Jury unable to reach verdict in high profile bribery trial of former Chief Executive

The retrial of the former Chief Executive of Hong Kong, Donald Tsang Yam-kuen, has again resulted in a hung jury. On Friday 3 November, after 14 hours of deliberation, the jury advised the court that it was unable to reach a verdict and was dismissed. In February, Mr Tsang was convicted of misconduct in public office but the jury was hung on the concurrent bribery charge and a retrial was ordered. The prosecution has indicated that the Department of Justice is not intending to seek a second retrial. For further information about the charges and the trial please see our bulletin here.

Trial of Kennedy Wong begins

The prosecution of Kennedy Wong, delegate to the Chinese People's Political Consultative Conference (Beijing's top political advisory body), has begun. Mr Wong is accused of bribing Herbert Hui Ho-ming with a share option in Hong Kong Resource Holdings during a period while they were both directors of the company.

The share option was allegedly for the opportunity to buy shares at HKD0.12 per share against a closing price of HKD1.33. These shares were subsequently converted into ordinary shares worth HKD21.3 million an amount equivalent to 14 years' worth of Mr Hui's salary. The purpose of the payment was alleged to be to keep Mr Hui favourably disposed to Mr Wong in board decisions.

Mr Wong pled not guilty to the charges.

Uptick in enforcement of smaller-scale private sector bribery cases

There appears to have been an increased trend for investigations and prosecutions of smaller-scale offences in the private sector, including acts such as bribery, wage exploitation and the use of false documents.

This trend has taken the form of the Independent Commission Against Corruption ("ICAC") prosecuting offences involving both relatively small amounts of money or persons relatively junior in an organisation. For example, in October 2017, the ICAC announced unrelated convictions or charges laid against a property manager, a sales clerk, a site supervisor, the manager of a web services company, and a security guard.

Executive Director of the SFC's Enforcement Division discusses initiatives in relation to financial crime

Mr Thomas Atkinson, Executive Director of the Securities and Futures Commission ("SFC") Enforcement Division, has delivered a keynote speech at the recent 8th Pan Asian Regulatory Summit in Hong Kong. He identified a number of key areas of focus:

  • Cross-border evidence gathering: The SFC is actively looking at a new regulatory response that will partially address the problems with cross-border evidence gathering. They are also looking to further build their relationship with the China Securities Regulatory Commission.
  • Corporate Fraud: This was identified as a priority challenge last year. The SFC currently has 136 active corporate fraud misfeasance investigations of which they are "laser-focused" on 28. He specifically referred to a focus on sponsors under the IPO sponsorship regime and failures to verify critical business data.

The speech also discussed a range of other enforcement-related initiatives:

  • The Enforcement Division has aligned its priorities with those of the SFC as a whole, with a focus on front loaded regulation and enhanced operational collaboration with other divisions. 
  • Low impact cases have been culled from the SFC, resulting in a reduction of matters by one third.
  • Co-operation continues to be of high importance to the SFC, and the speech provides some broad guidance on how co-operation may be relevant to settlement sanctions. A new guidance note will be issued to provide more guidance on early cooperation in disciplinary, civil and Market Misconduct Tribunal proceedings.
  • In relation to the manager-in-charge regime it was again said that it focuses responsibility on particular individuals but does not change the obligations owed by senior management.   

Anti-money laundering address verification requirements relaxed for financial institutions

The SFC has issued a circular (which can be found here) to intermediaries and associated entities on a change to the guidelines on anti-money laundering and counter-terrorist financing ("AML/CTF").  The SFC, Hong Kong Monetary Authority ("HKMA") and the Insurance Authority will remove the address verification requirement in the guidelines, such that financial institutions are only required to collect address information of customers and/or beneficial owners without the need to collect documentary evidence for AML/CTF purposes.

The provisions in the guidelines which are to be amended are listed in the appendix to the SFC's circular (which can be found here).  The amendments are expected to be gazetted in the first half of 2018, along with other revisions to the guidelines following the passage of the Anti-Money Laundering and Counter-Terrorist Financing ("Financial Institutions") ("Amendment") Bill 2017.  Pending the amendment, the SFC has indicated that the absence of address verification (under the provisions listed in the appendix) will be justified.  The SFC emphasises, however, that intermediaries may still require address verification from a customer for other purposes.

The HKMA has issued a similar circular (which can be found here) to authorised institutions regarding the removal of the address verification requirement under AML/CFT guidelines. 

Hong Kong corporate crime team publishes article addressing the thorny issue of privilege in Asia investigations

Given the variety of civil law and common law systems across Asia, and the fact that corporate investigations in the region almost always involve multi-jurisdictional elements, protecting privilege is a complex topic. With the differing approaches to privilege adopted both in Asia and in aggressive enforcement jurisdictions like the US and the UK, this topic occupies lawyers, law enforcement agencies and regulators alike.

This article, which was first published in Global Investigations Review’s The Asia-Pacific Investigations 2018, summarises the position in Asian civil law countries as well as in key common law jurisdictions like Hong Kong and Singapore. It also highlights recent developments in the UK including in the RBS Rights Issue and ENRC cases, as well as the position in the US. Finally, it covers practical steps to be taken to maintain privilege over relevant documents and evidence in the context of investigations.  The article, authored by Kyle WomboltChristine Cuthbert and Anita Phillips, is available to download here. GIR's full review is available to download here.

White collar crime conference in Hong Kong discusses topic regional issues

Global Investigations Review ("GIR") has held its 3rd annual conference in Hong Kong. Kyle Wombolt, global head of the Corporate Crime and Investigations practice at Herbert Smith Freehills, chaired the half-day conference, which attracted senior in-house and private practice lawyers and compliance professionals. The keynote speechwas delivered by Wesley Wong SC, Hong Kong's Solicitor General, who addressed legal policy developments in relation to various aspects of financial crime. In addition to the keynote address, the conference covered hot topics including (with links to GIR's subscription-based summaries of the discussions):

  • the prevalence of WeChat in China and the evidential issues this raises in internal and external investigations;
  • the asset freezing regime in Hong Kong, in particular the freezing of bank accounts by the police through their issuance of no-consent letters on financial institutions; and
  • the US tax evasion cases currently arising from transfers made from Swiss to Hong Kong bank accounts prior to the launch of the Swiss Bank Programme.