Some Hong Kong tycoons have started moving personal wealth offshore as concern deepens over a government plan to allow extraditions of suspects to face trial in China for the first time, according to financial advisers, bankers and lawyers familiar with such transactions.
One tycoon, who considers himself potentially politically exposed, has started shifting more than US$100 million from a local Citibank account to a Citibank account in Singapore, according to 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,” the adviser said. “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.”
Hong Kong and Singapore compete fiercely to be considered Asia’s premier financial center. The riches held by Hong Kong’s tycoons have until now made the territory the larger base for private wealth, boasting 853 individuals worth more than US$100 million — just more than double the number in Singapore — according to a report from Credit Suisse last year.
The extradition bill, which would cover Hong Kong residents and foreign and Chinese nationals living or traveling through the territory, has sparked unusually broad concern that it might threaten the rule of law that underpins Hong Kong’s international financial status.
Beijing-backed Hong Kong Chief Executive Carrie Lam (林鄭月娥) has said the bill is necessary to plug loopholes that allow criminals wanted in China to use the territory as a haven and that the courts would safeguard human rights.
Simon Young (楊艾文) , a professor at the University of Hong Kong’s law school, told reporters that it was understandable that some Hong Kong residents might be considering moving assets out of the territory given the little-noticed financial reach of the bill.
If the bill becomes law, it would be possible for Chinese courts to request Hong Kong courts to freeze and confiscate assets related to crimes committed in China, 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.”
The head of the private banking operations of an international bank in Hong Kong, who declined to be named, said 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,” the banker said. “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.”
A Hong Kong government spokesman did not directly address questions over capital flight, but said Hong Kong’s “world-class financial infrastructure” and open, international market had a regulatory regime “completely compatible with that of overseas markets.”
The amendments seek to simplify case-by-case extraditions to jurisdictions, including China, beyond the 20 with which Hong Kong already has extradition treaties.
As well as removing an explicit block on extraditions to China in the Fugitive Offenders Ordinance, the amendments also remove the restrictions on China from the Mutual Legal Assistance in Criminal Matters Ordinance, known as the MLAO.
According a Hong Kong Bar Association study, the MLAO allows foreign jurisdictions to ask Hong Kong authorities to gather evidence for use outside the territory “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 says.
Requests can also be made at the investigative rather than prosecution stage.
The association said 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.”
The government spokesman said that 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.
“The rights and freedoms of Hong Kong people and foreigners in Hong Kong, including their assets, are fully protected by the Basic Law,” the spokesman added, referring to Hong Kong’s mini-constitution.
Prominent commercial lawyer Kevin Yam (任建峰) said he was aware of high net-worth Hong Kong figures taking steps to move assets to Singapore as they matured or market conditions proved favorable.
“At this point I would say it is a steady trickle rather than stampede, but is most definitely happening,” he said.
Three other private bankers said they had received inquiries from clients about the impact of the bill, but had not yet seen the funds move.
Yam said few expected the bill to be widely exploited by Beijing overnight if passed, but it was creating a climate of deep unease, with the fear it could be used more liberally in coming years.
“It is great for Singapore,” he said. “And such an own-goal for Hong Kong.”
Additional reporting by James Pomfret and Sumeet Chatterjee
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