“Dealing Offence” – Recap

Organized and Serious Crimes Ordinance (Cap. 455) (“OSCO”), s. 25(1):

“Subject to s. 25A, a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.” (emphasis added)

The CFA’s landmark judgment in HKSAR v Yeung Ka Sing [2016] HKEC 1506, FACC Nos. 5 and 6 of 2015, represents a victory for those in the Department of Justice who argued over the years that to secure a conviction under s. 25(1) of OSCO, based on the “alternative” mens rea, it is not necessary for the prosecution to prove a predicate offence; namely, that the property with which the defendant deals represents the proceeds of a serious offence. For more on the case, readers are referred to Morley Chow Seto’s feature article, in the August 2016 edition of the Hong Kong Lawyer.

Going forward, a number of points may be observed.

  • The number of convictions for money laundering has tailed off since 2014; perhaps, pending clarification of the law in (for example) – HKSAR v Pang Hung Fai [2014] 17 HKCFAR 778, HKSAR v Yeung Ka Sing and HKSAR v Salim, FACC No. 1 of 2015. This may now change and more prosecutions for the “dealing” offence based on the alternative mens rea (“having reasonable grounds to believe”) may follow.
  • For now, the alternative offence in s. 25A of OSCO (“failing to report knowledge or suspicion that property represents proceeds of a serious crime”) appears to be regulating itself given the high number of Suspicious Transaction Reports (“STRs”) to the Joint Financial Intelligence Unit in Hong Kong (“JFIU”). When these AML offences first came onto the statute book in Hong Kong a generation ago it was the “failing to report” offence that appeared to have financial intermediaries and the professions more worried than the more serious “dealing” offence. However, prosecutions for “failing to report” pursuant to s. 25A of OSCO are rare; perhaps, in part, reflecting its summary offence status. The police and the prosecution authorities appear to be content to let things be (for now). In the meantime, a high level of “defensive reporting” appears to continue.
  • In the first seven months of this year, Hong Kong has already beaten her PB (“Personal Best”) for the number of STRs in a year (previously, in 2015) and this trend looks set to continue. The level of STRs in the legal sector is increasing considerably; last year increasing approximately fourfold and making-up approximately two percent of all STRs.
  • Hong Kong’s next mutual evaluation by the Financial Action Task Force (the inter-governmental body) is scheduled for October/November 2018 (reporting in a plenary discussion due in summer 2019). One can expect more of a spotlight to fall on (amongothers) the professions in Hong Kong and not just the financial institutions.
  • In the meantime, solicitors and law firms in Hong Kong should pay attention to their “Practice Direction P” (“Guidelines on AML and Terrorist Financing”); in particular, its mandatory aspects (for example – Know Your Customer, STRs, record-keeping, staff awareness and training). Law firms are also better off for having an internal AML compliance and reporting officer. In HKSAR v Wu Wing Kit [2014] HKEC 1554, DCCC No. 1022 of 2012 (para.125), a District Court judge referred to Practice Direction P as prescribing “a common standard all solicitors shall adhere to”*.

* The case was ordered to be retried by the Court of Appeal on 26 May 2016 ([2016] 3 HKLRD 533, CACC No. 299 of 2014) and a pre-trial review is due to be heard in the District Court on 19 October 2016.

Editorial Note: For more Insights from Ganesh and Carmichael on AML, please use the search function for Hong Kong Lawyer online.

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Partner, Smyth & Co in association with RPC

Senior Consultant, Smyth & Co in association with RPC