US Treasury meets with banks in Hong Kong on Russia sanctions

U.S. Treasury officials pressed Chinese and foreign banks in Hong Kong this week to comply with new Biden administration sanctions on Russia's military industry as part of a global effort to turn up the heat on Moscow over its invasion of Ukraine.

Andrea Gacki, director of the Treasury Department's Financial Crimes Enforcement Network, on January 17 presided over two meetings that included representatives from Chinese and Western financial institutions and the Hong Kong chapter of the Association of Certified Anti-Money Laundering Specialists, Nikkei Asia reports.

Executives from Bank of China, Industrial and Commercial Bank of China, Bank of Communications, CMB Wing Lung Bank, UBS, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Deutsche Bank, Barclays and BlackRock attended one of the meetings, according to people familiar with the matter. 

"The U.S. officials want to mitigate risk and for financial institutions to do more than what they are currently doing, such as reviewing transactions and containing goods that are going to Russia," said one attendee. "They were pretty collaborative in messaging."

The banks pressed the U.S. officials for details on how they would be affected by a December executive order that subjects foreign financial institutions to secondary sanctions if they help Russia circumvent sanctions. 

That would include unknowingly facilitating transactions that involve sanctioned individuals related to Russia's military industry, or the trade of dual-use items under U.S. export controls.

The U.S. Treasury did not respond to a request for comment. Citi declined to comment. The other banks did not respond to requests for comment.

Last June, U.S. Treasury officials met with representatives of Hong Kong financial institutions, including Bank of China Hong Kong and Standard Chartered, to urge banks and regulators to identify U.S. high-tech items being shipped to Russia through Hong Kong.

The latest meetings involved more participants.

Last September, HSBC tightened its compliance and halted remittance services for Russian corporate clients, notifying business customers that the decision had been taken to "minimise operational exposure to Russia and Belarus," Nikkei Asia has reported. 

The U.S. has campaigned globally to punish Russia for its invasion of Ukraine, with U.S. officials travelling to the Middle East and other areas to warn businesses of consequences if they do business with sanctioned individuals.

Last November, the U.S. targeted firms in the United Arab Emirates, China and Turkey for supplying Moscow with goods that can be used for military purposes.

The Biden administration has taken action to curb Russia's access to technology and defence equipment, which is often obtained via routes running through friendly countries. Hong Kong became a major hub for high-value exports of chips to Russia, according to a Nikkei Asia investigation.

U.S. Treasury Deputy Secretary Wally Adeyemo will travel to Europe and Japan this month to brief financial institutions on the executive order.