Hong Kong Security Chief Warns Citigroup, HSBC Against Dealings With Pro-Democracy Tycoon
May 27 2021 - 11:59AM
Dow Jones News
By Elaine Yu
Hong Kong authorities issued warnings to units of Citigroup Inc.
and HSBC Holdings PLC that their employees could face jail time if
they deal with the accounts or assets of Jimmy Lai, a pro-democracy
newspaper owner charged with national-security offenses.
Mr. Lai, who is in his 70s, is currently serving a prison
sentence for unauthorized assembly related to protests that erupted
in the city in 2019. He is also awaiting trial on national-security
charges amid China's crackdown on dissent in the city.
Earlier this month, Hong Kong police froze Mr. Lai's assets,
including his majority stake in a popular pro-democracy newspaper,
under a national-security law imposed last year by Beijing.
In letters dated May 14 that were separately addressed to the
Hong Kong offices of Citibank and HSBC, Hong Kong Secretary for
Security John Lee said the banks must not directly or indirectly
deal with the accounts of offshore companies owned by Mr. Lai
without a license granted by the security minister.
Employees who "knowingly contravene the direction" would be
deemed to have committed an offense and could be fined and jailed
for seven years, according to two letters that were seen by The
Wall Street Journal.
Mr. Lai's offshore companies were described in the letters as
entities in the offshore tax haven of the British Virgin Islands,
raising questions about the new security law's extraterritorial
reach. Six bank accounts -- one at Citibank and five at HSBC --
belonging to two companies were listed in the letters, which were
earlier reported by Reuters.
The possible dealings outlined in the letters include moving
assets of the offshore companies into or out of Hong Kong, handling
transactions for them, and using them as collateral for loans.
Mr. Lee, when asked by reporters about the letters to the banks
after a Legislative Council meeting on Thursday, said: "I am
exercising the power because Lai has been charged with two offenses
of collusion with other countries or external forces to endanger
national security."
The security secretary added: "It is my duty to specify in my
notice to the relevant parties what will be the consequences if
they fail to comply with my direction."
A Citigroup spokesman said the bank doesn't comment on
individual client accounts, but added that it is "required to
comply with all applicable laws and regulations in markets where we
operate."
HSBC declined to comment on Thursday. The London-based bank is
in a political pickle with regard to Hong Kong, having decided to
focus its business on China. The bank said Thursday that it was
exiting most of its U.S. retail banking business.
Mr. Lai controls a Hong Kong-listed media company, Next Digital
Ltd., which publishes the Apple Daily newspaper, known for its
criticism of China's Communist Party government in Beijing. Next's
shares were suspended from trading for more than a week after Mr.
Lai's assets -- which include his majority ownership in the company
-- were frozen.
A pro-Beijing newspaper in Hong Kong, Ta Kung Pao, ran a
commentary in April that called for Apple Daily to be outlawed,
triggering fears among democracy supporters and press-freedom
advocates that the paper's days in the city -- once a bastion of
free speech -- could be numbered.
In a stock exchange regulatory filing on Wednesday, Next Digital
said its working capital would remain sufficient for at least 18
months from April without additional funding from Mr. Lai. On
Thursday the shares closed 51% higher, giving the company a market
capitalization of about $95 million.
Write to Elaine Yu at elaine.yu@wsj.com
(END) Dow Jones Newswires
May 27, 2021 11:46 ET (15:46 GMT)
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