engaging in “democratic processes routine ”, (iii) expressing opinions about the government or the Chinese Communist Party and (iv) participating in public gatherings;
- may be subject to electronic surveillance by authorities in the People’s Republic of China (“PRC”) and Hong Kong without a warrant and may be compelled to turn over data to those authorities due to the extended legal powers under the NSL;
- may be subject to restricted access to information due to increased pressure on freedom of speech and of the press following the imposition of the NSL; and
- may face increased risks and uncertainties regarding retaliation by the PRC against companies that comply with, among other things, economic sanctions imposed by the United States.
The departments reminded companies and individuals operating in Hong Kong that the United States has several sanctioning authorities targeting specific behaviors related to the erosion of autonomy and democratic processes in Hong Kong, and that the non- compliance with these penalties may result in civil and criminal penalties. . Accordingly, the departments strongly recommended that organizations under U.S. jurisdiction, including foreign entities, that do business in Hong Kong apply a risk-based approach to sanctions compliance through development, implementation and enforcement. regular update of a sanctions compliance program.
Along with Hong Kong’s advice, the Treasury announced new sanctions imposed on seven Chinese officials in connection with the situation in Hong Kong.
Comment James Treanor
Earlier this year, the Biden administration announced a top-down review of U.S. economic sanctions to ensure their effectiveness. Last month, the Biden administration essentially reaffirmed Trump-era sanctions on Communist Chinese military companies (renaming affected companies to companies in the Chinese military-industrial complex, covered here). Just days before issuing this notice in Hong Kong, the Treasury and other departments issued an updated notice highlighting sanctions and other risks related to businesses linked to China’s Xinjiang Uyghur Autonomous Region (covered here). So while the results of the administration’s sanctions review have not been officially released, it appears that a relaxation of the China-related bans is not on the horizon.
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