Hong Kong Justice Secretary's Standard Chartered mortgage is under scrutiny as US sanctions on city officials sever banking ties

By Sandy Li

/ SCMP |

August 25, 2020 12:06 PM SGT

SINGAPORE (EDGEPROP) - Two of the seven Hong Kong officials sanctioned by the United States government have outstanding mortgages held with international banks, obligations which are coming under scrutiny as financial institutions move to sever ties with them to comply with US regulations.

Secretary for Justice Teresa Cheng Yeuk-wah took out a mortgage with Standard Chartered Bank for her HK$26 million ($4.6 million) Tuen Mun villa, bought in 2008, according to Land Registry records. Commissioner of Police Chris Tang Ping-keung transferred his mortgage from HSBC to Bank of China (Hong Kong) on August 4, three days before the US put him on the sanction list, record showed.

The scrutiny underscores how US sanctions can make day-to-day life more difficult for so-called specially designated nationals and their families, as international banks who want to continue to access the US financial system suspend their businesses. Hong Kong's Chief Executive Carrie Lam Cheng Yuet-ngor, who does not have any property registered under her name in the city, said she is having difficulty using her credit cards, an inconvenience that she described as "meaningless" in her interview with Chinese state television.

"It would be safer to shift the mortgage to big mainland banks," said Raymond Chong, managing director at mortgage referral brokerage firm StarPro Agency.

Tuen Mun home of Secretary for Justice Teresa Cheng Yeuk wah - EDGEPROP SINGAPORE

Workers setting up scaffolding at the Tuen Mun home of Secretary for Justice, Teresa Cheng Yeuk-wah, on January 11, 2018. The building authority approved a two-month plan to remove three illegal structures on the property. Photo: Winson Wong

US President Donald Trump signed the Hong Kong Autonomy Act into law last month, giving American regulators the ability to sanction non-US banks who engage in "significant" transactions with individuals who helped end the city's "high degree of autonomy" from mainland China. The legislation was passed after the US failed to dissuade China's parliament from enacting a national security law for Hong Kong.

The US law did not specify what constitutes a significant transaction and bankers and other financial professionals in the city are hoping the issue will soon be clarified, according to compliance lawyers.

Secretary for Justice Teresa Cheng yeuk wah - EDGEPROP SINGAPORE

Secretary for Justice Teresa Cheng Yeuk-wah during a Commercial Radio programme in Kowloon Tong on 21 January 2018. Photo: Winson Wong

Cheng bought her villa at 5 Lok Chui Street more than a decade ago using a company called Sparkle Star Development, of which she is director. She took out a mortgage of an undisclosed amount with Standard Chartered, Land Registry records show. Cheng declined to comment, according to her press officer. Standard Chartered, one of the three currency-issuing banks in Hong Kong, said in a statement that it "would not comment on matters related to any individual clients."

The Tuen Mun villa is among the five residential property Cheng owns in Hong Kong, according to the July declaration of interests by members of the Hong Kong government's Executive Council, of which she is a member. She owns flats in Sha Tin, the South District, and an industrial unit for family storage in Sha Tin, according to the declaration. She also owns an apartment each in Beijing, and in Yunnan province.

Global banks in Hong Kong reviewed their client lists for potential people at risk ahead of the sanctions being opposed as tensions worsened between Beijing and Washington, but are trying to strike a balance between US regulators and the national security law, which prohibits the imposition of sanctions, blockades or other hostile actions against Hong Kong or the mainland, according to people familiar with their thinking.

The Hong Kong Monetary Authority (HKMA), the city's de facto central bank, said on August 8 that unilateral sanctions by foreign governments are "not part of the international targeted financial sanctions regime and have no legal status in Hong Kong."

Otto Poon Lok-to, Cheng's husband, began reducing his investment in the US two days after Cheng was sanctioned.

The Hong Kong-listed engineering firm Analogue Holdings, in which Poon owns 63.5 per cent, reduced its stake in a New York venture called Transel Lift & Electric (TEI) to 49 per cent from 51 per cent. He sold the stake to Transel's partner for US$1.4 million ($1.9 million), according to the company statement filing to the Hong Kong stock exchange.

Hong Kong's police chief Chris Tang transferred the mortgage for his 439-square foot (41-square metre) flat, which he bought in March 2017 for HK$6.25 million, on August 4. The police department's public relations department said the flat was for Tang's "self use," and the transfer of his mortgage was his "personal consumer choice."

Two Hong Kong officials on the sanctions list have already fully paid for their property. Eric Chan Kwok-ki, Secretary General for the Committee for Safeguarding National Security, does not have an outstanding mortgage for his home at Royal Ascot in Sha Tin, bought for HK$8.69 million in 2009.

Secretary for Security John Lee Ka-chiu has also fully paid for his HK$12.5 million abode at King's Park Villa in Ho Man Tin, bought in 1997.

Erick Tsang Kwok-wai, the Secretary for Constitutional and Mainland Affairs, sold his home at New Jade Gardens in Chai Wan in 2009. He sold the property for HK$2.35 million, about HK$300,000 less than the purchase price of HK$2.38 million in 1995, according to Land Registry records. His sole property was a flat in the Guangdong provincial city of Dongguan, according to his July disclosure of interest.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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