Five U.S. federal agencies issued Sept. 6 an updated advisory warning U.S. businesses about “new and heightened” risks to their operations and activities in Hong Kong.
The advisory states that businesses, individuals, academic institutions, media organizations, research service providers, investors, and others that operate in Hong Kong or have exposure to U.S.-sanctioned individuals or entities should be aware of changes to Hong Kong’s laws and regulations that have been issued since the previous advisory in 2021 and could have an adverse impact.
For example, the March 2024 Safeguarding National Security Ordinance contains broad and vague provisions regarding the criminalization of “colluding with external forces,” activities involving “state secrets,” and “espionage,” among other acts, that could affect or impair commerce, trade, and seemingly routine individual commercial activities in, or travel to, Hong Kong. This could include due diligence research on government policy or local clients; analysis of local or mainland economic conditions or firms; maintaining connections with local and international government officials, journalists, or non-governmental organizations; and data management, protection, and transmission to and within Hong Kong.
Further, many provisions of the SNS Ordinance purport to apply extraterritorially to any Hong Kong resident who is a Chinese citizen for their activities outside of Hong Kong; any firm registered in Hong Kong; and any company outside of Hong Kong that has a place of business in Hong Kong. Additionally, some offenses, such as the unlawful disclosure of state secrets, purport to apply to anyone outside of Hong Kong, regardless of nationality.
The updated advisory also highlights that businesses operating in Hong Kong (1) face potential legal, regulatory, operational, financial, and reputational risks, including of increased scrutiny, potential financial penalties, and legal actions, for perceived violations of the SNS Ordinance or the National Security Law, and (2) may face conflicting jurisdictional requirements and liability in connection with sanctions compliance efforts. Failure to adhere to U.S. sanctions can result in civil and criminal penalties under U.S. law.
For more information on understanding and mitigating these risks, please contact Xiaofeng Xu at (852) 2603 9350 or via email.
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