Why Trump’s Hong Kong sanctions are bad news for banks

Companies and lawyers are rushing to work out the implications of US sanctions on Chinese and Hong Kong officials, which have raised temperatures between the world’s two biggest economies.

The measures, announced by the Trump administration on Friday, are in response to a draconian national security law Beijing has imposed on Hong Kong. China on Monday unveiled retaliatory sanctions on US officials.

Washington’s moves could have far-reaching implications beyond the targeted individuals, with banks among those that could be affected.

What are the sanctions?

The sanctions are designed to prevent the 11 named individuals — which include Hong Kong leader Carrie Lam — from participating in the US financial system. They penalise US financial institutions and individuals that do business with those who have been sanctioned.

They follow a well-established process by which the US government has used its financial system to previously put pressure on individuals in countries such as Iran and Russia.

Their effectiveness partly depends on whether the sanctioned individuals have US assets. Luo Huining, China’s top official in Hong Kong, has said he does not hold “one cent” in overseas assets. He added, sarcastically, that he…

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