Lai See | Who's watching the trust industry in Hong Kong?

In our accounts last week of tax consultant Deborah Annells and her company AzureTax, we said that in view of the large sums of money held by trust companies, the business should be regulated. Annells, it will be recalled, although based in Hong Kong, was found by the Taxation Disciplinary Board (TDB) of Britain's Chartered Institute of Taxation (CIOT) to have acted dishonestly in dealing with client funds on six instances and was expelled from the organisation. Annells says "mistakes were made", though she denies any wilful wrongdoing and dishonesty.

Although there is no regulator of the business in Hong Kong in the way banks are regulated by the Hong Kong Monetary Authority, there is actually a regulator of sorts - the financial secretary. Under the Trustee Ordinance, the financial secretary can appoint an inspector when a trustee business is operating fraudulently or in breach of trust.

Lai See understands that the financial secretary was furnished with the same information that was later sent to the institute, which subsequently concluded that Annells had acted dishonestly. However, the Financial Services and the Treasury Bureau decided not to appoint an inspector on the basis that "it does not seem to be in the public interest" and "the case has been reported to the police".

One has to wonder about this decision, given the conclusions arrived at by the institute when served with similar information. So when would it be in the public interest to appoint an inspector? Isn't the proper administration of a trust business of vital public interest irrespective of what the police may be doing? Shouldn't an inspector have checked the books to see exactly what was going on at Azure?

The financial secretary, for some strange reason, chose not to exercise his powers. What then of the Hong Kong Institute of Chartered Public Accountants (HKICPA)? It said earlier this week that it was looking into the case. The HKICPA declined to speak to Lai See, saying it was its policy not to comment on individual cases once an investigation had started. The suspicion is that it is only since the recent CIOT findings and the attendant publicity that it has begun its investigation. However, Lai See understands that it received two complaints in November 2011 about Annells and was likewise furnished with the same information that was considered by the CIOT. You have to wonder why the HKICPA has sat on this for 20 months. Is it a watchdog or lapdog?

Meanwhile, the police investigation has been lumbering on since December 2011 when Annells was first arrested, though not charged, and is still on bail. How long will it be before the Department of Justice makes a decision to charge her or not - another 20 months, more? In the interests of justice, a decision should be made. And what happens if our suspect decides to leave Hong Kong for good?