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Treasury releases its Hong Kong Autonomy Act report, OFAC publishes FAQs, and makes some updates

OFAC updated the following Hong-Kong related designations today:

CHAN, Eric (a.k.a. CHAN, Eric Kwok-ki; a.k.a. CHAN, Kwok-ki (Chinese Traditional: 陳國基; Chinese Simplified: 陈国基)), Flat F, 20 Floor, Block 2, Royal Ascot, Shatin, Hong Kong; DOB 05 Apr 1959; POB Hong Kong; nationality Hong Kong; Gender Male; National ID No. G142458A (Hong Kong); Secretary General, Committee for Safeguarding National Security of the Hong Kong Special Administrative Region (individual) [HK-EO13936]. -to- CHAN, Eric (a.k.a. CHAN, Eric Kwok-ki; a.k.a. CHAN, Kwok-ki (Chinese Simplified: 陈国基; Chinese Traditional: 陳國基)), Flat F, 20 Floor, Block 2, Royal Ascot, Shatin, Hong Kong; DOB 05 Apr 1959; POB Hong Kong; nationality Hong Kong; Gender Male; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; National ID No. G142458A (Hong Kong); Secretary General, Committee for Safeguarding National Security of the Hong Kong Special Administrative Region (individual) [HK-EO13936].
 
CHENG, Teresa (a.k.a. CHENG, Teresa Yeuk-wah; a.k.a. CHENG, Yeuk Wah), House No. 4, Villa De Mer, 5 Lok Chui Street, Tuen Mun, Hong Kong; DOB 11 Nov 1958; POB Hong Kong; nationality Hong Kong; Gender Female; Passport KJ0221326 (Hong Kong) issued 28 Jan 2012 expires 28 Jan 2022; National ID No. G579067A (Hong Kong); Secretary for Justice (individual) [HK-EO13936]. -to- CHENG, Teresa (a.k.a. CHENG, Teresa Yeuk-wah; a.k.a. CHENG, Yeuk Wah), House No. 4, Villa De Mer, 5 Lok Chui Street, Tuen Mun, Hong Kong; DOB 11 Nov 1958; POB Hong Kong; nationality Hong Kong; Gender Female; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; Passport KJ0221326 (Hong Kong) issued 28 Jan 2012 expires 28 Jan 2022; National ID No. G579067A (Hong Kong); Secretary for Justice (individual) [HK-EO13936].
 
LAM, Carrie (a.k.a. LAM CHENG, Carrie Yuet-ngor; a.k.a. LAM CHENG, Yuet-ngor (Chinese Simplified: 郑月娥; Chinese Traditional: 林鄭月娥)), Victoria House, No. 15 Barker Road, The Peak, Hong Kong; DOB 13 May 1957; POB Hong Kong; nationality Hong Kong; Gender Female; Passport KJ0505670 (Hong Kong) issued 13 Apr 2016 expires 13 Apr 2026; National ID No. D3356664 (Hong Kong); Chief Executive of the Hong Kong Special Administrative Region (individual) [HK-EO13936]. -to- LAM, Carrie (a.k.a. LAM CHENG, Carrie Yuet-ngor; a.k.a. LAM CHENG, Yuet-ngor (Chinese Simplified: 郑月娥; Chinese Traditional: 林鄭月娥)), Victoria House, No. 15 Barker Road, The Peak, Hong Kong; DOB 13 May 1957; POB Hong Kong; nationality Hong Kong; Gender Female; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; Passport KJ0505670 (Hong Kong) issued 13 Apr 2016 expires 13 Apr 2026; National ID No. D3356664 (Hong Kong); Chief Executive of the Hong Kong Special Administrative Region (individual) [HK-EO13936].
 
LEE, John Ka-chiu (a.k.a. LEE, John; a.k.a. LEE, Ka Chiu (Chinese Traditional: 李家超); a.k.a. “LI, Jiachao”), Flat A, 5/F, Block 2, King’s Park Villa, No. 1 King’s Park Rise, Homantin, Kowloon, Hong Kong; DOB 07 Dec 1957; Gender Male; National ID No. G0286787 (Hong Kong); Secretary for Security (individual) [HK-EO13936]. -to- LEE, John Ka-chiu (a.k.a. LEE, John; a.k.a. LEE, Ka Chiu (Chinese Traditional: 李家超); a.k.a. “LI, Jiachao”), Flat A, 5/F, Block 2, King’s Park Villa, No. 1 King’s Park Rise, Homantin, Kowloon, Hong Kong; DOB 07 Dec 1957; Gender Male; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; National ID No. G0286787 (Hong Kong); Secretary for Security (individual) [HK-EO13936].
 
LUO, Huining (Chinese Simplified: 骆惠宁; Chinese Traditional: 駱惠寧), Hong Kong; DOB 05 Oct 1954; POB Dangtu, China; nationality China; Gender Male; National ID No. 340103195410053558 (China); Director, Hong Kong Liaison Office (individual) [HK-EO13936]. -to- LUO, Huining (Chinese Simplified: 骆惠宁; Chinese Traditional: 駱惠寧), Hong Kong; DOB 05 Oct 1954; POB Dangtu, China; nationality China; Gender Male; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; National ID No. 340103195410053558 (China); Director, Hong Kong Liaison Office (individual) [HK-EO13936].
 
TANG, Chris (a.k.a. TANG, Ping-keung (Chinese Traditional: 鄧炳強)), 1 Arsenal Street, Hong Kong; DOB 04 Jul 1965; POB Hong Kong; nationality Hong Kong; Gender Male; Passport KJ0638810 (Hong Kong) issued 14 Oct 2017 expires 14 Oct 2027; National ID No. D4118015 (Hong Kong); Commissioner of Police (individual) [HK-EO13936]. -to- TANG, Chris (a.k.a. TANG, Ping-keung (Chinese Traditional: 鄧炳強)), 1 Arsenal Street, Hong Kong; DOB 04 Jul 1965; POB Hong Kong; nationality Hong Kong; Gender Male; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; Passport KJ0638810 (Hong Kong) issued 14 Oct 2017 expires 14 Oct 2027; National ID No. D4118015 (Hong Kong); Commissioner of Police (individual) [HK-EO13936].
 
TSANG, Erick (a.k.a. CENG, Guowei; a.k.a. TSANG, Erick Kwok-wai; a.k.a. TSANG, Kwok-wai (Chinese Traditional: 曾國衞; Chinese Simplified: 曾国); a.k.a. ZENG, Guowei), Flat 5F, Block 6, New Jade Gardens, Chaiwan, Hong Kong; DOB 01 Sep 1963; POB Hong Kong; nationality Hong Kong; Gender Male; National ID No. E9963190 (Hong Kong); Secretary for Constitutional and Mainland Affairs (individual) [HK-EO13936]. -to- TSANG, Erick (a.k.a. CENG, Guowei; a.k.a. TSANG, Erick Kwok-wai; a.k.a. TSANG, Kwok-wai (Chinese Traditional: 曾國衞; Chinese Simplified: 曾国); a.k.a. ZENG, Guowei), Flat 5F, Block 6, New Jade Gardens, Chaiwan, Hong Kong; DOB 01 Sep 1963; POB Hong Kong; nationality Hong Kong; Gender Male; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; National ID No. E9963190 (Hong Kong); Secretary for Constitutional and Mainland Affairs (individual) [HK-EO13936].
 
XIA, Baolong (Chinese Simplified: 夏宝; Chinese Traditional: 夏寶龍), China; DOB 01 Dec 1952 to 31 Dec 1952; POB Tianjin, China; Gender Male; Director, Hong Kong and Macao Affairs Office of the State Council (individual) [HK-EO13936]. -to- XIA, Baolong (Chinese Simplified: 夏宝; Chinese Traditional: 夏寶龍), China; DOB 01 Dec 1952 to 31 Dec 1952; POB Tianjin, China; Gender Male; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; Director, Hong Kong and Macao Affairs Office of the State Council (individual) [HK-EO13936].
 
ZHANG, Xiaoming (Chinese Simplified: 张晓明; Chinese Traditional: 張曉明), China; DOB 03 Sep 1963; POB Taizhou, China; nationality China; Gender Male; National ID No. 11010819630903003X (China); Deputy Director, Hong Kong and Macao Affairs Office of the State Council (individual) [HK-EO13936]. -to- ZHANG, Xiaoming (Chinese Simplified: 张晓明; Chinese Traditional: 張曉明), China; DOB 03 Sep 1963; POB Taizhou, China; nationality China; Gender Male; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; National ID No. 11010819630903003X (China); Deputy Director, Hong Kong and Macao Affairs Office of the State Council (individual) [HK-EO13936].
 
ZHENG, Yanxiong (Chinese Simplified: 郑雁雄; Chinese Traditional: 鄭雁雄), Apt 608, 50 Huali Road, Guangzhou, Guangdong 510623, China; DOB 25 Aug 1963; POB Shantou, China; nationality China; Gender Male; Passport SE0226769 (China) issued 10 Aug 2016 expires 10 Aug 2021; National ID No. 440111196308254212 (China); Director, Office for Safeguarding National Security in Hong Kong (individual) [HK-EO13936]. -to- ZHENG, Yanxiong (Chinese Simplified: 郑雁雄; Chinese Traditional: 鄭雁雄), Apt 608, 50 Huali Road, Guangzhou, Guangdong 510623, China; DOB 25 Aug 1963; POB Shantou, China; nationality China; Gender Male; Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116-149; Passport SE0226769 (China) issued 10 Aug 2016 expires 10 Aug 2021; National ID No. 440111196308254212 (China); Director, Office for Safeguarding National Security in Hong Kong (individual) [HK-EO13936].

Notice how they’re warning “Secondary sanctions risk”? Although it doesn’t say “Subject to Secondary Sanctions”…. wouldn’t you like to know the difference? Look at the FAQs to see…

And OFAC issued 4 new FAQs:

848. What are the sanctions implications of the Secretary of State’s October 14, 2020 report to Congress pursuant to section 5(a) of the Hong Kong Autonomy Act (HKAA), and subsequent updates of this report, identifying foreign persons that are materially contributing to, have materially contributed to, or attempt to materially contribute to the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law?

Answer

Pursuant to section 5(a) of the HKAA, the Secretary of State submitted a report (“Section 5(a) Report”) on October 14, 2020 to the appropriate congressional committees and leadership identifying foreign persons that the Secretary of State, in consultation with the Secretary of the Treasury, determined are materially contributing to, have materially contributed to, or attempt to materially contribute to the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.  

Section 6 of the HKAA requires blocking sanctions to be imposed on each foreign person identified in the Section 5(a) Report, or in an update to that report under section 5(e) of the HKAA.  The individuals identified in the October 14, 2020 Section 5(a) Report were designated by OFAC on August 7, 2020 pursuant to Executive Order (E.O.) 13936, and the property and interests in property of those individuals that are in the United States or in the possession or control of U.S. persons are blocked.

Further, section 5(b) of the HKAA requires the Secretary of the Treasury, in consultation with the Secretary of State, to submit a report to Congress 30–60 days after the Section 5(a) Report is submitted, identifying any foreign financial institution (FFI) that knowingly conducts a significant transaction with a foreign person identified in the Section 5(a) Report.  For the purposes of the report under section 5(b) (“Section 5(b) Report”), the Treasury Department will only identify FFIs that knowingly conduct a significant transaction with a foreign person identified in the Section 5(a) Report or any update to that report following the person’s listing in the Section 5(a) Report.  As a general matter, transactions with persons identified in the Section 5(a) Report that constitute a good-faith wind down within 30 days of a person’s identification on such report will not be considered “significant” for purposes of the Section 5(b) Report.  In addition, the Treasury Department will reach out to an FFI to inquire about its conduct before identifying it in a Section 5(b) Report.

Pursuant to section 7(a) of the HKAA, within one year of an FFI’s inclusion in the Section 5(b) Report, five out of 10 of the sanctions set out in section 7(b) of the HKAA must be imposed on that FFI.  Not later than two years after an FFI has been included in the Section 5(b) Report, all 10 sanctions set out in section 7(b) must be imposed on that FFI.  

Any FFI that knowingly conducts a significant transaction with a foreign person named in the Section 5(a) Report or an update to that report is potentially subject to mandatory secondary sanctions under the HKAA.  Accordingly, with respect to foreign persons in the Section 5(a) Report that also appear on the List of Specially Designated Nationals and Blocked Persons (SDN List), OFAC has updated the SDN List to include the language, “Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116–149.”

849. Can a foreign financial institution (FFI) be excluded or removed from the Section 5(b) Report so that sanctions under the Hong Kong Autonomy Act (HKAA) would not apply?

Answer

Pursuant to section 5(d)(2) of the HKAA, an FFI may be excluded from the Section 5(b) Report or an update to that report under section 5(e) of the HKAA, or may be removed from the Section 5(b) Report or an update to that report prior to the imposition of sanctions under section 7(a), if the significant transaction or transactions of the FFI that merited inclusion in that report:  (A) does not have a significant and lasting negative effect that contravenes the obligations of China under the Joint Declaration and the Basic Law; (B) is not likely to be repeated in the future; and (C) has been reversed or otherwise mitigated through positive countermeasures taken by that FFI.

850. How does the Treasury Department determine whether a transaction is “significant” for purposes of section 5(b) of the Hong Kong Autonomy Act (HKAA)?

Answer

For purposes of implementing section 5(b) of the HKAA, the Secretary of the Treasury may consider the totality of the facts and circumstances when determining whether transactions are “significant.”  As a general matter, the Treasury Department may consider some or all of the following factors in determining whether a transaction is “significant”:  (1) the size, number, and frequency of the transaction(s); (2) the nature of the transaction(s); (3) the level of awareness of management and whether the transaction(s) are part of a pattern of conduct; (4) the nexus between the transaction(s) and a foreign person identified in a report submitted by the Secretary of State under section 5(a) of the HKAA or in updates to that report; (5) the impact of the transaction(s) on statutory objectives, including whether the transaction(s) (A) have a significant and lasting negative effect that contravenes the obligations of China under the Joint Declaration and the Basic Law, (B) are likely to be repeated in the future, and (C) have been reversed or otherwise mitigated through positive countermeasures taken by that FFI; (6) whether the transaction(s) involve deceptive practices; and (7) such other factors that the Secretary of the Treasury deems relevant on a case-by-case basis.  For purposes of section 5(b) of HKAA, a transaction will not be considered significant if a U.S. person would not require a specific license from OFAC to conduct or participate in the transaction.

851. How will the following key terms in section 5(b) of the Hong Kong Autonomy Act (HKAA) be defined:  “financial institution” and “knowingly”? 

Answer

Section 2 of HKAA defines these terms as follows, which OFAC intends to incorporate into relevant regulations:

“financial institution” – the term “financial institution” is defined to have the same meaning as a financial institution specified in section 5312(a)(2) of title 31, United States Code.  

“knowingly” – the term “knowingly”, with respect to conduct, a circumstance, or a result, means that a person has actual knowledge of the conduct, the circumstance, or the result.

And the State Department issued a press release about the report:

The Chinese Communist Party (CCP) has systematically dismantled the autonomy that Beijing promised to the Hong Kong people and the world in a UN-registered treaty. Through the imposition of the National Security Law, the CCP has crippled democratic institutions, human rights, judicial independence, and individual freedoms in Hong Kong. The United States has publicly condemned an increasing number of problematic actions taken by Beijing and Hong Kong authorities to stifle dissent and eviscerate Hong Kong’s autonomy. These include the installation of a mainland security agency, mass arrests of peaceful protestors, the politically motivated delay of the September 2020 Legislative Council elections, and the capture and detention of Hong Kong democratic activists attempting to leave Hong Kong.

The Hong Kong Autonomy Act requires the Secretary of State to submit a report to Congress identifying foreign persons who are materially contributing to, have materially contributed to, or attempt to materially contribute to the failure of the People’s Republic of China (PRC) to meet its obligations under the Sino-British Joint Declaration or Hong Kong’s Basic Law. This year’s report includes ten PRC and Hong Kong officials whose actions have undermined freedoms of assembly, speech, press, or the rule of law, or whose actions have reduced the high degree of autonomy of Hong Kong. On August 7, the United States imposed sanctions on these same individuals under Executive Order 13936.

The release of this report underscores our ongoing objection to Beijing’s actions that are intentionally designed to erode the freedoms of the people of Hong Kong and impose the CCP’s oppressive policies.

For more information about reporting requirements under the Hong Kong Autonomy Act, including required reports by the Secretary of the Treasury, please see guidance from the Department of the Treasury’s Office of Foreign Assets Control available here.

Links:

OFAC Notice

FAQs: 848, 849, 850, 851

State Department Press Release

Categories: Frequently Asked Questions (FAQ) Guidance Hong Kong Autonomy Act report Hong Kong-related sanctions OFAC Updates Sanctions Lists

eric9to5

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