According to Kevin Yam, a prominent Hong Kong-based lawyer, high net-worth individuals from Hong Kong are taking steps to relocate their assets to Singapore.
China’s aggressive push towards Hong Kong is starting to have repercussions.
According to lawyers, bankers, and financial advisers familiar with ongoing transactions, many tycoons from Hong Kong have started relocating their personal wealth offshore stemming from deep concerns over the Hong Kong government’s plan to allow extraditions of suspects to face trial in mainland China.
One such tycoon, who considers himself politically exposed, has begun relocating more than $100 million from a local Citibank account to another Citibank account in Singapore, said an adviser involved in the transactions.
“It’s started. We’re hearing others are doing it, too, but no-one is going to go on parade that they are leaving,” said the adviser. “The fear is that the bar is coming right down on Beijing’s ability to get your assets in Hong Kong. Singapore is the favored destination.”
Incidentally, Singapore and Hong Kong compete neck to neck as Asia’s premier financial center.
The wealth held by Hong Kong’s tycoons have so far made the city the larger base for private wealth. More than 853 individuals in Hong Kong are worth more than $100 million – double the number in Singapore, according to a 2018 report from Credit Suisse.
Hong Kong’s extradition bill, which will cover Hong Kong residents, foreign residents and Chinese nationals living or traveling through the city, has sparked broad concerns it may threaten the rule of law that underpins Hong Kong’s international financial status.
Carrie Lam, Hong Kong’s Beijing-backed leader, has so far stood by the bill, saying it is necessary to plug loopholes that allow criminals wanted on the mainland to use the city as a haven. She has said the courts would safeguard human rights.
Peaceful protestors faced police violence which erupted into violence forced an initial legislative debate to be shelved last Wednesday; it is unclear when the debate on the bill will be resumed.
Once the extradition treaty becomes law, it will be possible for mainland Chinese courts to request Hong Kong courts to freeze and confiscate assets related to crimes committed on the mainland, beyond an existing provision covering the proceeds of drug offenses.
“This has been largely overlooked in the public debate but it is really a significant part of the proposed amendments,” Young said. “It may not have been overlooked, of course, by the tycoons and those giving them legal advice.”
According to the head of a private banking operations of an international bank in Hong Kong, who sought the cover of anonymity, clients have been moving money out of Hong Kong to Singapore.
“These aren’t mainland Chinese clients who might be politically exposed, but wealthy Hong Kong clients,” said the banker. “The situation in Hong Kong is out of control. They can’t believe that Carrie Lam or Beijing leaders are so stupid that they don’t realize the economic damage from this.”
The extradition bill seeks to make amendments to simplify case-by-case extraditions to jurisdictions, which include mainland China, beyond the 20 with which Hong Kong already has extradition treaties.
As well as removing an explicit block on extraditions to mainland China in the current Fugitive Offenders Ordinance, the amendments also remove the restrictions on the mainland from the Mutual Legal Assistance in Criminal Matters Ordinance (MLAO).
According to a recent Hong Kong Bar Association study, the MLAO allows foreign jurisdictions to ask Hong Kong authorities to gather evidence for use outside the city “and to render other forms of assistance, such as freezing and confiscating the assets of persons wanted for crimes in other jurisdictions”.
“Search, seizure and confiscation can involve cases with a penalty of two years in prison or more, compared with the threshold of seven years for extraditions under the Fugitive Offenders Ordinance, the submission notes. Requests can also be made at the investigative rather than prosecution stage”, said the Hong Kong Bar Association.
The association notes that the mutual legal assistance amendments would “significantly strengthen the impact of the amended Fugitive Offenders Ordinance in relation to criminal prosecutions on the mainland”.
According to a Hong Kong government spokesman, any external confiscation order had to be registered in a Hong Kong court and could be challenged. It had to meet a “double criminality” standard, whereby it had to be based on conduct that was also a crime in Hong Kong.
He went on to add, “The rights and freedoms of Hong Kong people and foreigners in Hong Kong, including their assets, are fully protected by the Basic Law” in reference to Hong Kong’s mini-constitution.