This month, a first round of US sanctions was put back into place following US President Donald Trump’s decision in May to revoke the Iran nuclear deal signed by his predecessor, Barack Obama. Under the deal, Iran agreed to limit its nuclear program in exchange for sanctions relief.
This first round of sanctions target any transactions with Iran involving US dollars, gold and other precious metals, aluminum, steel, commercial passenger aircraft, shipping and Iranian seaports.
Another round of sanctions is expected in November, according to Financial Tribune.
Figures from the Hong Kong Monetary Authority , the city’s de facto central bank, show complaints about the freezing of corporate accounts in Hong Kong have risen steadily: 36 cases in 2016, 40 in 2017 and 24 in the first half of 2018. Complaints about account closures reached 53 in 2016, 46 in 2017 and 42 in the first six months of 2018.
But those numbers could be even higher as they do not include people who forgo filing a formal complaint–people such as Masoud Sajjadi, one of about 50 Iranians in Hong Kong who say they are facing banking troubles, South China Morning Post reported.
HKMA has issued guidelines to remind banks to “treat customers fairly” when doing due diligence, and be mindful not to “unreasonably” impede access to bank services. HKMA has no policy of limiting banks from taking on customers from any country.
But in reality, Henry Smith, of the consulting firm Control Risk, said “banks will choose to or be compelled to freeze bank accounts they think expose them to high-risk jurisdictions”.
Iranians on mainland China have also experienced problems. WeChat groups of Iranian expatriates, averaging 200 members, have sprung up in mainland cities to vent about how bank troubles have disrupted lives and businesses.
Mehdi Fakheri, Iran’s consul general in Hong Kong, said his country’s diplomats had spoken to Chinese authorities about the problem.
But, he added, Tehran was “not satisfied” with the response from Beijing, whose commitment to trading with Tehran and defying US sanctions has not translated into a clear directive to Chinese banks to treat Iranians fairly.
“That needs political support by the Chinese government and if the banks receive indication from the government to go ahead, that will solve the problem,” he said.
The issue has fuelled debate over how to protect people from getting caught in the middle of the fight the US is unilaterally waging against Iran without support from major economies–China, Russia, European Union, Japan and South Korea.
Hong Kong lawmaker Cheng Chung-tai proposed to HKMA in December that it establish an independent body, similar to the Consumer Council, where people who are mistreated by banks can seek compensation.
“A compensation mechanism is a moderate solution. The banks would think twice before making inconsiderate decisions,” Cheng said at the time.
But analysts are divided over whether such an idea is feasible.
“Doesn’t seem to be,” Mini VandePol, of the law firm Baker McKenzie, said. “Whether a bank chooses to do business with a given company or individual is usually a matter of risk that bank is willing to take and a commercial matter and sanctions compliance risk is one such factor taken into account.”
Hammond said Hong Kong could instead adopt a policy similar to the European Union’s “blocking statute” that forbids Europeans from complying with American sanctions on Iran, protects them from US court decisions and allows them to recover damages arising from the enforcement of sanctions.