Hong Kong is one of Asia's key financial and trading centers, attracting companies with favorable business conditions: low taxes, flexible regulation and an international reputation. However, when cooperating with Hong Kong intermediary companies, Russian counterparties often face a number of serious risks.

To reduce the likelihood of financial, reputational and legal consequences, it is important to carefully check foreign partners.

In the context of globalization and an unstable geopolitical situation, business often turns to international markets in search of new opportunities and partners. The Asia-Pacific region remains one of the most attractive destinations due to its active foreign economic activity and favorable geographical position.

Hong Kong occupies a special place among the jurisdictions of the region - it is one of the largest financial and logistics hubs in Asia, through which significant volumes of international trade pass. Hong Kong bills itself as a free, business and tax haven offering attractive business registration terms:

Due to these factors, Hong Kong has become one of the most popular options in the organization of foreign economic activity, including with the participation of companies from Russia, China, Southeast Asia and Europe.

The external attractiveness of Hong Kong's jurisdiction can hide risks - especially when it comes not to direct producers or suppliers, but to intermediaries the ownership structure and actual activities of which remain non-disclosed.

Shell companies, fictitious directors, nominal shareholders, transactions through third jurisdictions and the lack of open financial statements - all this significantly complicates the verification of the good faith of the counterparty and creates risks: from reputational to sanctions and tax

Despite the overall business attractiveness, when dealing with Hong Kong counterparties, especially intermediaries ones, it is important to consider a number of significant risks:

In Hong Kong, nominal directors and shareholders are allowed, making it difficult to identify the real owners of the business. Data on the ultimate beneficiaries are not subject to mandatory disclosure: the Significant Controllers Register is maintained within the company itself and is not available to third parties.

Some information may be provided only upon formal request and generally only to persons registered in Hong Kong. At the same time, companies are often being registered through intermediaries using nominees, which further complicates the identification of ownership structure and increases the risks of opacity.

The rapid and inexpensive establishment of companies created a market of shell companies without employees, offices and assets. Such structures are often used to transit funds, evade taxes or hide the beneficial ownership.

Some Hong Kong companies can be used as intermediaries in deliveries to sanctioned countries. This is fraught with secondary sanctions, account blocking and other reputational and tax risks.

Private companies in Hong Kong (not listed) are required to submit financial statements to the tax authorities, but they are not required to disclose them publicly. This limits access to information for potential investors and creditors, reducing the transparency of financial data compared to other jurisdictions.

In Hong Kong, the principle of open justice provides access to court decisions and materials. Court decisions are usually published and available through the official website of the Hong Kong judiciary. However, access to other court documents, such as statements of claim, testimony of witnesses and expert opinions, is limited and is provided only to participants in the case or with special permission from the Court.

Thus, while information about litigation is available, it may be limited. This can make it difficult to establish whether a company is involved in litigation, has debts, or has fulfilled contractual obligations. For more complete information, a special request or the use of additional sources may be required.

Taking into account the mentioned risks, cooperation with Hong Kong companies requires particularly close check. Self-analysis can be difficult due to limited access to information, language barriers and the need to interpret foreign legal and registration data. For such tasks, it is recommended to use specialized business information systems that provide comprehensive analysis tools, for example, Globas.

In Globas online report can be requested for more than 527 million companies from Europe, America, Africa and the Asia-Pacific region. Basic information about companies worldwide is provided.

For a more detailed check, you can place an order for fresh investigations, which are prepared by Credinform experts. Offline reports contain key data, including registration data (date of registration, registration number, status), contact details, management, shareholders, types of activities, authorized capital, financial statements if available, banks, etc.

Offline reports contain additional data on Hong Kong companies:

This information will help to further understand the structure of the business and reduce risks when choosing a partner from Hong Kong.

The following data is also checked for reports on Hong Kong companies:

Globas helps to effectively overcome the limitations associated with the shortage of public data, providing a comprehensive compliance check of foreign counterparties. Use Globas to increase trust and reduce risks when building international business relations.

Foreign economic activity in modern conditions requires businesses to pay special attention to issues of sanctions compliance. Sanctions regimes are being updated more and more often, covering not only individual companies and persons, but also expanding the lists of goods and technologies prohibited for export and import. The changes concern both the lists themselves and the interpretation of legislative norms in different jurisdictions, which makes foreign trade operations a high-risk area.

In such a situation, it is critical not only to understand the new requirements, but also to be able to effectively use the available tools to minimize risks and ensure business stability.

Why sanctions risks have become critical

Sanctions restrictions may affect not only countries and companies, but also specific product categories. At the same time, the same product may be classified differently depending on the directory used: codes of the EAEU CN of FEA, CN of the EU, HTS of the USA, directories of dual-use goods, chemical elements, as well as internal classifiers of various departments.

Incorrect identification of the code or ignoring the current restrictions can have serious consequences – from blocking of foreign trade transactions and seizure of cargo to large fines and criminal liability.

Particular attention should be paid to the following goods:

Dual-use products are goods and technologies used in both civilian and military spheres. These can include:

Export or import of such goods without the appropriate license may violate export control laws both in Russia and abroad. In addition, cooperation with a foreign partner involved in violating the sanctions regime may become grounds for secondary sanctions.

The modern system of sanctions regulation for goods is a complex and constantly changing legal landscape. Every week, new restrictions appear, existing lists are updated, wording is expanded, and assessment criteria change — with each state or international organization creating its own sanctions regimes, guided by its own priorities and policies.

The key difficulty in dealing with commodity sanctions is their fragmentation and legal ambiguity. The same product may be subject to sanctions in several countries at once, and for different reasons.

In addition, in response to external restrictions, countries, including Russia, are introducing their own counter-sanctions, which create an additional legal burden on participants in foreign economic activity. As a result, companies have to take into account hundreds of sources, from international resolutions and directives to decrees and regulations at the national level.

The problem is aggravated by the ambiguity of interpretation: it is not always obvious whether a particular product is subject to sanctions, especially when using different commodity directories, translating technical descriptions or when there is no direct indication in the lists.

The uncertainty and multi-layered sanctions regimes can jeopardize not only individual transactions, but also the entire activity of the company. Sanctions can change without warning, and it is extremely difficult to detect this manually by screening each product

In such a situation, manual or episodic analysis becomes ineffective and risky.

The solution is to use professional tools, such as Sanctions Compliance in Globas.

Using Sanctions Compliance in Globas, you get ample opportunities for a comprehensive screening of goods for sanctions and restrictions. You will be able to:

Sanctions Compliance in Globas helps businesses confidently navigate the sanctions labyrinth and reduce the risks of foreign economic activity.