'Bankers Face Jail If They Deal With Lais Accounts'

Hong Kong's security chief sent letters to media tycoon Jimmy Lai and branches of HSBC and Citibank this month threatening up to seven years' jail for any dealings with the billionaire's accounts in the city, according to documents seen by Reuters.

The letters, signed by Secretary for Security John Lee, were sent to Lai after the Hong Kong authorities announced the freezing of his majority stake in publisher Next Digital and local accounts of three companies owned by him under a sweeping new national security law.

One of Lai's financial advisers said that while the amount of funds in the accounts was relatively small, they represented the Hong Kong management end of a global network of banking relationships covering his private wealth.

Three senior private bankers and three corporate lawyers – independent from Lai's accounts – said the action extended the tightening national security apparatus into elite tiers of the banking system for the first time, exposing risks for clients and top financial managers in Hong Kong.

The advisers are seeking guidance from bankers and lawyers on how to challenge the freeze, and its impact on offshore holdings and banking relationships managed through Hong Kong until now.

The action by the security secretary is also fuelling concern about the broader investment climate in the city given the potential reach of the security law, imposed on the former British colony last June by China's parliament, lawyers, bankers and diplomats say.

The moves could imperil any attempt by the democracy activist to move offshore assets back home to prop up Next's troubled Apple Daily tabloid, a staunch government critic, the financial adviser said.

Shares in Next Digital rose as much as 330 percent as they resumed trading on Thursday after authorities last week froze Lai's 71.26 percent stake, then worth US$45 million.

Lai has emerged as one of the highest profile targets of the new law and is facing three national security charges including allegedly colluding with a foreign country.

The letter to Lai, sent to him at the city's high-security Stanley Prison, threatens up to seven years' jail and an unspecified fine for any dealing in the named assets, including disposal or conversion, using them as collateral or transferring them in or out of Hong Kong.

A Security Bureau spokesman said as judicial proceedings were going on "it is not appropriate for us to disclose operational details".

"Suffice to say, endangering national security is a very serious crime."

A Hong Kong-based spokesperson for Citibank said the bank did not comment on individual client accounts. "Citi is required to comply with all applicable laws and regulations in markets where we operate," the spokesperson said. A spokeswoman at HSBC in Hong Kong declined to comment.

Lai said last May that, given the pressure building on him, the bulk of his personal wealth was off-shore. His advisers say this is spread across Asia and North America, including property in Taiwan, hotels in Canada and tens of millions in US stocks.

"We are certain they are determined to choke Apple, and even without trying to seize assets offshore, they are making it difficult to move that money back into Hong Kong," one adviser said.

"We can now see that any banking relationship you have centred on Hong Kong makes you vulnerable under the national security law – that is going to be a big wake-up call for the wealth management industry here, and their rich clients," the adviser said.

"In trying to nail Jimmy Lai and Apple to the wall, they might well be nailing that industry too."

The 73-year-old Lai is serving a 14-month prison sentence for taking part in unauthorised assemblies during anti-government protests that rocked Hong Kong in 2019. (Reuters)