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Potential for Change in Hong Kong Money Laundering Law: HKSAR v Yeung Ka Sing Carson

hong kong white collar crimeIvan Lee (2014/15 LLM student, London School of Economics and Political Science) discusses an upcoming appeal before the Court of Final Appeal in Hong Kong and its potential to change the law of money laundering in Hong Kong.

 

Speed Read

In the UK it is well-established that for an offence of money laundering to be made out, the Prosecution must prove that the property that was dealt with was in fact the proceeds of an indictable offence. This is not the case in Hong Kong, with the courts having previously distinguished the law of money laundering in Hong Kong from that in the UK. However, despite meaningful differences between the two legislative regimes, the issue is be revisited in an upcoming appeal in Hong Kong’s Court of Final Appeal, HKSAR v Yeung Ka Sing Carson.

 

Commentary

Money laundering law in Hong Kong is unsettled since Carson Yeung, the former president of Birmingham City Football Club, was granted leave to appeal to the Court of Final Appeal (“the CFA”) in August 2015 on a point of legal importance. The hearing is set for May 2016.

Yeung’s appeal relates to his conviction in the District Court on five counts of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to s.25 (1) Organized and Serious Crime Ordinance (Cap. 455). At trial, the Prosecution case was that movement of funds in Yeung’s five bank accounts bore the hallmarks of money laundering.

One of the questions which have been certified for appeal is whether the Prosecution must prove that the proceeds that were dealt with were in fact the proceeds of an indictable offence, or in other words, “criminal property”. Up until now, the elements of the offence under s.25 (1) Organized and Serious Crime Ordinance (Cap. 455) were thought to be settled.

In HKSAR v Wong Ping Shui & Another (2001) 4 HKCFAR 29, the applicant for leave to appeal raised a technical argument, comparing the status of “property” in the context of an offence of s.25 (1) Organized and Serious Crime Ordinance (Cap. 455) to that of “property” in the context of an offence of handling stolen goods under s.24 (1) Theft Ordinance (Cap. 210). Refusing leave, Ribeiro PJ, on behalf of the Court, considered that based on the natural meaning of the words in s.25 (1), “dealing with property” was the actus reus required to be proved by the Prosecution, not “dealing with the proceeds of an indictable offence.” The status of the “property”, namely the belief or knowledge that it was such proceeds, was the mens rea. By contrast, the status of “stolen goods” formed both actus reus and mens rea. As a consequence, the Prosecution did not have to prove that the property was in fact the proceeds of an indictable offence for an offence of money laundering under s.25 (1) to be established.

In the United Kingdom the opposite view has been taken. Similar legislation was considered by the House of Lords in Regina v Montila and others [2004] UKHL 50; [2004] 1 WLR 3141, which held that the fact that the property in question had its origins in criminal conduct or drug trafficking was an essential part of the actus reus of the offences of money laundering. The legislative provisions which arose for consideration in that case were section 93C (2) of the Criminal Justice Act 1988 and section 49 (2) of the Drug Trafficking Act 1994.   

In the lead judgment on behalf of the Committee of the House of Lords, Lord Hope had regard to the United Nation Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, which was adopted in Vienna in 1988 and the Criminal Justice (International Co-operation) Act 1990, which was subsequently enacted in the United Kingdom to implement the Convention. Noting that the purpose of the Convention was to combat the vicious cycle of drug trafficking and funding through proceeds laundering, Lord Hope considered that the Prosecution had to prove that the proceeds were in fact “criminal property” for offences of money laundering to be established.

In view of the outcome in Montila, the point was revisited in Hong Kong by the CFA in Hengky Wiryo v HKSAR (No2) [2007] 1 HKLRD 568. However, five judges of the CFA unanimously held that there were no grounds to conclude Wong was wrongly decided.

The unanimous judgment of the CFA is compelling for several reasons, not the least because of the clear differences between the money laundering legislation in the United Kingdom and Hong Kong.

In Hong Kong, the natural and ordinary meaning of s.25 (1) defines the offence of money laundering as dealing with “property” which the defendant “knows or has reasonable grounds to believe represent proceeds of an indictable offence,” not “dealing with the proceeds of an indictable offence”. This is in “sharp contrast” to the language of the money laundering legislative provisions which were the subject of consideration in Montila (paragraph [100]). Accordingly, affirming Wong, the CFA held that “dealing with property” was the actus reus, whereas the status of the property was the mens rea.

This is not to say that Montila should not be considered in Hong Kong. Where the Prosecution relies on the “knowing” limb of s.25 (1), it will have to prove that the property being dealt with is in fact the proceeds of an indictable offence.   In this regard, the comments of Lord Hope in Montila at paragraph [27]), that “the proposition that a person knows that something is A is based on the premise that it is true that it is A. The fact that the property is A provides the starting point. Then there is the question whether the person knows that the property is A,” are pertinent.

However, if the Prosecution relies on the “reasonable grounds to believe” limb of s.25b (1), requiring the Prosecution to also prove that the property was in fact the proceeds of an indictable offence conflates the mens rea and actus reus. In essence, it creates an additional evidentiary hurdle for the Prosecution that is not required by s. 25(1).

Although the strength of the Prosecution case might well be questionable if the Prosecution is unable to prove that the property was in fact proceeds of an indictable offence, there are clear differences between the law of money laundering in the United Kingdom and in Hong Kong. Others include a defence to money laundering of “reasonable excuse” in s. 25(2) which is not available in the United Kingdom. Further, rather than the threshold for a money laundering offence being “reasonable grounds to suspect” criminal property, as it is in the United Kingdom, s. 25 (1) requires the Prosecution in Hong Kong to prove a higher standard of “reasonable grounds to believe”. These subtle but meaningful differences reinforce that the English approach may not be readily applicable in Hong Kong.

If Yeung’s appeal allowed, his legal team will have to convince the CFA to depart from Oei Hengky Wiryo. If successful, the Prosecution will face an extra hurdle when seeking to establish an offence of money laundering.

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The views expressed in this article represent those of the author and not Bright Line Law.

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