RTHK interview on Crowdfunding and Money Laundering

Our criminal litigation partner Felix Ng was interviewed by RTHK television program “Viewpoint 31 (視點31)” on recent police arrests relating to crowdfunding and money laundering allegations.

Overview of Money Laundering

During the program, Felix provided an overview of the regulatory framework on money laundering in Hong Kong, which is an offence formally known as “dealing with property known or believed to represent proceeds of indictable offence” under Section 25 of the Organized and Serious Crimes Ordinance (Cap 455).

Felix further analyzed the criminal act (actus reus) and mental element (meas rea) of the offence in view of the latest Court of Final Appeal decisions in HKSAR v Harjani Haresh Murlidhar (FACC 17/2018), HKSAR v Yeung Ka Sing Carson (FACC 5 & 6/2005 and FACC 1/2005, heard together) and HKSAR v Pang Hung Fai (FACC 8/2013). He emphasized two peculiar features of the Hong Kong regulatory regime which may make it appear rather draconian:

1. the threshold for investigation authorities to form a “reasonable suspicion” and arrest suspects for money laundering offences is relatively low;
2. the prosecution is not required to prove the predicate offence in money laundering proceedings.

Crowdfunding & “Hallmarks of Money Laundering”

Crowdfunding itself would not constitute any criminal offence in Hong Kong, and it is a relatively novel phenomenon for the police to arrest fundraisers for money laundering allegations. Felix commented that the authorities would normally look into certain “hallmarks of money laundering” to ascertain if there is sufficient evidence to substantiate such allegations.

The typical hallmarks include:

• Unidentifiable senders and recipients of funds;
• Concealed sources of funding, which often involve offshore corporate vehicles;
• Newly established companies and bank accounts with no track record;
• Absence of company records on business operations, profits and tax;
• Bank accounts used as temporary repository for funds (e.g. funds are deposited and withdrawn on the same day);
• High frequency of high-value cash transactions with no apparent business purposes;
• Unnecessary and complex layering of transactions

Investigation Procedures & Account Freezing

Felix then shared his experience in defending money laundering prosecutions, especially with respect to the investigation procedures, timeframe, and account freezing by way of “No Consent Letters” issued by the police and Restraint Orders imposed by the courts.

He also provided practical tips to crowdfunding organizers on the reasonable steps to take to avoid suspicions of money laundering.

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