HONG KONG: US lawmakers have sounded the alarm over Hong Kong’s growing role in money laundering and sanctions evasion, urging a reassessment of America’s close business ties with the Asian financial hub.
According to a CNN report, a letter sent to US Treasury Secretary Janet Yellen on Monday from bipartisan leaders of the House Select Committee on China warned that the city has become a critical player in illicit financial activities under Beijing’s tightening grip.
Tarnished reputation
The lawmakers expressed concern that Hong Kong’s once-sterling reputation as a global financial centre is now tarnished. They pointed to its involvement in facilitating illegal trade with countries like Russia, North Korea, and Iran.
In particular, Hong Kong has been linked to the export of Western technology to Russia, the creation of front companies to purchase Iranian oil, and the operation of “ghost ships” that engage in unlawful trade with North Korea.
Since the imposition of the national security law by China in 2020, Hong Kong has been accused of drifting from a trusted financial hub to a key component of China’s authoritarian alliance with Russia, Iran, and North Korea.
Growing scrutiny of Hong Kong’s financial sector
The lawmakers cited recent research showing that nearly 40% of goods shipped from Hong Kong to Russia between August and December 2023 were critical to Moscow’s military capabilities, fuelling the production of weapons and military technology.
This has raised concerns about the city’s role in supporting Russia’s war efforts and whether US businesses should continue operating in Hong Kong without reconsidering the associated risks.
The letter calls on the US Treasury Department to provide a detailed briefing on the status of US banking relationships with Hong Kong and the measures in place to address the evolving situation.
A spokesperson for the Treasury Department confirmed receipt of the letter and indicated that a response would be provided through appropriate channels.
In contrast, the Hong Kong government strongly rejected the allegations, asserting that it enforces United Nations sanctions but does not comply with unilateral sanctions imposed by individual countries, particularly the US.
Political shifts and increased tensions
The letter from the House Select Committee comes as tensions between the US and China escalate, particularly over Hong Kong’s autonomy.
Following the 2020 imposition of the national security law, former President Donald Trump revoked Hong Kong’s special trade status with the US, a move that hit Hong Kong-based businesses hard. Since then, numerous companies have faced US sanctions for allegedly circumventing measures against Russia, including the provision of critical semiconductors and other dual-use technologies.
The political landscape in the US is shifting, with a more hawkish stance on China emerging in Washington. With Trump’s return to the White House, along with his cabinet appointments, including Marco Rubio as Secretary of State, the focus on Hong Kong and China’s influence over the territory is likely to intensify.
Rubio has been a vocal critic of China’s actions in Hong Kong and has sponsored legislation to sanction officials linked to human rights abuses there.
Isaac Stone Fish, CEO of Strategy Risks, a China-focused business intelligence firm, suggested that even if Yellen does not act on the letter, the expected appointment of Scott Bessent as Treasury Secretary could signal a tougher stance on China and Hong Kong.
Bessent, who has criticized Beijing as a “despotic regime,” is expected to bring a more aggressive approach to US policy on China, raising concerns for US businesses with significant operations in Hong Kong.
As the US-China rivalry deepens, lawmakers are questioning whether US companies can continue operating in Hong Kong without facing increased scrutiny and potential risks tied to the city’s shifting role in global finance.