Towards the end of 2019 the Court of Final Appeal (“CFA”) handed down an important judgment in HKSAR v Harjani  HKCFA 47. Among other things, the judgment clarifies the meaning of the alternative mens rea for the offence of dealing with property “having reasonable grounds to believe” that the property represents the proceeds of an indictable offence (s. 25 of the Organized and Serious Crimes Ordinance).
Harjani clarifies the position set out in landmark cases such as – HKSAR v Yeung (2016) 19 HKCFAR 279 and HKSAR v Pang (2014) 17 HKCFAR 778. The other mens rea is “knowledge”.
In short, for a defendant to be convicted in Hong Kong of the offence of “dealing” (based on “having reasonable grounds to believe”) the judge or jury must find that he or she has grounds to believe and that those grounds are reasonable. Although rather frustrating for a layperson, everything (in effect) stands or falls by a test of reasonableness. It is probably not helpful to describe the test as objective or subjective, albeit aspects of these descriptions persist. As the CFA confirms (at paras. 26–28 of its judgment), the judge or jury must address:
- first, what matters (facts and circumstances) did the defendant know that might affect his or her belief as to status of the property (for example, whether it is “clean or tainted”). This is a subjective question; and
- second, would any reasonable person who shared the defendant’s knowledge be bound to believe that the property is “tainted”. This is an objective question. If the answer is in the affirmative, the defendant is guilty – if the answer is in the negative, the defendant is not guilty.
Given the alternative mens rea (“having reasonable grounds to believe”) to that of “knowledge”, it is normally not necessary or helpful to ask whether the defendant has deliberately “turned a blind eye” or “shut his eyes” to the obvious.
In Yeung and Pang, the CFA may have thought that, at the time, it had adequately clarified the meaning of the words “having reasonable grounds to believe”. Harjani should (for now) complete that clarification. An important point to come out of these cases is that they apply a higher standard to the meaning of the words “having reasonable grounds to believe”. It is not a matter of “could or might a reasonable person believe” that the property is tainted but more a matter of “would he or she believe”.
A Tale of Two Offences
Of the two main anti-money laundering offences in Hong Kong (the other being “failing to disclose knowledge or suspicion” – s. 25A of the Ordinance), the dealing offence comes with significantly tougher sentences. Since the Ordinance was enacted approximately a generation ago, the dealing offence has been prosecuted far more often compared with the failure to disclose/report offence – for example, on average, approximately 110 times in each of the last seven years (see “Statistics” section of the Joint Financial Intelligence Unit’s website*).
A “failure to report/disclose” charge has (to date) rarely resulted in a conviction and this statutory provision may tend to police itself, given the relatively high-level of reporting that goes on among financial institutions – however, this could change given a drop off in the number of suspicious transaction reports in 2019 (see JFIU’s website) and a perceived degree of under-reporting by some designated non-financial businesses and professions.
Towards the end of 2019, news reports surfaced of the Solicitors Regulation Authority for England & Wales (“SRA”) having reviewed 400 law firms’ compliance with the UK Money Laundering Regulations, 2017. Apparently, approximately twenty per cent of law firms were not compliant. This has come with a warning of strong regulatory action; the SRA having already taken approximately sixty such cases to the Solicitors Disciplinary Tribunal in the last five years, resulting in some forty practitioners having been struck-off or suspended.
Similar failures in Hong Kong expose practitioners to the risk of (among other things) serious sanctions, pursuant to (for example) s. 9A(1AA) of the Legal Practitioners Ordinance (Cap. 159) – the same is true for solicitors or foreign lawyers while serving as a director of a corporation that is a trust or company service provider licensee.
*Editorial Note: It is thought that the conviction statistics shown relate to the dealing offence.