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HKSAR v Carson Yeung: Casting a wider net

cityscape 1081704 640Justin Bong-Kwan discusses the differences between the Hong Kong and UK legislative schemes regarding money laundering as recently highlighted by the Hong Kong Court of Final Appeal in HKSAR v Yeung Ka Sing Carson (FACC Nos. 5 & 6 of 2015).

Speed Read

In the recent decision of HKSAR v Yeung Ka Sing Carson (FACC Nos. 5 & 6 of 2015), the Hong Kong Court of Final Appeal held that, on a charge under s 25(1) of the Organised and Serious Crimes Ordinance (Cap. 455) (‘OSCO’), the prosecution does not need to demonstrate that the proceeds being dealt with by the defendant were proceeds of an indictable offence.  It will be sufficient for the prosecution to show that there were reasonable grounds for the defendant to believe that the proceeds he/she dealt with were proceeds of an indictable offence. This clarification by the Court not only establishes a wide scope for an offence to be made out but also draws attention to the structural differences between money laundering offences in Hong Kong and those in the UK. Caution must be exercised when handling property in Hong Kong in circumstances that may give rise to suspicion that the property being dealt with are proceeds of an indictable offence.

Commentary

Mr Yeung was convicted on five charges in the Hong Kong District Court of infringing s 25(1) of OSCO:

Subject to section 25A, a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.

The five charges relate to the allegation that Mr Yeung dealt in sums of money, which exceeded an aggregate amount of HK$700 million, in five bank accounts between 2001 and 2007. The prosecution opted not to establish any of the predicate offences that the monies were alleged to have originated from, and argued that there were reasonable grounds for Mr Yeung to believe that the property in question represented the proceeds of an indictable offence.  Among the issues that the Court of Final Appeal was tasked with deciding was whether the prosecution is required to establish that the property being dealt with by the defendant was indeed proceeds of an indictable offence.

This issue had already been dealt with by the Appeal Committee in HKSAR Wong Ping Shui (2001) 4 HKCFAR 29. It was held that the feature of the property representing the proceeds of an indictable offence is an element in the mens rea and not the actus reus, since s 25(1) OSCO defines the actus reus as dealing with property that the defendant knows or has reasonable grounds to believe represents proceeds of an indictable offence. This interpretation was affirmed in Oei Hengky Wiryo v HKSAR (No 2) (2007) 10 HKCFAR 98 after the Court of Final Appeal took into consideration the decision of the House of Lords in R v Montilla [2004] 1 WLR 3141, in which a contrary view was adopted regarding the old UK offences set out in s 93C(2) of the Criminal Justice Act (‘CJA’) 1988 and s 49(2) of the Drug Trafficking Act (‘DTA’) 1994.  The Oei Hengky Wiryo decision was subsequently affirmed in HKSAR v Li Kwok Cheung George (2014) 17 HKCFAR 319. However, Counsel on behalf of Mr Yeung argued that Oei Hengky Wiryo was wrongly decided and adopted the approach decided in Montila. Counsel contended that the words ‘that property’ at the end of s 25(1) referred to the immediately preceding phrase ‘any person’s proceeds of an indictable offence’. Thus, semantically, the actus reus should be interpreted as requiring the property dealt with by the defendant to indeed be proceeds of an indictable offence. 

In rejecting this argument, the Court held that the words ‘that property’ referred to the same ‘property’ that was used earlier in the section in relation to the mens rea requirement – the property that the defendant had reasonable grounds to believe are the proceeds of an indictable offence.   The mens rea requirement will be satisfied if it can be demonstrated that the defendant knew or had reasonable grounds to believe that any property represents the proceeds of an indictable offence, whether in whole or in part; and the actus reus is committed when that property is dealt with by the defendant.  Indeed, their Lordships opined that:

…the fact that the present offence is defined as dealing with “any property” rather than dealing with “the proceeds of an indictable offence”, strongly indicates that the statutory intention is to avoid imposing any requirement of proof that the property dealt with actually represents the proceeds of indictable crime.[1]

Their Lordships indicated that there is a ‘major structural difference’ between the offence in OSCO s 25(1) and the old UK offences in DTA 1994 s 49(2) and CJA 1988 s 93C(2). [2] A defendant used to fall foul of an offence under the DTA or CJA where he (a) concealed or disguised the property; (b) or converted or transferred or removed it from the jurisdiction, for the purposes of assisting any person to avoid prosecution for a drug trafficking offence or a CJA 1988 offence or the making or enforcement of a confiscation order. The effect of this formulation necessitates the property in question to in fact be the proceeds of crime. It must be demonstrated that the property was handled for the purposes stated, requiring a level of knowledge from the defendant that borders on actual knowledge that the property is in fact proceeds of crime. Instead of merely proving that the defendant ‘dealt’ with the property, the prosecution must also show that the defendant had committed one of the aforementioned acts of concealing, disguising, converting, transferring or removing. 

However, the policy reasons behind the approach in Hong Kong are compelling. Underlying offences that the property in question allegedly relates to are notoriously difficult to prove since such offences may have been committed in multiple jurisdictions, and the proceeds of these offences may have been put through a multitude of sanitising processes which make the task of tracing the origins of such property formidable.  The current approach enables more effective prosecution of money laundering by side-stepping the obstacle of having to establish predicate offences. This means that, potentially, the scope of the money laundering offences in Hong Kong are much wider than in the UK, where the proof of the existence of criminal property remains a vital constituent element of the offences contrary to sections 327 to 329 of the Proceeds of Crime Act 2002. It follows that British businessmen in Hong Kong need to exercise particular caution when handling property in Hong Kong in circumstances that may give rise to a suspicion that the property being dealt with are proceeds of an indictable offence. Individuals cannot choose to ignore suspicious circumstances and take refuge behind a veil of ignorance.

*In its judgment, the Court of Final Appeal also reaffirmed its decision in HKSAR v Pang Hung Fai (FACC No. 8 of 2013). To read more about Pang Hung Fai, please see: HKSAR v Pang Hung Fai: An approach tempered with proportionality.

About the Author

Justin Bong-Kwan read law at St Mary’s College, University of Durham. The following year he obtained a LLM in Banking Law and Financial Regulation from the London School of Economics and Political Science with an emphasis on corporate and financial crime. Justin is starting pupillage in December 2016 to qualify as a practising barrister in Hong Kong.

[1] (FACC Nos. 5 & 6 of 2015) at [45].

[2] ibid, [72].

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HKSAR v Pang Hung Fai: An approach tempered with p...
The views expressed in this article represent those of the author and not Bright Line Law.

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