International banks were seeking details on Friday of the scope of U.S. legislation that would penalize them for doing business with Chinese officials who implement Beijing’s sweeping new national security law on Hong Kong.
The U.S. Senate passed the bill unanimously on Thursday, a day after it saw full support in the House of Representatives, in a rare example of bipartisan support that reflects politicians’ concern over the erosion of the Hong Kong’s autonomy following China’s imposition of the law on Tuesday.
The bill calls for sanctions on Chinese officials and others who help violate Hong Kong’s autonomy, and financial institutions that do business with those who are found to have participated in any crackdown on the city.
But it does not lay out which individuals might be included, nor what they would be forbidden from doing.
Banks including Citigroup and Bank of America were among those holding calls on Friday with U.S. colleagues to discuss the potential fallout from the legislation, but few conclusions could be drawn at this stage, sources said.
Spokesmen for the banks declined to comment.
President Donald Trump has not yet indicated if he will sign the bill into law.
“Financial institutions are concerned about the legislation principally because of uncertainty about how the sanctions will be used,” said Nick Turner, a lawyer specializing in sanctions and anti money laundering at Steptoe and Johnson in Hong Kong.
Turner said the main area of uncertainty was around what would constitute a significant transaction, and whether that would prevent a bank providing retail or private banking services to a sanctioned person, as well as which individuals might be named.
The bill calls for the Secretary of State to report to Congress within 90 days of the law’s passage and identify any foreign person who has, or is, materially contributing to undermining Hong Kong’s autonomy.
Within 60 days, the Treasury Secretary must then submit a report identifying those banks that have knowingly conducted a significant transaction with someone named.
“Internally, it’s very difficult for us to take a call on this now and think about its impact without seeing the names of the people and the entities that would be targeted,” said a trade finance banker at a large European bank, who also discussed the bill with colleagues on a call.
“If they name party members who are sitting on the boards of large SOEs (state-owned enterprises), that would create a massive problem,” he added, declining to be identified due to the sensitivity of the matter.
