What Bankers Can Know, You Can't in Hong Kong

Hong Kong Chief Executive Carrie Lam addressed a legal forum on Monday and asserted that press freedom has been upheld since China enacted its national security law for the city last year. On the same day, the government was pursuing its latest retreat from transparency by moving to restrict access to corporate information that has helped journalists uncover financial wrongdoing, bring to light issues of public interest and hold perpetrators to account.

Officials propose to let directors withhold some details on the Companies Register, allowing them to replace residential addresses with correspondence addresses and substitute partial identification numbers for full particulars under a new inspection regime that will begin a phased introduction next month. The administration is proceeding with a modified plan that will allow certain “specified persons” to continue to access full details, after a series of objections from lawyers, accountants, investors, corporate governance experts and the media. Journalists have been excluded from the list of those eligible.

The government’s stated objective is to prevent doxxing and misuse of personal information held on public registers. That’s a legitimate concern, though also a convenient excuse for an administration that has shown an increasing hostility to Hong Kong’s longstanding values of freedom of the press and free flow of information

City leaders appointed by and answerable to the central government have reason to be wary of how the media may use such public registries. Low-tax Hong Kong is a convenient offshore haven for China’s governing and business elites, and they would prefer to keep their activities away from prying eyes. The trouble is that the city’s competitive strengths as a financial center were built on a foundation of Western concepts that include freedom of the press and equality before the law.

Few are likely to disagree with letting companies obscure directors’ personal addresses, given the febrile atmosphere that has pervaded Hong Kong since the unrest of 2019. The issue is whether the replacement regime is fit for purpose, and enhances or undermines Hong Kong’s core strengths as a top-tier financial and business center. The government says the new inspection arrangements are comparable to those adopted in other common law jurisdictions such as the U.K. and Australia. That’s a questionable assertion.

The U.K. goes far further in openness and transparency, according to Jane Moir, research director for Hong Kong at the Asian Corporate Governance Association. The country doesn’t have ID cards. But the U.K.’s Companies Register collects a wealth of other information that helps in identifying people and tracking activities and interests, including date of birth, nationality, beneficial owners and company accounts. The search function is also free and easy to navigate — a contrast to Hong Kong, where users must pay for each search. Australia is less comprehensive, though has introduced director identification numbers to help prevent the use of fictitious identities and make it easier to pinpoint involvement in unlawful activity. (The U.S. is a more complicated comparison because each state decides its own rules.)

Moir questions why the government will allow companies to submit a correspondence address rather than forcing them to disclose their actual place of business. The likelihood is that the Companies Register will fill with the addresses of company secretarial services that act for multiple businesses — an unambiguously retrograde step for transparency.

The availability of these identifying details is critical to Hong Kong’s functioning as an international financial center. When access to the information was threatened, bankers and financial professionals raised an outcry. For them, this wasn’t just a matter of investment risk — it was a question of legal jeopardy; failure to perform adequate due diligence can lead to potential criminal sanctions under anti-money laundering or terrorism financing laws. In response to the complaints from the business community, the government tacked, slightly. It will allow specified persons to apply to the Companies Registry for access to protected information. They include certain lawyers and accountants; banks and financial institutions; liquidators; public officers and bodies; and data subjects themselves. Journalists are not included.

The real tell in the government’s approach is the exclusion of journalists. It’s a glaring omission. “It is clear that you are now targeting the media,” lawmaker Cheng Chung-tai told Monday’s subcommittee meeting on the changes. Sam Hui, deputy secretary for financial services and treasury, denied this was the motive, though his explanation didn’t shed much light on the rationale. (Hui also rejected adding a mechanism for public-interest access in the current legislation, though said officials would consider such a policy in future.)

A telling sign of the government’s thinking came in March when Lam said she couldn’t see the reason for journalists to have the “privilege” of being able to access this information. It’s a word that hints at a view of the media as a frivolity or an irritant, rather than an essential check-and-balance on power with a constitutionally protected role.

Even in a legislature largely denuded of opposition since the passing of the national security law, the changes are running into challenges. In a letter provided to members, Wendy Kan, assistant legal adviser in the Legislative Council Secretariat, asked the financial services branch to clarify whether, and how, the provisions were in conformity with the guarantees on freedom of the press and equality before the law in Hong Kong’s Basic Law and Bill of Rights (the secretariat’s legal service division is responsible for checking that all bills put forward by the government are compatible with these foundational pieces of legislation). The government has yet to respond.

The government’s bet that it can keep free flow of information in areas where it is advantageous for business while stripping it away from those whose purposes it doesn’t endorse is misguided. Transparency is a disinfectant that doesn’t discriminate. Take it away, and corruption will flourish wherever it is lacking.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Matthew Brooker is a columnist and editor with Bloomberg Opinion. He previously was a columnist, editor and bureau chief for Bloomberg News. Before joining Bloomberg, he worked for the South China Morning Post. He is a CFA charterholder.

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