The Chinese national security law recently enacted in Hong Kong will have considerable impact on Hong Kong's future as one of the Asia Pacific's leading financial centers. While the limits of the legislation are not yet clear, China's potential to use the broad new powers to freeze and confiscate assets has caused an increasing number of Hong Kong-based ultra-high-net-worth individuals (UHNWI) and family offices to consider moving valuable assets (and possibly themselves) outside the political and financial reach of the new law. The new favored destination is reportedly Singapore, and wealth managers are relocating their operations as well, in an effort to follow their clients.

The U.S. response to the Hong Kong national security law has made the situation even more complex. The U.S. Hong Kong Autonomy Act removed Hong Kong's special trade status and imposed economic sanctions, creating yet another layer of risk for "politically exposed persons" (PEPs) and foreign financial institutions that engage in "significant transactions" with any sanctioned entity or person. A broad swath of companies and their senior officers will face heightened scrutiny under this new set of trade rules, export control restrictions, and sanctions that the U.S. previously reserved for mainland China, but now applies with equal force to Hong Kong. Like the Hong Kong national security law, only time will tell the reach of the new U.S. laws and how vigorously they will be enforced.