OFAC Issues Hong Kong Sanctions Guidance
The Treasury Department issued updated guidance on Hong Kong-related sanctions and the State Department issued a report to Congress under the Hong Kong Autonomy Act, the agencies said Oct. 14.
The report, which identifies people and entities contributing to Beijing’s infringement on Hong Kong’s autonomy, includes 10 Hong Kong officials sanctioned by the U.S. in August (see 2008070039), according to a press release. Treasury’s Office of Foreign Assets Control updated the 10 entries on its Specially Designated Nationals List to clarify that the entries carry a “secondary sanctions risks” under the Hong Kong Autonomy Act, according to a notice. OFAC also issued four new frequently asked questions.
FAQ 858 provides background on the State Department’s report and specifies which transactions with the listed entries are blocked. OFAC also stressed that foreign financial institutions that “knowingly” conduct a “significant transaction” with the people named in the report may be subject to “mandatory secondary sanctions.” In certain situations, foreign financial institutions may be “excluded or removed” from sanctions under the Hong Kong Autonomy Act if the transaction that led to the sanctions “does not have a significant and lasting negative effect,” is “not likely to be repeated in the future” and has “been reversed or otherwise mitigated through positive countermeasures,” according to FAQ 849.
OFAC said it will consider the “totality of the facts and circumstances” when determining if a transaction qualifies as “significant,” including the size and frequency of the transaction, the “nature” of the transactions, the “level of awareness of management,” the transaction’s impact on U.S. sanctions programs and whether they are likely to be repeated, according to FAQ 850. OFAC also said it will consider whether the transactions have been “reversed or otherwise mitigated,” whether they involve “deceptive practices” and “such other factors” determined by the Treasury secretary. OFAC stressed that a transaction is not considered significant if a U.S. person would not require a license.
OFAC also defined two related terms in FAQ 851. The agency said it will use the same definition for “financial institution” that is outlined in the U.S. Code and said “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.”