There is limited support in Hong Kong for stricter rules on money laundering, but international trends and the SAR's official role in these may help the Government push through key changes

PUBLISHED : Thursday, 17 January, 2002, 12:00am
UPDATED : Thursday, 17 January, 2002, 12:00am


THE COURSE of money-laundering law in Hong Kong is not running smoothly. Put bluntly, proposed legislation that could jail stupid people or allow their cash to be seized at the mere whiff of an arrest is not proving hugely popular.

Throw in some adjectives bandied about at this week's bills committee hearing - 'unfair', 'against principle', 'draconian' - and you get the gist of just how unwilling are legislators to rubber-stamp this one. And lurking in the background is a plethora of opposition to the crux of the bill from the Law Society and the Bar Association.

So, a dead donkey? Perhaps not. The administration may have some comebacks up its sleeve that prove compelling to legislators.

We cringe to say it in this season of conveniently and shamefully blaming of everything on September 11, but momentum to tighten up money-laundering provisions on a global scale may play a part, rightly or not.

The bill seeks to make it easier for law enforcers to put money-launderers behind bars. Hong Kong's conviction rate is not up to scratch.

Figures provided by Commissioner for Narcotics Clarie Lo Ku Ka-lee bear this out. Between 1996 and November last year, 3,358 investigations took place, only 119 prosecutions were launched and a mere 54 people convicted.

One of the problems prosecutors face is proving that someone had reasonable grounds to believe the money they were passing through their bank account, mailbox or dry-cleaning shop was in fact dirty cash.

Were the mental element to be reduced to 'having reasonable grounds to suspect', a conviction would be easier to secure, the Government argues.

Bills committee members such as James To Kun-sun, Margaret Ng Ngoi-yee and Eric Li Ka-cheung see things differently, as do the Law Society and the Bar Association.

The net could be cast too wide, and innocent people who were genuinely oblivious to what was happening when dirty money was being laundered could find themselves jailed for being gullible.

Some amendments have been put forward by the administration - defence provisions and mitigating circumstances that could be taken into account - but in the words of Mr Li, these are 'minor touch-ups'.

Another far-reaching proposal is to empower police with the ability to seize suspects' assets upon arrest. Police can only do so at the moment if a suspect has been charged or an interim order is granted by a judge.

A restraint order that would come into effect as soon as a person was arrested would in theory stop assets from conveniently vanishing once the police were on to a suspect.

The proposal was swiftly attacked by legislators: what if the suspect is innocent? Not only is the seizure notion contrary to basic property rights, but it could leave the Government exposed to compensation claims.

As the Law Society pointed out: 'Should the relevant law enforcement agency have sufficient evidence, a charge should be able to ensue fairly promptly.'

A radical re-think was urged before the bill comes under discussion again. It looked highly unlikely that the proposal would receive any backing from lawmakers in its present form, if at all.

There is, however, a feeling that some legislators formerly adamant that the bill should not see the light of day are beginning to sway in the Government's direction.

In its latest round of responses to lawmakers' concerns, there was a central theme from the administration: the way things are going globally on the anti-money laundering front, we may have no choice but overhaul the law.

This is particularly so in relation to the mental element - ie, reducing the burden to having 'reasonable grounds to suspect'.

A meeting of the Financial Action Task Force (FATF) on Money Laundering in October came up with eight new recommendations to counter terrorist financing.

There are already 40 such recommendations in place - adherence will dictate how 'co-operative' FATF views a jurisdiction to be - and the additional ones came on the heels of the September 11 attack.

One of these states that if a financial institution, business or entity has 'reasonable grounds to suspect' funds are linked to terrorist acts, they should be required to report them.

Hong Kong is a member of the FATF - this year it is actually the chair - and should be in compliance with the recommendations, the Government contends.

Other jurisdictions are tightening their laws to this effect. Hong Kong would be merely 'aligning' its anti-money laundering regime with the latest international requirements.

It sounds good on paper. In reality, what we are talking about is police putting more drug-traffickers and tax-evaders, not terrorists, behind bars if the proposals are adopted.

Yet the 'aligning' argument will probably have an impact on some legislators as the debate over the bill continues and as Hong Kong hosts an FATF meeting at the end of this month.

It is unlikely to drown out its harshest critics, but the Government may get the numbers it needs to get the bill through.

Graphic: moneygbz