China has launched the biggest overhaul of its cross-border tax and capital-controls regime in decades, threatening three popular offshore brokers with at least $330 million in penalties, vowing stricter bank oversight, and ramping up private pressure on the country’s wealthiest citizens, according to Bloomberg.

In late May, the China Securities Regulatory Commission, the People’s Bank of China, the Ministry of Public Security, and five other government bodies issued a joint plan pledging to dismantle unauthorized offshore investment services targeting mainland investors and warning that banks and cross-border account providers would face tougher compliance scrutiny, the news outlet said. 

About 10 minutes after the joint statement, regulators announced enforcement actions against Futu Holdings Ltd., Up Fintech Holdings Ltd.-owned Tiger Brokers, and Long Bridge Securities Ltd. for allegedly operating on the mainland without a license. Authorities vowed to confiscate all “illegal gains” from the firms’ domestic and overseas entities, wiping out more than a quarter of Futu’s and Up Fintech’s market value in a single day of trading, Bloomberg said.

Citic Securities estimates the clampdown could affect as much as HK$250 billion ($32 billion) in Hong Kong assets, including up to HK$180 billion at Futu alone. Futu has worked on more Hong Kong initial public offerings than any other firm this year, according to data compiled by Bloomberg.

Hong Kong officials followed the mainland announcement by saying they would toughen rules on accounts opened by mainland Chinese investors, citing money laundering risks. Major Chinese lenders have suspended the opening of investment and wealth management accounts for mainland residents, and banks have raised the threshold for mainland savings-account applicants and tightened due diligence requirements, people familiar with the matter told Bloomberg.

Behind the scenes, Chinese tax officials have ramped up private pressure on wealthy individuals in Beijing, Shanghai, and Guangzhou, telling them investigations could look back at least to 2018, sources told Bloomberg. The individuals targeted typically hold more than $30 million in their accounts and are often of Chinese origin who obtained foreign passports and later returned to live in China, the sources said. Some had used offshore trust structures to manage their wealth.

Tax authorities have also moved against foreign investors in China’s Qualified Foreign Limited Partnership fund structure, with capital-gains profits previously subject to about a 10 percent withholding tax now being taxed at the 25 percent corporate income tax rate under the new interpretation, according to law firm DLA Piper as cited by Bloomberg. In some cases, the shift is being applied retrospectively, raising the prospect of back taxes and compliance risk, the outlet reported.

Chinese households, institutions and companies moved roughly $807 billion out of the country last year, the highest on record, according to estimates from the Institute of International Finance cited in the report.