Money Laundering laws in Hong Kong: the post-Carson Yeung era

On 11th July 2016, the Court of Final Appeal (“CFA”) delivered its judgment in the case of HKSAR v Yeung Ka Sing, Carson (FACC No. 5 & 6 of 2015) (“Judgment”), dismissing the final appeal of Mr. Yeung, the former chairman of Birmingham City Football Club.

This milestone Judgment sets down the Hong Kong position in relation to the interpretation of s25(1) of the Organized and Serious Crimes Ordinance (Cap 455) (“OSCO”) concerning the need for the Prosecution to prove a predicate offence and the test for considering the mens rea of a money laundering charge. The Judgment has also laid down an authoritative ruling on the issue of rule against duplicity.

 

Issue 1: Prosecution not required to prove the predicate offence

The CFA re-affirmed that it is not necessary for the Prosecution to prove that the property being dealt with were in fact the proceeds of an indictable offence to secure a conviction as an element of section 25(1) of OSCO. Namely, a person is guilty of money laundering as long as he either has (1) knowledge or (2) reasonable grounds to believe that the property being dealt with represents proceeds of an indictable offence. This is so even if the property later turns out to be “clean”. This conclusion comes about as a result of the interpretation of section 25(1) of OSCO. When OSCO was originally enacted in 1994, it created an offence which did require proof of the tainted provenance of the laundered property. However, the legislature radically re-cast the offence in 1995, strongly indicating that its intention was to make it no longer necessary to prove that actual criminal provenance of the property dealt with.

This differs from the position in the United Kingdom which requires the property concerned to be actual proceeds of crime. The discrepancy with the UK position is well noted by the CFA. But it was held that the UK position was not applicable to Hong Kong because there is no Hong Kong equivalent to relevant Act in the UK. Further, it was pointed out that unlike the UK where no immunity is available, the draconian consequence of the Hong Kong position is saved by the immunity under section 25A of the OSCO, so that a person with suspicion may obtain immunity by making a report to the relevant authority in Hong Kong (i.e. the Joint Financial Intelligence Unit (JFIU)).

 

Issue 2: The issue of duplicity

In Hong Kong, under the Indictment Rules 1976 (Cap 221C), each paragraph (called a “count”) in an indictment can only properly allege a single offence (i.e. the rule against duplicity). The question of duplicity arises where the conduct alleged in a charge involves a series of acts each of which is capable of being treated as a separate offence.

The CFA held in its Judgment that the purpose of concealing the property comprising each of the numerous deposits, known or reasonably believed to represent the proceeds of crime, provided a connection which made the individual deposits acts of a similar nature so that they could fairly be regarded as forming part of the same transaction or criminal enterprise. A charge or a count unifying those deposits was therefore justified and the rule against duplicity was not infringed. Hence, it was held that there is no prejudice to the Defendant.

 

Issue 3: Explanation of “reasonable grounds to believe”

The Judgment echoes the heated dispute over the test of “reasonable grounds” established in HKSAR v Shing Siu Ming (1999) 2 HKC 818. Under Shing Siu Ming, the Prosecution only has to prove that the mental element beyond reasonable doubt as follows:-

(a) Whether there were reasonable grounds for “a common sense, right-thinking member of the community” to believe that the person being assisted was a drug trafficker or had benefited therefrom, referred to as “the objective element”;

(b) If the answer was “Yes”, whether the Defendant knew of those grounds, referred to as “the subjective element”; and

(c) The standard to be applied in assessing whether the so-called objective element was established, was whether a “common sense, right-thinking member of the community” would consider the grounds “sufficient to lead a person to believe that the person being assisted was a drug trafficker or had benefited therefrom”.

The test under Shing Siu Ming was held to be “erroneous” in the CFA decision in HKSAR v Pang Hung Fai [2014] HKEC 1831. In the Carson Yeung Judgment, the CFA reaffirmed its decision in Pang Hung Fai and provided detailed rules of considering whether the Defendant had reasonable grounds to believe that the proceeds he dealt with were proceeds of crime as follows:-

(1) If the Defendant provides no evidence of his beliefs and perceptions, the Court can draw whatever inferences may be proper based on the prosecution’s evidence;

(2) If the Defendant provides evidence as to his state of mind but is entirely disbelieved, the Court can also draw whatever inferences may be proper based on the Prosecution’s evidence. Rejecting the Defendant’s evidence does not automatically mean that he must be convicted. It remains necessary for the court to be satisfied that the case against him has been proved beyond reasonable doubt; and

(3) If the Defendant provides evidence as to his state of mind, and if his evidence is accepted as true or may be true, acquittal is called for since the mens rea is not established by the Prosecution. This is so even if the asserted perceptions or beliefs are naïve or gullible or foolish to others.

Applying the above considerations, as Yeung was entirely disbelieved by the trial judge, it was held that no error of law was involved.

 

Quotation from Jonathan Caplan QC

Jonathan Caplan QC, leading Queen’s Counsel for the Department of Justice in the Carson Yeung case, provided his insight on the Judgment to our Senior Partner Jonathan Midgley in a breakfast meeting in London:-

“The Court of Final Appeal has now delivered an authoritative and comprehensive ruling on many aspects relating to money laundering which have been debated for some time. It is now clear that the prosecution does not have to prove that the property being dealt with was, in fact, the proceeds of crime; it is enough that the defendant had reasonable grounds to believe that it was. Nor does the prosecution have to charge a separate count for every act of dealing if they can all fairly be regarded as being part of the same criminal enterprise; one charge, therefore, may well cover all the deposits that were laundered through a single bank account as opposed to potentially having hundreds of charges representing each individual deposit. This judgment brings much needed clarity and common sense to this legal minefield and makes it clear that the bar is not being lowered on conduct which will involve the criminal law.”

Written by: Felix Ng, Partner; Jane Ma, Associate & Grace Gao, Trainee Solicitor