Regulatory Framework

Hong Kong fully implements targeted financial sanctions in compliance with the United Nations Security Council Resolutions (“UNSC Resolutions”), pursuant to the United Nations Sanctions Ordinance (Cap. 537) (“UNSO”) (its 12 subsidiary regulations) and the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575) (“UNATMO”).

Hong Kong does not implement sanctions above and beyond those imposed by the United Nations Security Council (“UNSC”). The Security Bureau maintains lists of designated individuals and entities under the UNATMO, which covers the UNSC Resolution 1373 relating to terrorism financing, while the Commerce and Economic Development Bureau (“CEDB”) maintains list of designated individuals and entities under the UNSO. 

Before engaging in a business relationship or providing legal advice, members should ensure that they do not deal with designated individuals and entities sanctioned by the UNSC. Members are required to screen the names of their clients, their representatives, beneficial owner(s) and connected parties against the names (and aliases) of designated individuals and entities on a risk sensitive basis.

The Hong Kong Government or its regulators, including the Law Society, do not issue or maintain any form of sanctions or designated individuals and entities list but they do have a supervisory role within the targeted financial sanctions regime in relation to firms’ systems and controls for complying with these legal requirements. 

Sanctions imposed by foreign governments are not part of the international targeted financial sanctions regime and have no legal status in Hong Kong. Therefore, no obligation is created on the firms under Hong Kong law to comply with other sanctions regimes. However, members must be aware of the extraterritorial application of other sanction regimes for example the Office of Foreign Assets Control - Sanctions Programs (US), the European Union Sanctions List (EU) and Her Majesty Treasury Sanctions List (UK). It is crucial for a firm to consider its operations and risks, its obligations under sanctions-related and existing money laundering and terrorist financing laws, and whether the provision of a firm’s legal services may have wider sanctions-related implications for its client. 

What Sanctions measures are imposed by the UNSC? 

The three most common types of measures imposed by the UNSC, these are:

  1. Financial Sanction (Asset Freeze): prohibits the making available of, or dealing with the financial assets and economic resources of, persons or entities designated by the UNSC or its relevant Committees;
  2. Travel Ban: prohibits the entry or transit of designated persons into or through the territories of United Nations Member States (including Hong Kong); and
  3. Arms Embargo: prohibits the supply, sale or transfer of arms and related materiel, technical advice, assistance or training related to military activities, to places or organisations under sanction.

As of August 2022, there were 12 countries and two organisations whose designated persons were subject to sanctions or other restrictions. 

 
What are Targeted Financial Sanctions?

Targeted financial sanctions are aimed at specifically named individuals, groups, undertakings and entities collectively referred to as “designated persons” and are measures for asset freezing and prohibitions to prevent funds or other assets from being made available, directly or indirectly, for the benefit of specified designated persons who are sanctioned. 

In practice, sanctions restrictions mean that a legal practitioner cannot:

  • receive payment from or make funds available to persons on the Sanctions List
  • deal with their economic resources
  • make a legitimate payment to those persons.
Where do I find lists of designated persons and entities?

The Security Bureau maintains lists of terrorists and terrorist associates under the UNATMO, while the CEDB maintains list of designated individuals and entities under the UNSO. The Consolidated UNSC Sanctions List contains all names of designated individuals and entities in one document. All lists are regularly updated, therefore member firms and sole practitioners that do not utilise automatic screening solutions should regularly check for Sanctions updates and name screen against the most up to date Consolidated UNSC Sanctions List. 

Please click here to access the lists: 

Lists of persons and entities subject to financial sanctions under the United Nations Sanctions Ordinance, Chapters 537 and its subsidiary legislation, please click here.

United Nations (Anti-Terrorism Measures) Ordinance, Chapter 575 - names of persons designated as terrorists or terrorist associates by the Committees of the United Nations Security Council, please click here.

The Consolidated United Nations Security Council Sanctions List (includes all individuals and entities subject to sanction measures), please click here.

The Security Bureau notifies the respective regulators, including the Law Society of Hong Kong, of any changes to the UN Sanction Lists and of any updates to the list of terrorists and terrorist associates maintained under the UNAMTO. 

Latest updates from the Security Bureau can be accessed here.

Sanctions reporting obligations

Members are legally obliged to report to the Joint Financial Intelligence Unit (“JFIU”) if they know or suspect that:

  • a breach of financial sanctions has occurred
  • a person (individual, entity or group) is a designated person
  • member holds frozen asset(s).

If, before providing legal services or during the relationship, a legal professional has identified a designated person or an association with such person or formed a suspicion that there may be a sanctions violation, they must:

  • report the matter to their Money Laundering Reporting Officer (“MLRO”)
  • suspend work on the transaction
  • decline to act for that client
  • submit a Suspicious Transaction Report (“STR”) to the JFIU.

Remember that even if you did not provide legal services and declined to act for the client, you are still required to report the case to JFIU. Not doing so is a criminal offence which may result in criminal prosecution or a monetary penalty.

Members should also consider submitting an STR to the JFIU if there is a suspicion of money laundering (“ML”), terrorist financing (“TF”) or proliferation financing (“PF”). There are offences under existing ML and TF laws that are relevant when dealing with sanctions-related matters: 

  • Under section 4 of the Weapons of Mass Destruction (Control of Provision of Services) Ordinance (Cap.526) (“WMDO”), it is an offence for a person to provide any services where he believes or suspects, on reasonable grounds, that those services will or may assist the development, production, acquisition or stockpiling of Weapons of Mass Destruction (“WMD”) in Hong Kong or elsewhere.
  • Under section 25 of the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap.405) (“DTROP”) and the Organized and Serious Crimes Ordinance (Cap.455) (“OSCO”), it is an offence for a person to deal with any property knowing or having reasonable grounds to believe it represents any person’s proceeds of drug trafficking or proceeds of an indictable offence (which includes an offence under section 4 of the WMDO respectively).
  • Section 25A of the DTROP and the OSCO, as well as sections 12 and 14 of the UNATMO, make it an offence if a person fails to disclose, as soon as it is reasonable for him to do so, his knowledge or suspicion of any property that directly or indirectly represents the proceeds of drug trafficking or was used in connection with, or is intended to be used in connection with, drug trafficking or an indictable offence (which includes an offence under section 4 of the WMDO or is terrorist property).
What are the penalties for breaching Sanctions requirements?
Penalties under the UNSO and UNATMO:
Legislation  Penalty 
UNSO Contravention of sanctions under the UNSO shall be punishable on conviction on indictment by an unlimited fine and imprisonment for a term not exceeding 7 years.
UNATMO Contravention of the relevant provisions under the UNATMO shall be punishable on summary conviction by a fine of HKD100,000 and imprisonment for two years, or on conviction on indictment by an unlimited fine and imprisonment for 14 years.
Section 12(1) of the UNATMO requires a person to report his knowledge or suspicion of terrorist property to an authorized officer (e.g. the JFIU). Failure to make a disclosure under this section constitutes an offence under section 14(5). The maximum penalty upon conviction of this offence is a fine of HK50,000 and imprisonment for three months. 
Contact details of relevant Governmental Bodies

Commerce and Economic Development Bureau (Commerce, Industry and Tourism Branch) 

The CEDB has overall responsibility in implementing the United Nations Sanctions in Hong Kong. Individuals or entities affected by targeted financial sanctions as a result of mistaken identification or confusion with individuals or entities on the relevant sanctions lists may submit written requests for clarification to the Commerce, Industry and Tourism Branch of CEDB, after requesting an explanation from the institution that froze the assets.

 

Contact Details: 
23/F West Wing
Central Government Offices
2 Tim Mei Avenue Tamar
Hong Kong
Tel: 3655 5170
E-mail: citbenq@cedb.gov.hk

 

Trade and Industry Department 

The Trade and Industry Department (“TID”) is responsible for implementing trade sanctions. 

The TID maintains a list of circulars regarding the UNSO regulations related to trade. For details, please click here.

List of countries subject to United Nations Sanctions and scope of trade-related sanctions are available at the TID website, please click here.

 

Contact Details: 
Tower 3 Concorde Road
Kowloon City
Hong Kong
Tel: 2392 2922
E-mail: enquiry@tid.gov.hk 

Disclaimer
The contents are intended to provide a general guide to the subject matter only and should not be treated as a substitute for specific advice concerning individual situations. While every effort has been made to ensure the accuracy of the content provided, it does not constitute legal advice and cannot be relied upon as such. The Law Society does not accept responsibility for liabilities arising from reliance upon the content provided.