In the weeks following Russia’s invasion of Ukraine, British lawmakers revived and rushed to pass a bill on economic crime that had been delayed in targeting Russian assets, with President Joe Biden saying the United States was “coming for your illicit profits”. And authorities in France and Italy seized yachts linked to Kremlin allies. As Western governments squander dirty money – or at least make a show of doing so – kleptocrats and the world’s oligarchs looking for new places to store their wealth. “In recent months, there has been an incredible reorientation of funds to new places where people can hide their money,” said Tom Mayne, a London-based think tank corruption expert at Chatham House. “Hong Kong is a great destination for these oligarchs.” While the former British colony – and a pioneer of offshore financing – is not the only place the wealthy Russians are suddenly being displaced, it has the upper hand over rivals such as Dubai and the Caribbean tax havens. “The oligarchs have historically loved London because of what it brings to the table not only in terms of financial services, but also luxury real estate and private schools for their children,” Mr Maine said. Hong Kong has these things in abundance. The city has long been attractive to Chinese oligarchs, and while that has changed somewhat in recent years due to the crackdown on President Xi Jinping and Beijing’s growing control, for those who are no less afraid of the Chinese government, is the ideal hole. . Beijing’s influence in Hong Kong could even be an advantage for those who want to shield their assets. The governments of China and Hong Kong – targets and critics of Western sanctions themselves – are reluctant to help foreign countries punish those responsible for the war in Ukraine, as they have reportedly turned a blind eye to sanctions imposed by North Korean entities here. A Hong Kong government spokesman said the city was enforcing UN Security Council sanctions to meet its international obligations. Sanctions in other jurisdictions are outside the scope of the government’s international legal duties, the spokesman added. David Asser, a former US State Department official and sanctions expert, said there was another reason why Hong Kong was an “obvious alternative” to London as a hub for oligarchs: the Clearing Automated Clearing System (Clear). House Automated Transfer System – CHATS). Founded in 2000, the state-owned CHATS processes billions of dollars without the transaction necessarily affecting the US banking system. During the extradition proceedings in Vancouver against Huawei executive Meng Wanzhou, who was accused of violating US sanctions against Iran, two experts testified that if the transactions had been conducted through CHATS, the whole case would have been avoided. “[Hong Kong bankers] “They are blatantly announcing that they can take your dollars and clear them in virgin bank dollars and it will be settled without you having to go through New York,” Asher said. “It is done by a large number of interesting and honestly annoying people around the world.” And if you need a local company to help you with some of these transactions or to buy a luxury property, Hong Kong happens to be one of the easiest places to register a company and keep the real owners secret and its purpose. Starting a company in Hong Kong costs less than C $ 250 and requires only one company manager and secretary, while only the latter needs to be based in the city. Thousands of companies offer secretarial services and can also provide a Hong Kong address for the new company, with some offices registered in hundreds of different companies, which the US Treasury Department considers a “red flag for shell companies”. . Although not necessarily a sign of crime, “we know that most shell companies are not legitimate businesses and are not involved in any business, they are just used to make money,” Mayne said. Some Russian oligarchs have already seen the benefits of operating in Hong Kong. The United States has imposed sanctions on entities in the city linked to Oleg Deripaska, a billionaire close to Russian President Vladimir Putin, and Yevgeny Prigogine, an oligarch accused of financing the US trolley farm. 2016 elections. and the Wagner mercenary group. According to the US State Department, between 2018 and 2019, three Hong Kong companies controlled by Mr. Prigozhin “facilitated more than 100 transactions in excess of $ 7.5 million.” The company records cite another person under sanctions, Igor Lavrenkov, as the director of these companies, while administrative services were provided by Hong Kong Easy Secretarial Ltd., which did not respond to a request for comment. All companies appear to have ceased operations since sanctions were imposed. Mr. Deripaska is the former director of the Hong Kong-listed aluminum giant Rusal. When the company received sanctions from the US along with other Russian entities in 2018, it was forced to resign, although it remains a major shareholder. Rusal was removed from the sanctions list the following year, but the Financial Times reported that US bankers had avoided trading in the stock, which has lost billions in value since the start of the war in Ukraine. Having a company based in Hong Kong can be beneficial, because like London – and unlike tax havens like the British Virgin Islands – its position as a global financial center can offer a certain veneer of dignity. On its website, Hong Kong Easy Secretarial Ltd. notes that customers “use Hong Kong’s international image and status to enhance the competitiveness of the company itself”. Following the publication of the Panama Papers in 2016 – which lists Hong Kong as a global hub for shell companies – the city has stepped up its crackdown on money laundering and corporate disclosure. This included the introduction of an important register of auditors, which requires companies to maintain a list of real owners who must “be open for inspection by law enforcement upon request”, though not by the public. A company secretary who worked in the industry for eight years and represented hundreds of companies described the new register as “a government checkpoint”. The Globe and Mail does not identify the person so that they can talk about sensitive issues. “It’s good for us because we charge a fee for it, but from a regulatory point of view it is quite useless,” they said, noting that even banks can not ask to see the register and its accuracy depends largely on the honesty of the individual. that maintains it. The company secretary said that while opening a bank account has become much more difficult in recent years due to the internal checks of financial institutions, people can still start a company or buy real estate without much government supervision. Under Hong Kong law, there is a legal obligation to report any suspicion that property involved in an agreement represents the proceeds of an offense that may be charged. However, statistics from the Hong Kong Common Financial Intelligence Unit (JFIU) show that some areas are tougher than others in doing so: Of the nearly 57,000 suspicious transaction reports the JFIU received last year, the vast majority – over 80% – submitted by banks. Just 860 reports, 1.5 percent of the total, were submitted by real estate agencies, lawyers, accountants and trust service providers and companies alike. Even if these areas submitted more reports, it is not clear that they would lead to convictions. The JFIU employs about 100 people, compared to the thousands who work for the Police National Security Department, which means that it is difficult to get involved in such activities. In 2021, less than 90 people were convicted of money laundering. This does not mean that such charges are unheard of. The much better-funded national security police have recently launched a series of money laundering cases – against government critics. 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