Photographer: Roy Liu / Bloomberg
Photographer: Roy Liu / Bloomberg
The freezing of bank accounts changed Dan’s mind.
Hong Kong, a finance worker in the early 1950s, has watched China tighten its grip on the city in recent years with growing nervousness. However, as a self-described apolitical person – he did not take part in any of the protests that hit the city in 2019, for example – he was not very worried that he would be personally affected.
Then last month, banks, including British creditor HSBC Holdings Plc, froze the account of former MP Ted Hui after he went into exile in Britain with his family. A church that helped protesters also suspended its account.
“He’s a game changer,” said Dan, who asked to use only his first name because he feared the repercussions of public speaking.
It is now in the process of moving about $ 100,000 – most of its savings – to a Canadian account, leaving only a small amount in Hong Kong to cover daily expenses.
Hong Kong police cited money laundering as a reason to call for a freeze on accounts, stressing how vast the police powers could be as a result of last year’s national security law imposed on the city.
“The security law allows assets to be frozen for issues that jeopardize national security, which are not specified,” said Philip Dykes, former president of the Hong Kong Bar Association, adding that Hong Kong is “unusual in terms of potential crimes that” they endanger national nations ”. Security.'”
Imposed on the city without debate in the local legislature, the full text of the national security law was first unveiled at midnight on June 30 – at the same time as it came into force. The law was justified as an antidote needed to restore stability after months of protests. It also calls for global jurisdiction to ban secession, terrorism, subversion and collusion with foreign forces.
It was not the first time that accounts related to the protest movement have been frozen. In 2019, HSBC closes the Spark Alliance bank account – a group that raised funds to provide legal assistance to protesters – after noticing activity other than the stated purpose of the company’s account.
Ted Hui was arrested during a June 2020 protest.
Photographer: Justin Chin / Bloomberg
But what shocked the Hong Kongers in Ted Hui’s case was the fact that his family members’ accounts had also been frozen, causing concern that people might be responsible for the actions of their relationships.
An HSBC spokesman said in December that it must comply with the laws of the jurisdiction in which it operates. Hui stepped up his criticism of HSBC last week after chief executive Noel Quinn explained in a personal email to Hui that the bank had no choice but to block his account following a police request.
In a Facebook post, Hui said the bank “did not provide the legal basis” for freezing his accounts and those of his family members and did not explain why his family was “collectively punished.”
In addition to fears that such powers could be used arbitrarily, Dan is concerned that if he does not act soon, it may be too late – for example, if Hong Kong residents begin to face restrictions on moving money over. hotare.
Hong Kong has a freely convertible currency, while people in mainland China are subject to a $ 50,000 cap on foreign exchange purchases per year.
Options Open
Many Hong Kongers convert their savings into other currencies, even if they haven’t actually moved money
Source: Hong Kong Monetary Authority
Since the security law was passed, the political situation has “deteriorated very quickly,” Dan said. The Hong Kong government only needs to tighten rules on moving funds out of the country “a little bit and then you face a lot of problems if you want to move the money out,” he said.
Anxiety is palpable, for example, from the proliferation of discussions on social media that offer advice on creating offshore accounts, moving money to other assets or opening accounts with US banks, which are perceived to be less flexible than the requirements of the Chinese authorities.
“As the addiction tightens, Hong Kong will look less and less secure as a place where people can park their money,” said Andrew Collier, director of Orient Capital Research. “We have not reached the peak, but none of this bodes well for the future of Hong Kong’s financial system.”
Data from the Hong Kong Monetary Authority, which shows that total bank deposits increased by more than 7% in the first three quarters of 2020, do not tell the full story. Money continued to flow in Hong Kong due to high demand for initial public offerings as well as a strong currency. As such, the movement of personal savings does not necessarily make a dent in official numbers.
There are signs elsewhere that the pace of money leaving the city is rising. According to figures from the Mandatory Pension Fund, the Hong Kong Pension Fund, the total amount of withdrawals from people leaving the city permanently increased by almost 20% to 5.1 billion US dollars (660 million US dollars) for the year ended June 2020, compared to the same period last year, the highest level in at least five years.
Rising withdrawals
Hong Kongers who leave take their pension vessels with them
Source: Compulsory Insurance Fund, Bloomberg
In the meantime, the growing interest in UK properties in Hong Kong looking for a foothold in the country is another sign. This is a trend that will continue to be based on Hong Kong’s strong demand for British national overseas passports, which offers a path to British citizenship.
Analysts at Bank of America Corp. they estimated in a research note that The flow of money related to emigration to the UK could reach 280 billion US dollars (36 billion US dollars) this year and 588 billion US dollars over the next five years. The total amount of money leaving the city could be higher, analysts said, as countries such as Australia and Canada have also relaxed immigration policies for Hong Kongers.
Practical aspects matter
In the UK, financial advisers say they are starting to see the number of people wondering about asset transfers.
“It was a start-up flow and we expect it to be a flood soon,” said David Denton, who specializes in international financial planning at wealth manager Quilter International. However, he warns customers to be aware that moving from a low-tax destination like Hong Kong to a higher-tax destination like the UK is something that requires careful planning.
Get off the trail
The number of Hong Kong holders of British national overseas passports has increased significantly
Source: Home Office in the UK
“If you leave Hong Kong because you are politically afraid, you may want to release and take out everything you have from Hong Kong,” Denton said. “Psychologically, it could be a good thing, from a fiscal point of view, it could be exactly a wrong thing.”
This is an echo of Colin Monton of Rathbones wealth manager. He tells customers to give themselves around 18 months, or at least a full fiscal year, to prepare and not make generous moves as if they were just sending money without thinking about the implications. Products that could make sense as expats – such as offshore bonds, for example – are effective abroad, but can be taxed in the UK if not handled properly, he said.
For the basics, such as getting a UK bank account, he suggests you start by seeing if your current Hong Kong bank, especially if it’s a major international operation, can help you with their overseas arm. – although you should be ready for documentation.
“The anti-money laundering requirements are sometimes stricter if you are unknown or expat from a higher-risk jurisdiction,” Monton said. “You’re often asked for additional identification – so be prepared for that.”
In Hong Kong, Simon Parfitt, director of Pyrmont Wealth Management Ltd., says that “people are definitely blinking” and asking more “focused questions” than vague questions.
“Hong Kong is home to many and it is not as if they are definitely leaving and will not return,” Parfitt added. “But assess where they want their children to grow up.”