URGENT legislation will be introduced to prevent Hongkong from being flooded with drug money if the Government loses its appeal next month against a High Court ruling which struck down the territory's laws on handling illicit funds.
The principal assistant secretary for monetary affairs, Mr Raymond Li Ling-chung, said that without an effective law obliging banks to report suspicious transactions the fight against money laundering would be severely impeded.
''Money laundering includes many steps, but at the end of the day the funds end up in banks,'' he said.
Last August, the High Court threw out the territory's only legal restraint against money laundering when Mr Justice Gall ruled that Section 25 of the Drug Trafficking (Recovery of Proceeds) Ordinance contravened the Bill of Rights.
Fearful of law suits by irate clients charging breach of confidentiality, some banks have since stopped reporting suspicious transactions to the Financial Investigation Group under the police narcotics bureau. About 24 reports have been made since August, compared to an average of 30 a month before the ruling.
The Government has been given leave to appeal against the ruling and senior assistant Crown prosecutor Mr Steve Bailey will argue the case before the Privy Council from March 22 to 27.