Hong Kong: Money Laundering Legislation
| DOI | https://doi.org/10.1108/eb027125 |
| Published date | 01 January 1997 |
| Pages | 97-100 |
| Date | 01 January 1997 |
| Author | Michael Chan |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control 1/1
Hong Kong: Money Laundering Legislation
Michael Chan
In Hong Kong money laundering is mainly
governed by two ordinances:
— Drug Trafficking (Recovery of Proceeds) Ordi-
nance 1989
— Organised and Serious Crime Ordinance 1994
The Drug Trafficking (Recovery of Proceeds)
Ordinance 1989 (DTO) was primarily aimed at
drug traffickers. It allowed the courts to freeze and
confiscate proceeds, thus creating some basic
powers to deter money laundering. These powers
were extended to all indictable offences by the
Organised and Serious Crime Ordinance 1994
(OSCO). The relevant parts to money laundering
were s. 25 of both ordinances where the wording
was identical but for the substitution of organised
and serious crime for drug trafficking.
On 1st September, 1995, the Drug Trafficking
(Recovery of Proceeds) (Amendment) Ordinance
and the Organised and Serious Crime (Amend-
ment) Ordinance came into operation. These
amendments repealed s. 25 of the previous ordi-
nances, closed a number of lacunae and clarified
the legislation for the public and for prosecutors.
THE PAST
Under the old ordinances, to be guilty of money
laundering, the prosecution had to establish that:
(1) there was an arrangement to perform certain
acts for another person in relation to the pro-
ceeds of the crime;
(2) the proceeds were from illegal activities;
(3) the defendant knew or had reasonable grounds
to believe that the other person was a criminal
or a beneficiary of
a
crime.
The mens
rea
for money laundering was therefore
objective — would the reasonable ordinary person
believe that the other person was a criminal or
beneficiary of the crime. It should be noted that
under the old s. 25 it appeared that it would not be
illegal to launder one's money. This lacuna was
acknowledged by Alastair Sinclair (Commissioner
for Narcotics in Hong Kong) who said that it
would be addressed along with other problems in
the ordinance.1
The wording of the former s. 25 was unclear.
'Arrangement' was not defined and caused con-
siderable uncertainty. The defences available
within the ordinance placed the burden of proof
on the defendant. To summarise, the defendant
had to prove:
(1) he had no knowledge or did not suspect that
the arrangement would involve the proceeds of
drug trafficking/serious crime;
(2) he had no knowledge or did not suspect that
the arrangement would have the effect it had;
(3) he intended disclosure, but had a reasonable
excuse for remaining silent;
(4) he reported under s. 25(3) — thus gaining
exemption from civil liability.
Section 25(3) did not create an obligation but
merely encouraged one to report one's suspicions
(unless s. 25 applied).
When viewed as a whole, the old s. 25 used an
objective test to determine the defendant's state of
mind but allowed the defence to use subjective
beliefs. Objective tests of culpability have long
been a troublesome area for the law. They are
often criticised as being too inflexible, over-inclu-
sive or in breach of civil liberties. In Attorney-
General
of Hong
Kong
v Lee Kwong Kut,2 the defence
claimed that s. 25(1), s. 25(4)a and s. 25(4)b of the
DTO were inconsistent with Article 11 of the
Hong Kong Bill of Rights — the presumption of
innocence until proven guilty. The Privy Council
held that the prosecution still retained the burden
of proving that the defendant had been involved
with an arrangement involving the proceeds of
drug trafficking. However, once proven, the
burden is placed upon the defendant to show that
he did not have the alleged knowledge or suspi-
cion.
THE PRESENT AND FUTURE
The present s. 253 only requires the prosecution to
prove two facts:
Page 97
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