Sanctions – Focusing on China Countermeasures for Global Asset Manager

Introduction

In today’s world, it has become crucial for both domestic and foreign businesses to understand and comply with Chinese sanctions laws. These regulations, which originated with the 2015 National Security Law and were further shaped by the recent political landscapes, have evolved rapidly. The legislative process culminated in June 2021 with the enactment of the Anti-Foreign Sanctions Law (“AFSL”) by the Standing Committee of the National People’s Congress. As the highest legal authority on sanctions, the AFSL provides the legislative basis for other sanction-related rules and empowers various departments to implement countermeasures as needed.

Why do sanction laws matter to you?

China’s sanction laws demonstrate a firm commitment to safeguarding national sovereignty and economic interests. The broad language and wide scope of interpretation of these laws, coupled with the increasing use of sanction lists, indicate a growing risk of compliance issues over the years, especially in the current geopolitical climate.

At this moment, there are 3 pieces of major sanctions legislation in China:

• Anti-Foreign Sanctions Law (AFSL) - The AFSL serves as the cornerstone of China’s sanction framework. The AFSL has authorised the Ministry of Foreign Affairs (MFA) to administer a “Countermeasure List” that targets foreign entities, including prohibiting Chinese entities from conducting transactions, cooperation, or other activities with them.
• Unreliable Entity List (UEL) - Adopted in September 2020, the UEL is administered by the Ministry of Commerce (MOFCOM) and focuses on business-related bans, including restrictions on immigration entry/exit, import/export, and investment. This list operates independently of the AFSL Countermeasure List.
• Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures (Blocking Measures) - Adopted January 2021, the Blocking Measures aim to counteract foreign rules and sanctions that restrict Chinese entities from engaging in trade and economic activities with third-party states. Chinese entities are required to report any such sanctions within 30 days of encountering restrictions, and to comply with subsequent governmental bans against such sanctions.

These regulations are now imposing new challenges for financial institutions and global asset managers with the following characteristics:

• turning private companies and institutions into enforcers of compliance of sanctions laws;
• requiring global asset managers to establish a dedicated compliance team for China-related sanctions matters;
• necessitating the adoption of better screening technologies when onboarding new investors;
• forcing global asset managers to navigate conflicts of law across different jurisdictions.

Why Choose Us

At Simmons, and our alliance PRC law firm, Shanghai YaoWang Law Offices, we understand the complexities that come with these legal requirements. We offer tailored solutions to ensure that your operations remain compliant while minimising risks. Melody Yang, partner and Co-head of YaoWang, and our funds and regulatory team are well-positioned to help clients adapt to these fast-evolving domestic, regional and international frameworks.

Key Services

• Assessing and advising on suspected violations
• Carrying out risk assessments for potential exposure to liabilities
• Reviewing and analysing compliance policies and procedures
• Interacting with governmental agencies tasked with enforcing sanction laws

Feel free to reach out to us so that we can share how we can assist you in navigating the complexities of PRC sanctions law and regulatory compliance.