Understanding Financial Secrecy in Hong Kong

Abstract

Purpose – This paper aims to identify Hong Kong’s regulatory ambiguity and geopolitical status, which intensify the vulnerability to financial secrecy (“FS”), and examine how these highlighted flaws and favors of HK are utilized to adopt different secrecy forms for their predicate deviance. It is expected to further outline the role of HK as a generic offshore financial center (“OFC”) functioning as a secrecy jurisdiction specifically for China. Meanwhile, in light of the HK FS cases and the real-life exploitation of these regulatory flaws, this paper further presents the findings on Asset Secrecy, a new secrecy form found to be favorably taken in facilitating FS. Design/methodology/approach – The paper positions HK as one of the vital secrecy jurisdictions among APAC regions within the political economy theory of globalization. It addresses HK’s increasing significance in facilitating FS for local and cross-border White-Collar Crimes (“WCC”). Considering HK is found to utilize its quasi-sovereignty and segregated law-making powers to cultivate the regulatory framework favorable for facilitating FS. Especially for those both state-actors like governments, other non-state-actors Multinational Corporations (“MNCs”), or high-net-worth individuals, HK has been a financially credible hub for perpetuating their predicate crime or underlying purpose by consistently taking the regulatory flaws of HK. The paper uses publicly available evidence for comparative studies on regulatory framework analysis with geopolitical contexts to illuminate the regulatory flaws of HK among the APAC region for further demonstration from the FS-modus-operandi derived from court cases and some well-known incidents. Findings – The series of actions from the convicted cases and relevant non-court FS-involved incidents reaffirm the regulatory ambiguity as highlighted by the regulatory framework comparative analysis, being exploited by those perpetrators in favor of the geopolitical context of HK. This paper consolidates the modus operandi and their strategic patterns commonly adopted from the FS facilitation, addresses the possibility for more proactive prevention against ML before the execution, and highlights the intrinsic complexity of FS being the apparent hindrance to effective control over W2C.