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Trends and climate
Have there been any recent changes in the enforcement of anti-corruption regulations?
Recent high-profile convictions – including those of billionaire Thomas Kwok and Hong Kong's former chief secretary Rafael Hui – show the willingness of the courts to prosecute Hong Kong's wealthiest and most senior-ranking individuals. In October 2015 former Hong Kong chief executive Donald Tsang became the most senior politician to be indicted.
There have also been a number of high-profile prosecutions in relation to private sector bribery over the past year. Stephen Chan was found guilty along with his assistant on a joint charge of conspiracy to accept an advantage, after receiving a payment to host a live talk show for a third party while employed by another TV channel, TVB. Despite arguing that he had a "reasonable excuse" as TVB had "silently agreed", the Court of Appeal unanimously affirmed his conviction in October 2015.
Recent enforcement activity by the Hong Kong Monetary Authority and the Securities and Futures Commission also merits mention. These authorities have been undertaking more investigations and have taken both disciplinary and prosecutorial action, including under the Anti-money Laundering and Counter-terrorist Financing (Financial Institutions) Ordinance. Several banks have been reprimanded and fined and this trend is expected to continue. In a related development, there has been an uptick in the number of reports of money laundering in the past year.
Are there plans for any changes to the law in this area?
No. However, the outcome of two Court of Final Appeal cases (Kwok/Hui and Chan) in 2017 may revise the definition of conspiracy and the scope of the reasonable excuse defence under Hong Kong law.
Which authorities are responsible for investigating bribery and corruption in your jurisdiction?
The Independent Commission Against Corruption (ICAC) is charged with investigating corruption, with assistance from other bodies. The ICAC is regarded as one of the most rigorous and effective law enforcement bodies in the world, and is the principal agency responsible for investigating and preventing corruption in Hong Kong. It was established in 1974 and consists of three departments:
- corruption prevention; and
- community relations.
These address law enforcement, prevention (including advisory services) and education, respectively.
The ICAC maintains extensive contacts in the public and private sectors to exchange information and facilitate cooperation. Further, it works with local law enforcement agencies and government departments, including the police, correctional services, customs and excise, immigration and the Joint Financial Intelligence Unit (a clearing house for suspicious transaction reports operated jointly by the police and the Customs and Excise Department).
What are the key legislative and regulatory provisions relating to bribery and corruption in your jurisdiction?
The Prevention of Bribery Ordinance (Cap 201) is the primary anti-corruption legislation in Hong Kong. It establishes a series of offences for corrupt conduct, as well as specific offences relating to bribery in connection with public procurement, tenders and auctions, and illicit enrichment by public officials.
Those working in the banking sector are also subject to the Banking Ordinance (Cap 155), which regulates the receipt of advantages in certain circumstances. This ordinance applies to directors and employees of authorised institutions (ie, banks and deposit-taking institutions licensed under the Banking Ordinance).
The Organised and Serious Crimes Ordinance (Cap 455) criminalises money laundering and makes it an offence for a person to deal with property that is known or reasonably believed to be the proceeds of an indictable offence. Importantly, this ordinance imposes disclosure obligations that will, in many instances, mandate disclosure of conduct that implicates the Prevention of Bribery Ordinance.
Of relevance to regulated financial institutions, violations of the Prevention of Bribery Ordinance and the Banking Ordinance may constitute violations of the codes of conduct issued by the Hong Kong Monetary Authority and the Securities and Futures Commission.
Regulatory requirements also apply to civil servants, who are subject to a civil code of conduct. ‘Prescribed officers’ (a category of civil servants) are also subject to the Acceptance of Advantages(Chief Executive’s Permission) Notice 2010. This notice provides practical guidelines and important general and specific permissions in certain circumstances for the solicitation and acceptance of gifts by prescribed officers.
What international anti-corruption conventions apply in your jurisdiction?
Hong Kong is a party to the United Nations Convention against Corruption. Hong Kong is also a member of the Asia Development Bank and the Organisation for Economic Cooperation and Development Anti-corruption Initiative for Asia and the Pacific.
Specific offences and restrictions
What are the key corruption and bribery offences in your jurisdiction?
Prevention of Bribery Ordinance
Generally speaking, the offer, solicitation or acceptance of an advantage as a reward or inducement for or otherwise on account of someone (not) doing an act or showing (dis)favour constitutes an offence (subject to certain exceptions).
Public sector bribery offences
Undertaking the following acts without lawful authority or reasonable excuse is an offence:
- offering an advantage to a public servant (or, as a public servant, soliciting or accepting an advantage) as an inducement or reward or otherwise on account of the public servant (not) performing or influencing the performance of any act in his or her capacity as a public servant, or influencing any business transaction between any person and a public body (Section 4);
- soliciting or accepting an advantage as an inducement or reward or otherwise on account of the public servant giving assistance in connection with a contract with, the withdrawal of a tender for or an auction conducted by or on behalf of a public body (Sections 5, 6 and 7); and
- offering an advantage to a prescribed officer (a type of public servant) while having dealings with the relevant government department (Section 8).
A number of offences are not remedied by lawful authority or a reasonable excuse. These concern public sector bribe recipients only.
Private sector bribery offences
These are found in Section 9 and address the bribery of ‘agents’. In a business context, the principal is regarded as the employer and the agent is regarded as the employee. Section 9 is intended to prohibit conduct that may undermine the integrity of the principal-agent relationship – in particular the receipt by an agent of advantages from third parties without the principal's knowledge and secret attempts by third parties to corrupt or influence an agent.
Offences include, without lawful authority or reasonable excuse, offering an advantage to an agent (or, as an agent, soliciting or accepting an advantage) as an inducement or reward or otherwise on account of the agent (not) performing an act or (dis)favouring any person in relation to his or her principal’s affairs or business.
Are specific restrictions in place regarding the provision of hospitality (eg, gifts, travel expenses, meals and entertainment)? If so, what are the details?
Three particular features of the Prevention of Bribery Ordinance affect the offer and receipt of gifts, entertainment, travel and training:
- Where the recipient is duly authorised, usually no offence is committed by either the offeror or recipient.
- The Prevention of Bribery Ordinance specifically carves out the provision of food and drink-based entertainment as a permissible exception.
- If given in a purely private or personal context (ie, not on account of the recipient's role or office), the benefit is unlikely to contravene the Prevention of Bribery Ordinance.
Outside these circumstances, offering such benefits as a direct reward or to develop goodwill and retain a general favourable disposition has the potential to violate the Prevention of Bribery Ordinance.
The surrounding circumstances must always be assessed to determine whether gifts, hospitality, travel and training are in fact bribes. The Prevention of Bribery Ordinance and the Banking Ordinance provide no de minimis exceptions and it is unlikely that the 'triviality' of a benefit would prevent it from being judged to be an advantage. Factors to take into account in determining whether an advantage constitutes a bribe include:
- the purpose of the benefit;
- the value and frequency of the benefit (lavish or extravagant benefits are red flags);
- whether the benefit is equally offered to others or just the recipient in question;
- the relationship between the offeror and the recipient – in particular, if there are official dealings between them (in the public sector, gifts, hospitality and other benefits should not be accepted or authorised in such circumstances); and
- the recipient's position and role (eg, gifts from subordinates in particular are often discouraged or not permitted in the public sector).
In relation to the public sector, further rules and guidance apply. The Hong Kong Civil Service Bureau (CSB) has published a number of civil service regulations which set out relevant anti-bribery provisions and disciplinary actions arising for public servants in breach. Civil Service Regulation 444 states that advantages offered to an officer (or his or her spouse) by virtue of the officer's official position or on an occasion attended in the officer's official capacity are regarded as advantages to the officer's department and must be dealt with in accordance with civil service regulation protocols (usually polite rejection of the advantage). A number of CSB circulars set out further principles for public servants, notably Civil Service Bureau Circular 4/2007 (which deals with advantages offered when acting in an official capacity).
Prescribed officers are also subject to the Acceptance of Advantages (Chief Executive’s Permission) Notice 2010. Prescribed officers are prohibited under Section 3 of the Prevention of Bribery Ordinance from soliciting or accepting advantages without the general or special permission of the Hong Kong chief executive. The notice addresses four restricted advantages (gifts of money or in kind, discounts, loans and travel) and contains certain permissions in this regard. Outside these categories, prescribed officers can accept all other advantages in a private capacity. Acceptance of advantages in an official capacity is usually prohibited, but may be approved in certain circumstances under Circular 4/2007.
Finally, the Civil Service Code and the Civil Servant's Guide to Good Practices contain core values of conduct, integrity and impartiality, as well as specific provisions on the acceptance of advantages by public servants.
Although these regulations, circulars, notices and codes are not binding on those who offer advantages, they nevertheless provide helpful guidance on how the government and the CSB interpret the Prevention of Bribery Ordinance and the restrictions under which public servants operate. This in turn provides guidance on the type of benefits that it may be acceptable to offer.
There is limited external guidance on bribery in the private sector. However, most companies have internal anti-bribery guidelines with which their employees must comply. The Independent Commission Against Corruption has made available a non-binding Sample Code of Conduct for private companies to adopt. This includes carve-outs for the acceptance of specific benefits recognised by law and, outside this, a procedure for seeking permission from an appropriate principal. The Sample Code of Conduct states that permission should be declined if acceptance could "affect his/her objectivity in conducting the company's business or induce him/her to act against the interest of the company, or acceptance will likely lead to a perception or allegation of impropriety".
What are the rules relating to facilitation payments?
The Prevention of Bribery Ordinance does not permit facilitation payments and does not provide a statutory defence on a de minimisbasis. The ordinance prohibits advantage to 'expedite' the performance of a public function.
Scope of liability
Can both individuals and companies be held liable under anti-corruption rules in your jurisdiction?
Companies can technically be found liable for violating the Prevention of Bribery Ordinance; however, prosecutors target individuals in practice.
Can agents or facilitating parties be held liable for bribery offences and if so, under what circumstances?
Yes, indirect bribery through intermediaries is prohibited. The Prevention of Bribery Ordinance regulates the indirect offer and receipt of advantages and the person accepting them may take them “for himself or for any other person”. Thus, it is an offence to offer an advantage to a third party (eg, a relative) with the intention to influence a public servant or private sector employee.
Can foreign companies be prosecuted for corruption in your jurisdiction?
Whistleblowing and self-reporting
Are whistleblowers protected in your jurisdiction?
At present, there is no specific legislation in Hong Kong which protects or rewards whistleblowers. However, a number of measures exist which ensure the confidentiality of corruption reports to the Independent Commission Against Corruption to protect the anonymity and personal safety of informers, grant immunity to witnesses and prevent unfair treatment.
Subject to certain limited exceptions, Section 30A of the Prevention of Bribery Ordinance provides a framework under which the names and addresses of informers are protected from use in civil or criminal proceedings.
Is it common for leniency to be shown to organisations that self-report and/or cooperate with authorities? If so, what process must be followed?
There are no formal voluntary disclosure programmes that can assist an entity in claiming amnesty or reduced penalties. Instead, it will be determined by the authorities on a case-by-case basis. Hong Kong prosecutors target individuals and if a person voluntarily discloses criminal conduct by way of self-reporting or cooperates with the authorities, this would operate as a powerful mitigating factor. It would influence the prosecutor’s decision on whether immunity should be granted, although this is not guaranteed. Alternatively, if convicted, he or she could receive a reduced sentence.
Dispute resolution and risk management
Is it possible for anti-corruption cases to be settled before trial by means of plea bargaining or settlement agreements?
A prosecutor has discretion to consider whether to accept an alternative plea proposed by the defence in order to resolve criminal proceedings. Three tests must be satisfied in this regard:
- There is admissible evidence available to prove the charges to which pleas have been offered;
- The alternative plea reflects the essential criminality of the conduct; and
- The charges give the court adequate scope to impose penalties appropriate to address that criminality.
Section 23 of the Prevention of Bribery Ordinance provides that a person giving evidence may be granted immunity from prosecution. At the written request of the secretary for justice, the court may inform a person accused or suspected of an offence that he or she will not be prosecuted for any offence disclosed by his or her evidence if he or she gives full and true evidence or is lawfully examined in such proceedings.
The secretary for justice may consider the views of law enforcement agencies as to any proposal or request for immunity or reduced sentences with respect to a witness. In reality, the use of immunised witnesses is recognised as an important tool to law enforcement. However, immunity will not be granted lightly. The witness's evidence must usually be crucial to the conviction, and the context of the prosecution and the relative culpability and credibility of the witness and the accused, as well as the interests of justice, will all be taken into account.
Are any types of payment procedure exempt from liability under the corruption regulations in your jurisdiction?
Specific payments are not exempt, nor is there a de minimis threshold. However, the provision of entertainment is specifically exempted. ‘Entertainment’ means the provision of food or drink for consumption on the occasion when it is provided and of any other entertainment provided at the same time.
What other defences are available and who can qualify?
With the exception of Sections 3 and 10 (which have a stricter standard) and Section 9(3) (which concerns intent to deceive a principal), all public and private sector bribery offences allow for an affirmative defence where the public servant or agent is acting with "lawful authority or reasonable excuse". These are not defined in the Prevention of Bribery Ordinance and the burden is on the defendant to prove them on the balance of probabilities. Lawful authority generally concerns disclosure of and permission to receive the advantage.
The Chan/TVB case provides practical insights as to how the defence of reasonable excuse will be treated in relation to Prevention of Bribery Ordinance offences. Courts will consider whether the employer's internal policies and reporting procedures have been complied with when determining the question of reasonable excuse. The judgment confirms the limited practical application of the defence. However, an appeal will be heard by the Court of Final Appeal in February 2017. This will address the ambit of the reasonable excuse defence, as well as the mens rea required of an agent and the meaning of acting in relation to a principal's affairs under the private sector offence.
What compliance procedures and policies can a company put in place to assist in the creation of safe harbours?
- prohibit bribery in the public and private sectors;
- take on board the recipient authorisation principle under the Prevention of Bribery Ordinance; and
- acknowledge the scope of the entertainment exception.
Record keeping and reporting
Record keeping and accounting
What legislation governs the requirements for record keeping and accounting in your jurisdiction?
The Companies Ordinance is the principal statute in this area, although a number of other relevant laws and regulations apply, depending on the document in question and the nature of the company.
What are the requirements for record keeping?
Every company must keep proper books of account, sales and purchases, assets and liabilities for seven years from the end of the financial year in which the last entry was made or to which the matter recorded relates.
What are the requirements for companies regarding disclosure of potential violations of anti-corruption regulations?
There is no common law duty in Hong Kong to report a crime to the police. Moreover, the Independent Commission Against Corruption (ICAC) Ordinance, the Prevention of Bribery Ordinance and the Banking Ordinance do not prescribe whistleblowing obligations. However, the following laws and codes contain reporting provisions arising from suspected corruption-related breaches.
Organised and Serious Crimes Ordinance
- Section 25A imposes an obligation on a person who knows or suspects that any property represents the proceeds of, or was or will be used in connection with, an indictable offence to report this to the police or the Customs and Excise Department. In practice, such reports are usually made through the Joint Financial Intelligence Unit. There is a similar obligation under the Drug Trafficking Recovery of Proceeds Ordinance to file a report if a person suspects or knows that any property represents the proceeds of drug trafficking. An employee may discharge this obligation by reporting to his or her employer in accordance with established procedures within the organisation.
- The making of a suspicious transaction report triggers a defence to money laundering offences.
- The maximum penalty for failure to report under the Organised and Serious Crimes Ordinance and the Drug Trafficking Recovery of Proceeds Ordinance is a HK$50,000 fine and imprisonment for three months on conviction.
- Tipping off under Section 25A(5) carries a higher penalty than a failure to report. The penalty for this offence is a HK$100,000 fine and imprisonment for one year on summary conviction or a HK$500,000 fine and imprisonment for three years for conviction on indictment.
Securities and Futures Commission/Hong Kong Monetary Authority Codes of Conduct
- Financial institutions licensed by or registered with the Securities and Futures Commission (SFC) should be familiar with the Prevention of Bribery Ordinance and follow ICAC guidance (Section 2(4) of the SFC Code of Conduct). They must self-report under the SFC Code of Conduct if they suspect or know that they have, or an employee has, committed a material breach of any laws, rules, regulations and codes issued by the SFC.
- The Hong Kong Monetary Authority’s (HKMA) Supervisory Policy Manual Code of Conduct specifically requires staff of authorised institutions to comply with Section 9 of the Prevention of Bribery Ordinance and Section 124 of the Banking Ordinance. It also contains similar self-reporting requirements whereby authorised institutions should notify the HKMA (and any other regulatory bodies or law enforcement agencies) as soon as practicable of matters which could give rise to fraud, deception, theft, forgery, corruption or other illegal activities.
- Both the SFC and the HKMA require registered and authorised entities to report material breaches which may negatively affect the fitness and propriety of their board members or members of senior management.
In addition, whistleblowing obligations are imposed on accountants and financial institutions licensed with the HKMA or the SFC under their respective codes.
What penalties are available to the courts for violations of corruption laws by individuals?
Should prosecution be pursued and a conviction be handed down by the court, the following penalties apply.
Prevention of Bribery Ordinance
Section 12 of the Prevention of Bribery Ordinance regulates the punishment of persons as follows:
- On summary conviction (including conspiracy), the offender will be subject to a HK$500,000 fine and imprisonment for three years for a Section 10 offence (eg,
- On conviction on indictment (including conspiracy), the offender will be subject to a HK$500,000 fine and imprisonment for 10 years for a Section 5 offence (offering, soliciting or accepting an advantage to assist or influence a contract with a public body) or Section 6 offence (offering, soliciting or accepting an advantage in relation to the withdrawal of a tender for a public body), a HK$1 million fine and imprisonment for 10 years for a Section 10 offence and a HK$500,000 fine and imprisonment for seven years for all other offences.
- possession of unexplained property by a prescribed officer) and a HK$100,000 fine and imprisonment for three years for all other offences.
- There are also provisions for restitution of unlawfully obtained property.
- The Hong Kong courts have advocated the need for deterrent sentences, which means that immediate custodial sentences can be expected.
Where a person has been convicted of an offence under the Prevention of Bribery Ordinance, the court may – if it is in the public interest to do so – prohibit the convicted person from taking or continuing employment, whether paid or unpaid, for up to seven years (Section 33A).
A person who contravenes Section 124 is liable to a HK$50,000 fine and imprisonment for two years on summary conviction or a HK$100,000 fine and imprisonment for five years on conviction on indictment.
Companies or organisations
What penalties are available to the courts for violations of corruption laws by companies or organisations?
The laws above contain no specific regime for recovery against corporate defendants. Should a corporate be prosecuted (which is rare), a fine would be the likely sentence.