Tuesday, May 18, 2021

U.S. Department of the Treasury: Newly Released Report Pursuant to Section 5(b)and 5(e) of the Hong Kong Autonomy Act

Pix Credit: Hong Kong News


For those who follow these things, The U.S.Department of the Treasury has issued its latest report as required of it under ¶5(b) of the Hong Kong  Autonomy Act. The HKAA Pub.L. 116–149 (text) comprises a long list of political and ideological conclusions and positions about the authoritative approach to the implementation of international law and the Basic Law of Hong Kong that serve as the foundation for  the imposition of a series of requirements that are meant to uphold the principles of the United States-Hong Kong Policy Act of 1992 (22 U.S.C. 5701 et seq.) and the Hong Kong Human Rights and Democracy Act of 2019 (Public Law 116-76; 22 U.S.C. 5701 note.  Section 5(a) requires the U.S: Secretary of State to identify, and report to Congress on that identification, of foreign persons who "are materially contributing to, has materially contributed to, or attempts to materially contribute to the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law." Section 5(b) requires the Secretary of the Treasury, in consultation with the Secretary of State, [to] submit to the appropriate congressional committees and leadership a report that identifies any foreign financial institution that knowingly conducts a significant transaction with a foreign person identified in the report under subsection (a). Section 5(e) then requires updates of such reports "in an ongoing manner." The Treasury's Report  then meets the obligations of Sections 5(b) ad (e) of the HKAA.

The Report concludes:

As of May 1, 2021, Treasury has not identified any FFI that has knowingly conducted a significant transaction with a foreign person identified in the Section 5(a) Report submitted on October 14, 2020 and the update thereto submitted on March 16, 2021 after their respective submission dates. Treasury will continue to monitor for any activity that meets these criteria. Treasury will also continue to engage foreign governments and FFIs to help ensure they understand the reporting requirements and sanctions risks under the HKAA and other authorities, as well as any relevant public guidance OFAC has issued. As required by the Act, Treasury will continue to update the Section 5(b) Report and intends to resubmit these updates as appropriate.

This conclusion is the least valuable part of the Report. Far more interesting is the slightest of discussions about the way that such a conclusion was made possible. These methods suggest the power of the Hong Kong Autonomy Act as a means of statecraft that extends well beyond the narrow parameters of the legal status of the political rights of Hong Kong SAR under international law as a constraint of the exercise of otherwise plenary sovereignty by Chinese central authorities under color of their constitutional system. They include:


1. The use of classified and unclassified sources of information to assess compliance. On that basis the Treasury has engaged in what may be substantial capacity building  to align foreign practices to the HKAA, but more importantly, to its positions with respect to the HK Basic Law, and applicable international law guarantees respecting the conditions of Hong Kong's political settlement under the "One Country Two Systems" principle as the US sees it. In that respect the Report noted that the "Treasury has also conducted outreach to foreign governments to help ensure they understand the reporting requirements and sanctions risks under the HKAA." Report p. 1).  

2. The instrumentalization of research and investigation as disciplinary and surveillance tools. In this respect HKAA has become a vehicle for the assemblage of data  that can be used to assess conduct of foreign persons of interest to the US. This data driven management might then be used not just to comply with HKAA but for general intelligence work that may serve US policy in other respects.  One of those ways is to help build ecologies of connection between designated foreign individuals and others.

3. Foreign engagement. HKAA serves as a potentially important vehicle for state-to-state narrative setting. "Treasury leadership held constructive conversations with foreign counterparts across the globe to communicate U.S. policy objectives with respect to Hong Kong, clarify HKAA reporting requirements and sanctions risks, and request that governments communicate these requirements and risks to financial institutions within their respective jurisdictions." 

Very little of this, of course, is particularly transparent.  Nor is there much of a reason for transparency  for much of it. On the other hand it does suggest that it may be what is invisible that is the most relevant part of an otherwise straightforward garden variety sanctions regime.
The Report follows. 

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