Introduction

Both money laundering and terrorist financing are criminal offenses under the Laws of Hong Kong. According to the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405) and the Organized and Serious Crimes Ordinance (Cap. 455), a person commits the offense of money laundering if he deals with any property, including money, which he knows or has reasonable grounds to believe to be proceeds of drug trafficking / indictable offence. Under the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575), a person commits the offense of terrorist financing if he provides or collects any property knowing or with the intention that the property will be used for terrorist acts.

Money Laundering

Under section 25(1) of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405 and section 25(1) of the Organized and Serious Crimes Ordinance, Cap 455, Money laundering is an offence for a person who, knowing or having reasonable grounds to believe that any property which, in whole or in part, directly or indirectly represents any person’s proceeds of drug trafficking or indictable offence, deals with that property.

Maximum penalty is a HK$ 5,000,000 fine and 14-year imprisonment.

To read more about these sections of the legislation, please follow this link to the Hong Kong E-Legislation.

Terrorist Financing

Under the following provisions of UNATMO Cap.575, it is an offence if a person:

  • provides or collects property, with intention or knowing or having reasonable grounds to believe, that the property, in whole or in part be used or will be used to commit one or more terrorist acts (section 7)

  • makes property or financial services available to or for the benefit of terrorist or terrorist associate. (section 8)

Maximum penalty is a fine and 14-year imprisonment.

UNATMO Cap. 575 has been fully implemented since 1st January 2011. Under section 6 of Cap. 575 the Secretary for Security is authorized to freeze the property of terrorists or of persons connected with terroristsection It is an offence under section 14 if a person knowingly contravenes a notice under section 6(1) or contravenes a requirement under section 6(7).

To read more about these sections of the legislation, please follow this link to the explanatory notes of section 6 and section 14 of Cap. 575 or this link to the Hong Kong E-Legislation.

Requirement of Filing STR

Under section 25(A) of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap 405, section 25(A) of Organized and Serious Crimes Ordinance, Cap 455, and section 12 of the United Nations (Anti-Terrorism Measures) Ordinance, Cap. 575 , state that when a person knows or suspects that any property is proceeds of drug trafficking or an indictable offence, or terrorist property, or was used in connection with drug trafficking, an indictable offence or terrorist act, or is intended to be used in drug trafficking, an indictable offence or terrorist act, he or she should report his or her knowledge or suspicion to an authorized officer (i.e. JFIU officers) as soon as practicable.

Failing to report is an offence which is liable to HK$ 50,000 fine and 3-month imprisonment.

To read more about these sections of the legislation, please follow this link to the Hong Kong E-Legislation.

Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Cap 615.

The Anti-Money Laundering and Counter-Terrorist Financing Ordinance, Cap 615, which seeks to improve Hong Kong's AML / CFT regime by better alignment of the financial institutions and designated non-financial businesses and professions with prevailing international standards has come into operation since 1 April, 2012 and further amended since 1 March 2018.

To read more about these sections of the legislation, please follow this link to the Hong Kong E-Legislation.

 

Outline for Letter of No Consent Mechanism

Pursuant to section 25A(2) of the Organized and Serious Crimes Ordinance, Cap. 455, section 25A(2) of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap. 405 and sections 12(2) and (2A) of the United Nation (Anti-Terrorism Measures) Ordinance, Cap. 575, it shall be a defence for a person to continue dealing with property known or suspected to represent proceeds of crime or terrorist property under the respective Ordinances if disclosure is made before the dealing and the dealing is made with the consent of an authorized officer (Note: Under Cap. 405 and Cap. 455, “authorized officer” means - (a) any police officer; (b) any member of the Customs and Excise Service established by section 3 of the Customs and Excise Service Ordinance (Cap. 342); and (c) any other person authorized in writing by the Secretary for Justice for the purposes of Cap. 405 and 455 respectively. Under Cap. 575, “authorized officer” means - (a) a police officer;(b) a member of the Customs and Excise Service established by section 3 of the Customs and Excise Service Ordinance (Cap. 342); (c)a member of the Immigration Service established by section 3 of the Immigration Service Ordinance (Cap. 331); or (d) an officer of the Independent Commission Against Corruption established by section 3 of the Independent Commission Against Corruption Ordinance (Cap. 204).) .

Consent may be refused by an authorized officer and a “Letter of No Consent” (“LNC”) will be issued. The considerations in deciding whether to issue a LNC by the Joint Financial Intelligence Unit (“JFIU”) and actions to be taken by the police after the issue of a LNC are summarized as follows.

The Considerations in Deciding Whether to Issue a LNC

While it is difficult to set out all the circumstances in which a LNC may be issued, the underlying principle is that the issue of a LNC should be reasonable, necessary and proportionate in the circumstances of a case and each case must be decided on its own facts and merits. In deciding whether a LNC may be issued, the following may be taken into consideration:

  1. The reasonable prospect of successfully obtaining a confiscation order.  This may include:-

    • the nature and seriousness of the offence;
    • the laying of a charge and the reasonable prospect of successfully obtaining a conviction;
    • the value of the proceeds of crime; and
    • the existence of realizable property.

  2. The reasonable likelihood of obtaining a restraint order;

  3. The reasonable likelihood of a victim obtaining an injunction within a reasonable period of time;

  4. Any other consideration that may have a bearing such as when dealing with an absconder or an overseas request; and

  5. The underlying principle that persons guilty of criminal offences are denied their proceeds of crime.

The Actions to be Taken by the Police After the Issue of a LNC

  1. After a LNC has been issued, the investigating unit should make the best endeavour to obtain a restraint or confiscation order as soon as practicable or, if the property belongs to a victim(s), request the victim(s) to apply for a civil injunction in respect of the property;

  2. Each LNC issued must be reviewed every month by the Superintendent commanding the investigating unit (“SPI”) and the Formation Commander where appropriate, until such time when the SPI or the Formation Commander has decided to withdraw the operation of “No Consent”;

  3. The monthly review process is conducted through the electronic system. The SPI will determine on whether the operation of a LNC should be continued or otherwise. The SPI will cause his/her decision and the underlying reasons be properly documented and be submitted electronically to JFIU;

  4. If a LNC has already been issued over three months whilst a restraint order or a civil injunction has not been obtained, a monthly review of the investigation by the Formation Commander must be undertaken. If the continuity of a LNC is considered justifiable on the basis of necessity, proportionality and reasonableness, the Formation Commander will endorse the continued operation of the LNC electronically.  The Formation Commander should also ensure the supporting grounds are properly documented;

  5. A LNC should normally last no more than six months from the date of issue. Only where there are exceptional circumstances will a LNC continue beyond the six-month period.  Examples of the exceptional circumstances justifying a LNC to go beyond the six-month period, may include, among others, the high complexity of a case; the large scale of investigation required due to the volume of transactions involved; the cross-border element in the investigation; the large number of victims involved and the inquiries required to ascertain the stance of each of the victims as to whether he/she would take any civil action for recovery of loss; and the way in which the person under investigation responds to the enquiries made by the police.  Ultimately, it would depend upon the particular circumstances of each case.  

  6. Prior to the lapse of the six-month period, the Formation Commander should critically review the case to decide whether there are exceptional circumstances to justify it to go beyond the six-month period. If the Formation Commander is satisfied such LNC should continue beyond the six-month period, he or she should ensure the exceptional circumstances and reasoning are fully documented. The Formation Commander should also ensure the submission of the relevant case file to the Proceeds of Crime Unit of Department of Justice for examining the prospect of obtaining a restraint order. All the above-mentioned actions should be completed within the six-month period, failing which the LNC will lapse and JFIU will issue a "Consent Letter" to the reporting entities; and

  7. At any time when the circumstances do not justify the continued operation of a LNC, the head of JFIU must be notified in the first instance, who will then cease the operation of the LNC as soon as practicable.


(The Court of Appeal Judgement for Interush Ltd v Commissioner of Police CACV 230/2015; [2019] HKCA 70 at this website.)