Investigatory powers have a wide reach and include orders to produce documents and records and the freezing of suspected proceeds of crime. Criminal offences include failure to comply with due diligence and reporting requirements, failure to disclose suspicious transactions, and ‘tipping off’ in relation to an investigation.
As described in Practice Note: The anti-money laundering regime, the laws dealing with money laundering and terrorist financing are as follows:
- Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) (AMLO)
- Drug Trafficking (Recovery of Proceeds) Ordinance (Cap 405) (DTROP)
- Organized and Serious Crimes Ordinance (Cap 455) (OSCO)
- United Nations (Anti-Terrorism Measures) Ordinance (Cap 575) (UNATMO)
Investigations under the AMLO
Supervisory and investigatory powers under AMLO are set out in AMLO, Pt III. The Hong Kong Monetary Authority, the Securities and Futures Commission, the Office of the Commissioner of Insurance and Customs and Excise, may authorise a person to do the following:
- enter the business premises of the financial institution
- inspect, and make copies or otherwise record details of, any record or document relating to the business carried on, or any transaction carried out, by the financial institution
- make inquiries of the financial institution
- give the authorised person access to records or documents
Reference: Section 11 of the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615) (AMLO)
If a relevant authority has reasonable cause to believe that an offence may have been committed, it can apply to the Financial Secretary to have an investigator appointed. Investigators have the power to require the production of documents or records. A warrant from the magistrate will allow premises to be searched.
Reference: AMLO, s 11, s 12, s 17
Investigations under OSCO
Under OSCO, law enforcers can seek an order requiring that information be furnished or materials produced. A search warrant can also be applied for at the Court of First Instance or District Court. During investigations, a Restraint Order may be imposed upon the financial institution, which can freeze funds or property pending the outcome of an investigation.
Section 3 of the Organized and Serious Crimes Ordinance (Cap 455) (OSCO)
OSCO, s 4
OSCO, s 5
Sections 10 and 11 of the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap 405) (DTROP)
OSCO, ss 15-16
Section 6 of the United Nations (Anti-Terrorism Measures) Ordinance (Cap 575) (UNATMO)
It should be noted that the Restraint Order may not apply to all funds or property involved within a particular business relationship.
Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615)
It is an offence for a financial institution to either knowingly or with the intent to defraud a regulatory authority, contravene a ‘specified provision’ of the Ordinance.
Reference: AMLO, s 5(11)
If the FI or an employee knowingly contravenes a specified provision, it is liable to a maximum term of imprisonment of two years and a fine of HK$1 million. If the FI contravenes a specified provision with the intent to defraud any RA, it is liable to a maximum term of imprisonment of seven years and a fine of HK$1 million upon conviction.
Disciplinary actions against FIs for any contravention of a specified provision in the AMLO include public reprimand, an order for the FI to take any action to remedy the contravention, and a financial penalty not exceeding the greater of $10 million, or three times the amount of profit gained or costs avoided as a result of the contravention.
Reference: AMLO, s 21
The United Nations (Anti-Terrorism Measures) Ordinance (Cap 575)
The UNATMO, enacted in 2002, gives effect to the mandatory elements of the United Nations Security Council Resolution 1373 and the Special Recommendations of the Financial Action Task Force.
The Secretary for Security can freeze suspected terrorist property and may direct that a person not deal with the property except under the authority of a licence. Failure to comply can result in a maximum penalty of seven years imprisonment and an unspecified fine.
Reference: UNATMO, s 6
It is an offence for any person to make any property or financial services available for the benefit of a terrorist or terrorist associate. It is also an offence for any person to collect property or solicit financial (or related) services for the benefit of a terrorist or terrorist associate. A conviction could result in a maximum sentence of 14 years imprisonment and an unspecified fine.
References: UNATMO, s 8, UNATMO, s 14
Disclosure of suspected money laundering and terrorist financing
It is an offence to fail to disclose where a person knows or suspects that property represents the proceeds of drug trafficking or of an indictable offence. Failure to make such a report carries a maximum three months’ jail term and a fine of HK$500,000.
DTROP, s 25A(1), 25A(8)
OSCO, s 25A(1), 25A(8)
It is also an offence to fail to disclose knowledge or suspicion of terrorist property.
Reference: UNATMO, s 12
FIs have an obligation to report where there is knowledge or suspicion of money laundering or terrorist financing. Generally speaking, knowledge is likely to include:
- actual knowledge
- knowledge of circumstances which would indicate facts to a reasonable person, and
- knowledge of circumstances which would put a reasonable person on inquiry
‘Having reasonable grounds to believe’ in the case of HKSAR v Pang Hung Faì  6 HKC 487 was interpreted by the Court of Final Appeal as meaning the accused had grounds for believing and these were reasonable to the point that anyone looking at the grounds objectively would believe.
Financial institutions have a statutory defence to the above offences provided they file a report to the Joint Financial Intelligence Unit (JFIU) and the report:
- is made before the FI undertakes the disclosed acts and the acts (transaction(s)) are undertaken with the consent of the JFIU
- the report is made after the FI has performed the disclosed acts (transaction(s)) and the report is made on the FI’s own initiative and as soon as it is reasonable for the FI to do so
DTROP, s 25A(2)
OSCO, s 25A(2)
UNATMO, s 12(2)
It is an offence to ‘tip off’ to another person any information which could prejudice an investigation. For example, if an individual is aware that a report has been made, it would be an offence to tell another person as this could prejudice the investigation.
DTROP, s 25A(5)
OSCO, s 25A(5)
UNATMO, s 12(5)
An offence of tipping off carries a maximum penalty, upon conviction, of imprisonment for three years and a fine of HK$500,000.
Confiscation of proceeds
On conviction, a court may order the confiscation of criminal proceeds and an FI may be served with a Confiscation Order if it holds funds or other property belonging to that defendant which the court says are the proceeds of crime. A court may also order the forfeiture of property where it is satisfied that the property is terrorist property.
DTROP, s 3
OSCO, s 8
UNATMO, s 13
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