The United States is escalating its financial pressure on Tehran by threatening secondary sanctions against Chinese and Hong Kong banks that process payments related to Iran’s oil trade. This move places financial institutions squarely in the middle of a growing regulatory conflict between Washington and Beijing.

US Treasury Secretary Scott Bessent has directly warned several banks, including two in China, that they will face secondary sanctions if caught handling Iranian funds. The US Treasury claims Iran laundered approximately $9 billion in 2024 through US correspondent accounts using networks of shell companies primarily based in Hong Kong, Oman, and the UAE.

These financial threats are part of a larger campaign by the Trump administration, which includes blocking Iranian trade ships at US ports and diplomatically pressuring Chinese President Xi Jinping to stop supplying weapons to Iran.

In response to foreign “long-arm jurisdiction,” Chinese Premier Li Qiang signed new regulations in April 2026. These rules allow China to assert its own jurisdiction, ban compliance with foreign sanctions, create a “malicious entities” list, and provide legal backing for affected Chinese companies to sue. Experts suggest these protections will likely extend to Hong Kong-based businesses.

Financial institutions in Hong Kong are caught in a geopolitical tug-of-war. While local officials claim they do not enforce US sanctions, major banks still comply with Washington to maintain their vital access to the SWIFT international payment network. Moving forward, these banks risk facing penalties from either the US or China depending on whose rules they follow.

Despite the regulatory scrutiny, reports indicate that Hong Kong’s rapid and low-cost company registration system has made it a central hub for underground trade. Sanctioned countries like Iran and Russia frequently use shell companies in the city to move money via alternative channels, such as cryptocurrencies, Chinese currency, and precious metals.