Hong Kong shares slump as banks reel from illicit fund movement reports

* Hang Seng index down 2.06%; biggest daily drop since July 24

* HSBC hits 25-year lows after reports of movements of illicit funds

* Tencent falls after it warns of risk to U.S. user growth

Sept 21 (Reuters) - Hong Kong shares fell on Monday, dragged by financials after reports said HSBC and Standard Chartered were among banks moving allegedly illicit funds over the past two decades and as Sino-U.S. tensions hit index heavyweight Tencent. ** At the close of trade, the Hang Seng index was down 504.72 points, or 2.06%, at 23,950.69, its biggest daily percentage drop since July 24. All but three index constituents fell on the day. ** Hong Kong shares of HSBC touched 25-year lows and finished down 5.33%, and Standard Chartered lost 6.18%, following media reports that they and other banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money. ** “The big banks ... are quite a meaningful weight in the index, and that the banks are going to be under such scrutiny (after the reports) is going be a big distraction for investors in this part of the world,” said Jim McCafferty, head of equity research, Asia ex-Japan at Nomura in Hong Kong. ** The Hang Seng China Enterprises index fell 1.66% to 9,640.42. ** The sub-index of the Hang Seng tracking the financial sector ended 2.14% lower. ** Shares of Tencent Holdings fell 1.62% after the social media giant said that its WeChat messaging platform may not be able to win new users in the United States amid a legal battle over a ban on the app. ** A U.S. judge on Sunday blocked the Trump administration from requiring Apple Inc and Alphabet Inc’s Google to remove WeChat for downloads by late Sunday. ** China’s main Shanghai Composite index closed down 0.63% at 3,316.94 points, while the blue-chip CSI300 index ended down 0.96%.

Reporting by Andrew Galbraith; Editing by Ramakrishnan M.