Pursuant to section 5(a) of the HKAA, the Secretary of State submitted a report (“Section 5(a) Report”) on October 14, 2020 to the appropriate congressional committees and leadership identifying foreign persons that the Secretary of State, in consultation with the Secretary of the Treasury, determined are materially contributing to, have materially contributed to, or attempt to materially contribute to the failure of the Government of China to meet its obligations under the Joint Declaration or the Basic Law.
Section 6 of the HKAA requires blocking sanctions to be imposed on each foreign person identified in the Section 5(a) Report, or in an update to that report under section 5(e) of the HKAA. The individuals identified in the October 14, 2020 Section 5(a) Report were designated by OFAC on August 7, 2020 pursuant to Executive Order (E.O.) 13936, and the property and interests in property of those individuals that are in the United States or in the possession or control of U.S. persons are blocked.
Further, section 5(b) of the HKAA requires the Secretary of the Treasury, in consultation with the Secretary of State, to submit a report to Congress 30–60 days after the Section 5(a) Report is submitted, identifying any foreign financial institution (FFI) that knowingly conducts a significant transaction with a foreign person identified in the Section 5(a) Report. For the purposes of the report under section 5(b) (“Section 5(b) Report”), the Treasury Department will only identify FFIs that knowingly conduct a significant transaction with a foreign person identified in the Section 5(a) Report or any update to that report following the person’s listing in the Section 5(a) Report. As a general matter, transactions with persons identified in the Section 5(a) Report that constitute a good-faith wind down within 30 days of a person’s identification on such report will not be considered “significant” for purposes of the Section 5(b) Report. In addition, the Treasury Department will reach out to an FFI to inquire about its conduct before identifying it in a Section 5(b) Report.
Pursuant to section 7(a) of the HKAA, within one year of an FFI’s inclusion in the Section 5(b) Report, five out of 10 of the sanctions set out in section 7(b) of the HKAA must be imposed on that FFI. Not later than two years after an FFI has been included in the Section 5(b) Report, all 10 sanctions set out in section 7(b) must be imposed on that FFI.
Any FFI that knowingly conducts a significant transaction with a foreign person named in the Section 5(a) Report or an update to that report is potentially subject to mandatory secondary sanctions under the HKAA. Accordingly, with respect to foreign persons in the Section 5(a) Report that also appear on the List of Specially Designated Nationals and Blocked Persons (SDN List), OFAC has updated the SDN List to include the language, “Secondary sanctions risk: pursuant to the Hong Kong Autonomy Act of 2020 – Public Law 116–149.”