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China Threatens Sanctions against USA Defense Companies that can affect American banks?
FROM A
DIFFERENT POINT OF VIEW by Monte Friesner
Financial Crime Consultant for WANTED SA
Friday October 08, 2010
WANTED SA has been informed that Banks that service American Defense Companies should be aware that the Government of China; disturbed over impending US arms deliveries to Taiwan has publicly stated that it intends to impose sanctions upon American Defense Companies that deliver arms and military equipment to Taiwan.
Unfortunately the exact nature of said sanctions has not been specified, which results in increased risk to not only your defense clients, but potentially to banks as well.
China is reportedly extremely unhappy with US plans to deliver weapons to Taiwan, as evidenced by statements made by both its Foreign Ministry and its Defense Ministry. US banks that handle business for America's largest defense manufacturers, and especially those whose products are known to be amongst those included in the list being shipped to Taiwan, should be aware that certain Chinese sanctions could, if implemented, impact them.
This is not to say that these events will necessarily occur; rather, senior bank management should be made aware*,on a risk management basis, that they are certainly within the realm of possibility. Given the current strained relationship between the US and China, they are certainly possible. Watch for these:
- * Governmental blocking of other international wire transfers to China, originating in those financial institutions known to bank the defense companies who manufacture, ship, service, or maintain the weapons systems and equipment sent to Taiwan.
- * The publication of an official "blacklist" of US companies involved in the Taiwan arms sales and deliveries.
- * The termination of existing work visas for bank staff tasked with operating a branch, agency, or representative office in China.
- * The closure of your bank's branch, agency, or representative office in China, denial of operating license for a proposed office or facility within China, or the loss of a correspondent relationship.
- * The levy of fines and penalties upon the defense contractors and/or their banks.
Will there be sanctions field against the manufacturers of dual-purpose goods to Taiwan? These are items that can have both civilian as well as military applications.
Though China did not name the companies against whom sanctions will be applied, the companies reportedly involved in the arms sales are: Boeing; Raytheon; United Technologies; Lockheed-Martin, and Raytheon.
We advise readers whose clients are potential military suppliers to Taiwan to closely monitor the situation. You may want to set up a contingency plan, in the event that your bank experiences any of the above sanctions. It is suggested that you make arrangements with another financial institution that has correspondence inside China, in the event that you are denied access. Some of the companies listed above have major sales operations of civilian products in China.
The facts and opinions stated in this article are those of the author and not those of WANTED SA. WANTED SA does not warrant the accuracy of any facts and opinions stated in this article; does not endorse them, and accepts no responsibility for them.
