HSBC & STAN Key takeaways from the expert call: ODI uncertainty clouds HK wealth outlook

Research evidence excerpt

HSBC & STAN Key takeaways from the expert call: ODI uncertainty clouds HK wealth outlook

ntial grandfathering,

there could still be disruption to FIs in HKSAR, as the expert believes existing

assets are also subject to the filing. We see downside risk to both revenue

growth, and existing wealth/PB AUM.)

• Implementation details are likely to come after the high-level framework,

but the exact timeline is still uncertain. The expert believes State Council

Doc. 837 appears to be the overarching policy framework, while more

operational rules are expected from subordinate regulators after July 1. There

may be a transition period before or after July 1, but the timing is not yet clear.

The expert noted that although the high-level document did not go through

public consultation, the Ministry of Justice was deeply involved in drafting and

local governments and other stakeholders also participated. The expert expects

more public consultation before detailed measures are released.

• CRS and AI are two key tools to ensure enforcement of new regulation. The

expert believes Chinese authorities already have a relatively broad picture of

offshore asset ownership through CRS (Common Reporting Standard) reporting

by financial institutions in signatories jurisdictions (i.e., HKSAR and

Singapore), tax data, AML/KYC channels, etc. Regulators may also leverage on

AI tools to compare various data sources, such as between onshore and offshore

records to ensure accurate filing of offshore financial assets; for example, a

resident with limited reported onshore/offshore income but large offshore assets

could trigger enhanced scrutiny. The expert also expects China to move closer to

a long-arm jurisdiction model, to ensure compliance.