Yesterday afternoon, the U.S. Department of State issued the first of two mandatory reports under the Hong Kong Autonomy Act (HKAA), identifying 10 Hong Kong and mainland China officials as materially contributing to the erosion of Hong Kong’s autonomy (the “Section 5(a) Report”).[1]  Because the same individuals were already designated on the List of Specially Designated and Blocked Persons (“SDN List”) maintained by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) on August 7, 2020,[2] the practical effect of the report is limited to setting a deadline of 30 to 60 days for the U.S. administration to issue the second required report under the HKAA identifying foreign financial institutions that knowingly conduct a “significant” transaction with the 10 individuals listed in yesterday’s Section 5(a) Report (the “Section 5(b) Report”).[3]  We discussed the reports required under the HKAA and the potential impact of those reports in our earlier blog post.[4]

In conjunction with issuance of yesterday’s Section 5(a) Report, OFAC published a set of accompanying FAQs.[5]  In addition to describing the factors that will be used to determine whether a transaction will be considered “significant” and explaining how foreign financial institutions can be excluded or removed from a Section 5(b) Report, the FAQs indicate that foreign financial institutions have 30 days, beginning October 14, 2020, to wind down transactions with the 10 individuals identified in yesterday’s Section 5(a) Report.[6]  The FAQs further note that the Treasury Department will reach out to a foreign financial institution to inquire about its conduct before identifying it in a Section 5(b) Report.[7]

Because, as noted above, the 10 individuals included in yesterday’s Section 5(a) Report are already designated on the SDN List, foreign financial institutions that have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” those individuals were already at risk of potential secondary U.S. sanctions under Executive Order 13936 prior to the release of the Section 5(a) Report.[8]  As a result, such institutions may have already taken steps to avoid holding accounts or processing transactions for or involving those individuals.  Foreign financial institutions that have not done so and continue to hold accounts or process transactions for or involving those individuals risk being identified on the upcoming Section 5(b) Report and potentially subject to sanctions under the HKAA.  The imposition of sanctions on a person or financial institution identified in a Section 5(a) Report or a Section 5(b) Report, which is not mandatory until a year after publication of the relevant report, is highly discretionary and subject to national security waivers.

[1] U.S. Dep’t of State, “Identification of Foreign Persons Involved in the Erosion of the Obligations of China Under the Joint Declaration or the Basic Law” (Oct. 14, 2020), also HKAA, Pub. L. 116-149,

[2] Former HKPF police commissioner Stephen Lo was also sanctioned on August 7, 2020, but was not included in the October 14, 2020 State Department report.  See Press Release, U.S. Dep’t of the Treasury, “Treasury Sanctions Individuals for Undermining Hong Kong’s Autonomy” (Aug. 7, 2020),

[3] See HKAA, Sec. 5(b).

[4] See Cleary International Trade and Sanctions Watch, “United States Enacts Additional Hong-Kong Related Sanctions; Impact Remains Unclear” (July 14, 2020),

[5] OFAC, “Publication of FAQs related to a report pursuant to section 5(a) of the Hong Kong Autonomy Act; Hong Kong-related Designation Updates” (Oct. 14, 2020),

[6] OFAC, FAQ #848,

[7] OFAC, FAQ #848,

[8] E.O. 13936, Fed. Reg. 43413 (July 14, 2020),