Beijing’s latest efforts to tighten oversight of cross-border capital flows have sparked concerns that a reduction in mainland demand for Hong Kong homes could impact the city’s recovering property market.
The debate follows a series of measures unveiled in recent weeks, including tighter scrutiny of unauthorised offshore brokers and guidelines issued to crack down on illegal cross-border fund-transfer channels.
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Richard Grasby, a partner at Appleby Hong Kong, said scrutiny of the source of mainland funds had increased in recent years. Real property agents, along with banks and other regulated professionals, were expected to place greater emphasis on verifying the source of buyer funds and how they were transferred to Hong Kong.
The last major exchange control in Europe was lifted by the United Kingdom in 1979. Many people ignore that China still enforces exchange control, thus preventing its residents to freely move capital abroad. Swiss banks are by law under a duty not to facilitate the circumvention of foreign laws, therefore to ensure that the monies Chinese residents intend to deposit with Swiss banks remains below the threshold of 50’000 USD per person per year or has been cleared by the Chinese exchange control, which in practice almost never occurs other than for commercial purposes. Therefore the acquisition of real estate in Switzerland by individuals residing in China must be scrutinized. The due diligence of Chinese clients is subject to regional characteristics needing adquate cultural skills. Banks need to be organized accordingly, else they may expose themselves by the supervising authority to the reproach of organization failure.