Money laundering
Criminal enforcementWhich government entities enforce your jurisdiction’s money laundering laws?
The Hong Kong Police Force (the Police) and the Customs and Excise Department (Customs) are the primary authorities responsible for investigating money laundering activities under the Organised and Serious Crimes Ordinance (Chapter 455) (OSCO), Drug Trafficking (Recovery of Proceeds) Ordinance (Chapter 405) (DTROPO) and United Nations (Anti-Terrorism Measures) Ordinance (Chapter 575) (UNATMO). If money laundering offences are facilitated by bribery or corruption, the Independent Commission Against Corruption will have jurisdiction.
There are a number of authorities responsible for investigating potential breaches of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO).
As the Basic Law upholds the principle of ‘one country, two systems’, except for a few ordinances related to defence and foreign affairs, the laws of mainland China do not generally apply to Hong Kong. As such, there is no parallel money laundering offence at a state or provincial level.
DefendantsCan both natural and legal persons be prosecuted for money laundering?
The definition of ‘person’ in Hong Kong legislation includes corporations. A corporation can, therefore, be subject to liability for an offence.
In practice, however, prosecution is usually against individuals. A number of offences, including financial crime offences, require human actors. It is, therefore, difficult in practice to hold a company liable for offences without an express offence or corporate penalty regime. Usually, companies are more likely to be subject to regulatory action or enforcement action (such as search and seizure notices).
The offence of money launderingWhat constitutes money laundering?
Money laundering offencesThe substantive offences of money laundering are as follows:
- under OSCO and DTROPO, it is an offence for any person to deal with any property, knowing or having reasonable grounds to believe that it represents proceeds of an indictable offence (in respect of OSCO) or drug trafficking (in respect of DTROPO);
- under UNATMO, it is an offence to deal with suspected terrorist property; and
- under the AMLO, it is an offence if a firm, knowingly or with intent to defraud, contravenes specified provisions of AMLO.
Under OSCO, DTROPO and UNATMO, a person who knows or suspects any property represents proceeds of an indictable offence, drug trafficking or terrorist activities is required to disclose that knowledge or suspicion to an authorised officer as soon as practicable. In practice, the disclosure is made by way of a suspicious transaction report (STR) to the Joint Financial Intelligence Unit (JFIU). Failure to make such disclosure may amount to an offence punishable by a fine of HK$50,000 and three months’ imprisonment.
Other offences include tipping off and breaches of certain provisions of AMLO.
Qualifying assets and transactionsIs there any limitation on the types of assets or transactions that can form the basis of a money laundering offence?
There is no monetary threshold to prosecution.
Predicate offencesGenerally, what constitute predicate offences?
Any indictable offence can constitute a predicate offence under OSCO. Section 25(4) further clarifies that references to an indictable offence include a reference to conduct that would constitute an indictable offence if it had occurred in Hong Kong. Accordingly, infringements of laws in other jurisdictions will not constitute a predicate offence if it would not constitute an indictable offence in Hong Kong.
Offences related to foreign tax evasion, which would constitute an indictable offence in Hong Kong, would, therefore, also be caught.
Under DTROPO, any drug trafficking offence can constitute a predicate offence.
It is not a requirement for the predicate offence to be proven to implicate OSCO and DTROPO. Rather, the prosecution needs only to prove that the subject had a reasonable suspicion that the property represented the proceeds of an indictable offence (or drug trafficking), not that the predicate offence itself had been committed.
DefencesAre there any codified or common law defences to charges of money laundering?
Under OSCO and DTROPO, it is a defence for a person who has dealt with suspicious property to prove that he or she had disclosed his or her knowledge or suspicion to an authorised officer either before the dealing, or after the dealing on his or her own initiative as soon as it was reasonable for him or her to do so. It is also a defence for a person to show that he or she intended to disclose such knowledge or suspicion to an authorised officer as soon as it was reasonable for him or her to do so, and he or she has a reasonable excuse for failing to do so earlier.
Resolutions and sanctionsWhat is the range of outcomes in criminal money laundering cases?
On conviction upon indictment, a maximum penalty of HK$5 million fine and 14 years’ imprisonment applies. On summary conviction, a maximum penalty of HK$500,000 and three years’ imprisonment applies (section 25(3) of OSCO and DTROPO).
The decision as to whether to prosecute lies with the Department of Justice (DOJ) (section 15 of the Criminal Procedure Ordinance). It is also open to the DOJ to resolve the matter through plea or settlement agreements.
In considering whether to prosecute, the Secretary for Justice will consider the Prosecution Code. The Code sets out the considerations that prosecutors are to take into account when deciding whether to prosecute, not to prosecute or seek a ‘binding over’ order. These include whether there is sufficient evidence and whether it is in the public interest to prosecute.
The prosecution may, upon invitation by the defence, agree to replace charges already laid with fewer or lesser charges on the condition that the defendant pleads guilty to the replacement charges.
ForfeitureDescribe any related asset freezing, forfeiture, disgorgement and victim compensation laws.
Generally, the court can make any number of orders on the treatment of property connected with any offence, including freezing assets, forfeiture, disgorgement and compensation. The statute creating the predicate offence will set out the details of any actions that can be taken in relation to property connected with the offence.
There are limited powers relating specifically to the laundered property (as opposed to the predicate offence). Where an STR has been made to the JFIU, the property cannot be dealt with until the JFIU has provided its consent. Accordingly, it is essentially frozen, pending the outcome of any investigation by the relevant authorities.
Limitation periods on money laundering prosecutionsWhat are the limitation periods governing money laundering prosecutions?
There is no limitation period under OSCO or DTROPO. There are no formal time limits for the commencement of a prosecution for an indictable offence.
Under AMLO, the limitation period for offences other than an indictable offence is 12 months from when the offence is discovered.
Extraterritorial reach of money laundering lawDo the money laundering laws applicable in your jurisdiction have extraterritorial reach?
The offence of dealing with property applies only to dealings in Hong Kong; however, the laws apply to both citizens and non-citizens, and the predicate offence can be conduct that takes place outside Hong Kong.
