Hong Kong no longer trusted financial centre, becoming a crime hub, say US lawmakers

Lawmakers in the US House of Representatives have urged Treasury Secretary Janet Yellen to rethink ties with Hong Kong’s banking sector, citing concerns that the city is increasingly becoming a hub for money laundering and sanctions evasion.

According to a Wall Street Journal report, the bipartisan leaders of the House Select Committee on the Chinese Communist Party in a letter to Yellen said Hong Kong has turned into a major centre for the export of controlled Western technology to Russia; the creation of front companies to buy Iranian oil; the managing of “ghost ships” that serve North Korea, as well as other violations of US trade controls.

The letter,  set to be publicly released on Monday, was signed by Rep. John Moolenaar, a Republican from Michigan and committee chair, and Rep. Raja Krishnamoorthi, a Democrat from Illinois and the committee’s ranking member.

“Hong Kong has shifted from a trusted global financial center to a critical player in the deepening authoritarian axis of the People’s Republic of China, Iran, Russia and North Korea,” WSJ quoted the lawmakers as saying in the letter.

“We must now question whether longstanding US policy towards Hong Kong, particularly towards its financial and banking sector, is appropriate,” the lawmakers added.

The letter cited research that shows nearly 40% of goods shipped from Hong Kong to Russia in 2023 were high-priority items such as semiconductors that Russia could use to prosecute its war in Ukraine, WSJ reported.

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Meanwhile, a Hong Kong government spokesman dismissed allegations that the city is a money-laundering hub, emphasising its strong enforcement system to prevent the illegal diversion of strategic commodities.

A representative for Treasury Secretary Janet Yellen did not respond to a comment request, added the report.

Reps. Moolenaar and Krishnamoorthi, who lead a committee focused on US-China competition, have asked Treasury for details on its efforts to combat money-laundering and sanctions evasion involving Hong Kong’s financial system.

Hong Kong’s status as a global financial hub is increasingly questioned as Beijing tightens its control, leading to an exodus of expatriates. The US has condemned Hong Kong’s crackdown on dissidents under a stringent national security law, though Western banks continue operations there.

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Last week, Hong Kong courts sentenced pro-democracy advocates for subversion under the law, prompting calls from the Biden administration for their release. Hong Kong officials rejected criticism of the proceedings.

At a Hong Kong financial summit that same day, global banking leaders, including Goldman Sachs’ David Solomon, Citi’s Jane Fraser, and State Street’s Ronald O’Hanley, attended but did not publicly address the court sentences.

Earlier this month, Moolenaar and Krishnamoorthi urged the Biden administration to sanction Hong Kong officials involved in the detention of human-rights activists.

With inputs from agencies