What is the governing legislation?
Hong Kong enforces the UN sanctions regime pursuant to the United Nations Sanctions Ordinance (Cap. 537). Where the UN Security Council passes a resolution introducing or amending sanctions in respect of a particular jurisdiction, the Hong Kong Government will, at the direction of the Ministry of Foreign Affairs of the People’s Republic of China, publish regulations incorporating those sanctions into Hong Kong law.
Currently, Hong Kong enforces UN sanctions against 14 countries:
- Central African Republic
- Cote d’Ivoire
- Democratic Republic of the Congo
- North Korea
- South Sudan
As the sanctions or prohibitions under each regulation are different, parties must consider the actual requirements of each specific regulation and implement appropriate controls to ensure compliance. The Hong Kong Monetary Authority maintains a list of current sanctions-related regulations, notices, and circulars here.
Who is required to comply with Hong Kong sanctions law?
In general, persons in the following categories or circumstances are required to comply with the UN sanctions regime under Hong Kong law:
- All persons (individuals or companies) acting within Hong Kong;
- Companies incorporated in Hong Kong, wherever they may be acting; and
- Individuals acting outside Hong Kong who hold Chinese citizenship and Hong Kong permanent residency.
What are the offences?
The range of activities that are prohibited varies for each country that is subject to UN sanctions under Hong Kong law. Types of activities that may be prohibited include:
- Supply, sale, or transfer of specified items (e.g. weapons and nuclear material);
- Supply, sale or transfer of luxury goods;
- Procurement of sanctioned goods on behalf of a sanctioned person;
- Providing technical training or services in relation to sanctioned goods;
- Carriage of sanctioned goods;
- Use of an aircraft or ship in connection with trade in sanctioned goods;
- Involvement in financial transactions, making economic resources available to, or providing financial services involving sanctioned persons or trade in sanctioned goods;
- Entry into or transit through Hong Kong by specified persons;
- Entry into Hong Kong waters or airspace by certain ships or aircraft
What are the exceptions/defences?
In certain circumstances a person may apply to the Chief Executive for a license to engage in a transaction that would otherwise involve a sanctioned entity or provision of a sanctioned good or service.
In addition, most legislation provide a valid defence to an alleged breach where the person accused of the breach lacked actual knowledge that the transaction was prohibited by sanctions law provided that the accused person also had no reason to believe the transaction contained a prohibited element. This is a reminder that parties remain obliged to undertake due diligence and cannot be wilfully blind to any suspicious aspects that may be identified as warranting cause for caution or further investigation.
What are the penalties?
Penalties remain the subject of judicial discretion and will vary subject to the seriousness of the offence and any mitigating factors that may be applicable. Parties must check the applicable legislation.
The range of possible penalties permitted under the relevant regulations range from fines at level six (currently HK$100,000) up to seven (7) years’ imprisonment.