Dealing and non-disclosure causes for prosecution

Allan Leung and Danny Leung of Hogan Lovells talk about HK's anti-money-laundering regime

PUBLISHED : Wednesday, 19 June, 2013, 12:00am
UPDATED : Wednesday, 19 June, 2013, 5:13am

Hong Kong's anti-money-laundering provisions have in recent years come under scrutiny, and the authorities have continued to crack down on suspected money laundering by developing new laws and guidelines and increasing enforcement activities.

The provisions apply to all types of businesses and you should be aware of how they could affect yours.

The law criminalises money-laundering conduct by two means. At its core is the legal obligation to report suspicious transactions.

A person commits an offence if he fails to report his knowledge or suspicion that any property represents the proceeds of crime. In other words, you must disclose suspicious property or face prosecution.

It is also an offence for a person to "deal with" property that he knows or has reasonable grounds to believe represents the proceeds of crime. Dealing with property can be anything from receiving the property, disposing of the property, bringing the property into Hong Kong or holding money on behalf of a customer or client.

One of the main criticisms levelled at the current money-laundering offences is the low burden of proof.

For the "dealing" offence, there is no need for the prosecution to prove that the property is generated by an indictable offence, just that the accused is aware of the facts and circumstances that would lead a right thinking member of the community to believe that he or she is dealing with the proceeds of serious crime.

For the "disclosure" offence, a report must be made not only when an individual actually has a suspicion (whether or not a reasonable person would have done so), but when an honest and reasonable person with his or her knowledge and experience would have formed such a suspicion. Again proof that the property represents the proceeds of crime is not necessary.

Anti-money-laundering law requirements are very stringent, with dire consequences for non-compliance. The dealing offence carries a maximum penalty of 14 years' imprisonment and a fine of HK$5 million. The disclosure offence carries a maximum penalty of three months' imprisonment and a fine of HK$50,000.

A number of recent money-laundering cases have stirred headlines. Sentences passed in these cases have shown that the courts would not hesitate to hand down heavy prison sentences to those convicted.

Luo Juncheng, a young school dropout, and Lam Mei-ling, a 61-year-old public housing estate tenant, were recently jailed for 10½ years and 10 years, respectively, for money-laundering offences.

In sentencing Luo, the judge suggested that the authorities re-evaluate whether the penalty should be increased.

Given the potentially serious consequences of the dealing and disclosure offences, it is important to be on the lookout for any suspicious circumstances or situations.

A number of factors may indicate that there is reason for concern: payment of a large sum in cash, reluctance to provide any personal or corporate details, or a third party paying any costs or expenses (or payment being made to any third party).

These circumstances do not necessarily indicate that money laundering is taking place, but are reasons to be on alert.

It is always possible that criminals will attempt to use your company to launder money. However, the following key tips will help you to avoid committing any offences:

  • Remain alert to any suspicious circumstances;
  • Verify your customers and any transactions that you carry out; and
  • Keep appropriate records and adopt relevant internal policies.

If in doubt, report your suspicions to the Joint Financial Intelligence Unit (http://www.jfiu.gov.hk/en).

However, in order to avoid committing the offence of "tipping off" under section 25A(5) of the Organised and Serious Crimes Ordinance, you must not disclose this to any person.


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