Lawyers and AML
Three Ordinances, Two Duties,
And One “P” Direction
2010/3/3
DOJ
1
2010/3/3
DOJ
2
Introduction






What
What
What
What
What
What
2010/3/3
is money laundering?
is the significance?
are the reporting offences?
are the protections?
about confidentiality?
about LPP?
DOJ
3
Sources of Law
Main Ordinances



Drug Trafficking (Recovery
of Proceeds) Ordinance
(Cap. 405) – since 1989
[DTROP]
Organized and Serious
Crimes Ordinance (Cap.
455) – since 1994
[OSCO]
United Nations (AntiTerrorism Measures)
Ordinance (Cap. 575) –
since 2002, some
provisions not in force
2010/3/3
Others




DOJ
High Court Rules, O. 115 117
Drug Trafficking (Recovery
of Proceeds) (Designated
Countries and Territories)
Order
(Cap. 405A)
Mutual Legal Assistance in
Criminal Matters
Ordinance (Cap. 525)
Prevention of Bribery
Ordinance (Cap. 201)
4
SECTION 25 : OSCO –MONEY
LAUNDERING
“subject to section 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.”
2010/3/3
DOJ
5
Interpretation of Section 25
Actus Reus



This is dealing in property, any property
Not necessary to prove that the property was in fact
proceeds of an actual indictable offence – the status
of the property is only relevant to the mens rea (Oei
Hengky Wiryo (2007) 10 HKCFAR 98)
A person can deal with property which represents
proceeds of his own crime (Lok Kar Win (CFI), leave
refused (CFA AC))
2010/3/3
DOJ
6
Dealing with Property
conceal and disguise
property to make it
look legitimate
2010/3/3
DOJ
7
Dealing
Receiving or
acquiring property
IF you keep it in the
bath or a transfer
is received into a
bank account
2010/3/3
DOJ
8
Dealing

using property to
borrow money, or
as security.
2010/3/3
DOJ
9
Dealing

bringing into or
removing the
property from
Hong Kong
2010/3/3
DOJ
10
Interpretation of Section 25



Mens Rea
Knowing: subjective standard
– believing a state of affairs that is in fact true (Lee
Wai–yiu, CACC 100/2006, 7 Jun 2007)

OR
Having Reasonable Grounds
objective standard
to
Believe:
“whether, objectively, reasonable grounds existed for the
belief and, if so, whether subjectively the defendant was
aware of the existence of those reasonable grounds”
: Yam Ho-Keung, CACC 555/2001, 24 Oct 2002.
2010/3/3
DOJ
11
Elements of the ML Offence
Section 25
Mens Rea



Not necessary for the prosecution to prove that D
actually believed that the property represented the
proceeds of an indictable offence (Ma Zhujiang, CACC
491/2005, 20 Aug 2007)
Honest belief as to the innocent status of the property is
NOT a defence, if D was aware of the objective grounds.
Not necessary to particularize or prove the precise
“indictable offence” in charging/proving that D had
reasonable grounds to believe (Li Ching, CACC 436/1997,
17 Dec 1997; Lam Hei Kit, FAMC 27/2004, 27 Sept 2004;
Chen Zhen Chu, CACC 433/2006, 2 Nov 2007)
2010/3/3
DOJ
12
Elements of the ML Offence
Section 25
Mens Rea
Choi Sui Hey, CACC 277/2007, 31 Oct 2008
“If a person either allows another to use his bank
account for the transmission of funds or accepts
substantial funds from others which he then remits,
without enquiry by him or explanation by the others,
to third parties unknown to him then, in the absence
of evidence to the contrary, the inevitable inference
will arise that the holder of the bank account has
reasonable grounds to believe that the funds passing
through the account or the funds with which he has
dealt represent proceeds of an indictable offence.”
(para 20)
2010/3/3
DOJ
13
Approaches to
Money Laundering

Self Laundering

Laundering for others
2010/3/3
DOJ
14
Make sure crime does not pay
2010/3/3
DOJ
15
How to make crime not pay



Deny the criminal the
fruits of crime, big
house, fancy car
Deny him the ability
to support his family
luxuriously
Deny him the assets
to invest in more
crime
2010/3/3
DOJ
16
Disclosure of knowledge or
suspicion




Section 25A(1) OSCO- the reporting
offence – summary offence
Failing to report to an authorised officer
Knowledge or suspicion that any property
is or is connected to the proceeds of an
indictable offence
Within a reasonable time
2010/3/3
DOJ
17
Relevant Property s.25A(1)



in whole or in part directly or indirectly
represents any person’s proceeds of an
indictable offence
was used in connection with; or
is intended to be used in connection with,
an indictable offence.
2010/3/3
DOJ
18
Mens Rea




Only Subjective
actual knowledge or suspicion concerning the
nature of the property
no objective qualifier, such as “reasonable” for
the alternative mental state of “suspicion”
Suspicion: “there is a possibility, which is more
than fanciful, that the relevant facts exist “ - and
the suspicion is in some cases settled K Ltd v
Natwest Bank (2006) EWCA Civ 1039, [2007] 1 WLR 311
2010/3/3
DOJ
19
Threshold of Suspicion


Suspecting property has the quality
defined in s.25A(1) falls a long way short
of having demonstrable proof that the
property is of that quality
What matters is what the defendant
thought, not what the reasonable person
would have thought in the particular
circumstances - Annexure 4 of Practice Direction ‘P’
2010/3/3
DOJ
20
Actus Reus

Failing to report in a reasonable time

What is reasonable?

Depends on circumstances

May allow for consultations or obtaining
legal advice - Practice Direction ‘P’
2010/3/3
DOJ
21
Reporting to whom

Authorised officer- police and customs

Joint Financial Intelligence Unit (JFIU)

STREAMS

Annex 5 & 6 - Practice Direction ‘P’
2010/3/3
DOJ
22
Confidentiality and LPP

Disclosure in OSCO and DTROP subject to
LPP: OSCO s.2(18)

Declaration of LPP: OSCO s.2(1)

Advice Privilege

Litigation Privilege
2010/3/3
DOJ
23
LPP






Important public and private interest
Advice privilege
Negative Examples:
Not conveyancing documents
Not client account ledger of client’s money
Not correspondence with other lawyers
2010/3/3
DOJ
24
Advice privilege




What is it?
Communications directly seeking or
providing advice
Information passed so that advice may be
given
Includes advice on what can be done in a
relevant legal context
2010/3/3
DOJ
25
Litigation privilege




Confidential communications in course of
litigation or reasonably in prospect of
same between
Lawyer and client
Lawyer and agent
Lawyer and third party
2010/3/3
DOJ
26
Litigation Privilege




Sole or dominant purpose:
Seeking or giving advice in
relation to litigation
Obtaining evidence to be
used in it
Obtaining information
leading to obtaining such
evidence
2010/3/3
DOJ
27
Crime exception for LPP


No LPP for documents forming part of a
criminal act
LPP is not displaced until there is prima
facie evidence of a fraud or other crime
2010/3/3
DOJ
28
Protections

AML offence: s.25 (1) OSCO

Disclosure protection and offence: s.25A(2)

Protection against suit: s.25 (3)

Offence to disclose the disclosure: s.25 (5)
tipping off “any matter likely to prejudice an
investigation”
2010/3/3
DOJ
29
Section 25A(2) OSCO





Disclosure of property suspicion under
s. 25A(1)
Does an act in contravention of s. 25(1)
Disclosure relates to that act
Gain protection if disclose prior to the act
and does act with consent of authorised
officer
Protection if disclosure after the act but
reasonably soon and on own initiative
2010/3/3
DOJ
30
S. 25A(2) OSCO - Protection



What protection?
Does not commit an offence under s.25(1)
- money laundering
Disclosure must be of every discrete act in
relation to the property subject to the
original disclosure
2010/3/3
DOJ
31
Protecting yourself & the firm





Disclosure protects
At your own risk if do not disclose
Client reality : need fees, need referrals
Practical reality: busy, mind set,
Legal reality: what is knowledge or
suspicion
2010/3/3
DOJ
32
Conclusions

Difficult area for lawyers

Develop awareness

Be mentally prepared to disclose

For your own protection and firm’s; and
for the wider public interest.
2010/3/3
DOJ
33
Conclusions (Cont’d)




Three OrdinancesDTROPO, OSCO & UNATMO
Duty to report suspicion about property
s.25A(2) OSCO
Duty to be aware of the elements of
s.25(1) OSCO - money laundering
Practice Direction ‘P’- guidance
2010/3/3
DOJ
34
Thank You


Welcome questions
Welcome exchange of
views and
experiences
2010/3/3
DOJ
35