Gavin Shiu Senior Assistant Director of Public Prosecutions

“The heart of an effective anti money laundering regime is the ability to :

seize restrain confiscate proceeds and

instrumentalities of money laundering and other predicate offences

in order to remove them from the financial system”.

APG-2005

Drug Trafficking (Recovery of Proceeds) Ordinance Cap., 405 (DTROP)

Organised and Serious Crimes Ordinance Cap.,455 (OSCO)

International Conventions FATF and APG

112/04/10GTS/DOJ

4

Main Ordinances Others Drug Trafficking

(Recovery of Proceeds) Ordinance (Cap. 405) – since 1989 [DTROP]

Organized and Serious Crimes Ordinance (Cap. 455) – since 1994 [OSCO]

United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575) – since 2002, some provisions not in force

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

Restraint When What Variation Confiscation How Enforcement

Tracing of defrauded or stolen or laundered money/assets – Why?

Money / assets is it the proceeds of a crime or the benefit (proceeds) gained by a defendant?

Only money or property that directly or indirectly are proceeds of crime?

NO See s 2(6) OSCO Proceeds is not the ordinary man’s

understanding of the term It has a special meaning under OSCO

Property includes payments or other awards received at any time in connection with an offence (s2(6)(a)(i))

a payment before the commission of the offence

Award has a broad meaning

Pecuniary advantage connected to an offence (s2(6(a)(iii))

Wide and flexible meaning May include being able to use a

position to make a gain, even if gain itself is not illegal if there is the connection to the offence

Examples: A fraud facilitates a transaction and

professional fees are generated relating to the transaction not the fraud

Money is utilised to facilitate a fraud but comes from non crime sources

When property is identified as proceeds of crime what is to be done?

Police may restrain and confiscate but what about you?

MUST be aware of Section 25A of OSCO

What are your obligations?

Compulsory Reporting Scope : Everyone Structure of Offence Punishment Legal Professional Privilege &

Confidentiality

112/04/10GTS/DOJ

13

Section 25A(1) OSCO- the reporting offence – summary offence

Failing to report to an authorised Failing to report to an authorised officerofficer

Knowledge or suspicion that any Knowledge or suspicion that any property is or is connected to the property is or is connected to the proceeds of an indictable offenceproceeds of an indictable offence

Within a reasonable timeWithin a reasonable time

112/04/10GTS/DOJ

14

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.

112/04/10GTS/DOJ

15

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

112/04/10DOJ

16

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 circumstancestances

112/04/10DOJ

17

Failing to report in a reasonable time

What is reasonable?

Depends on circumstances

May allow for consultations or obtaining legal advice – Regulations

Practice Direction P

112/04/10DOJ

18

What should be the Reporting Approach?

Risk Based Approach

Screen for suspicious activity indicator(s)

Ask appropriate questionsFind out records for reviewEvaluate

Authorised officer- police and customs

Joint Financial Intelligence Unit (JFIU)

STREAMS

Regulations

112/04/10GTS/DOJ

20

1,583 in a month

395 in week

56 in a day

Several during this presentation.

Purpose : To facilitate possible confiscation of realisable

property of crime after conviction of the Defendant. (19(2)) Legislative steer.

Nature : Akin to Mareva Injunction.

Jurisdiction : Court of First Instance (15(1))

Proceedings have been instituted against D for a specified offence (arrest warrant or charged)

Proceedings have not been concluded

Reasonable cause to believe D has benefited from the specified offence

Evidence of dissipation of assets

Prohibit dealing with any realisable property

Authorised officer may seize any realisable property

Court may appoint a Receiver to manage the restrained assets

Affected party may vary/discharge the order

Any property held by D

Any property held by a person as gift (directly or indirectly) from D going back 6 years from charge

Any property subject to effective control of D regard to family, domestic and business relationships

Affected party may apply to vary for :

Reasonable Living expenses; but not to a luxurious standard

Reasonable legal expenses O.115, r 4 (Cheng Wai-keung & Ors [2003]

HKCFI 329) Non disclosure (SJ v CKS & Anor (No.2) HKC

[2001] 611)

Application : Prosecutor/Respondent Grounds :

Mareva Injunction obtained by victim.* Confiscation order made. insufficient evidence against D. Respondent has no money/run out of money.

Confiscation Order is deemed to be a sentence passed on D in respect of convictions for appeal purpose

Submit s.10 statement to the trial judge which states : D convicted of a specified offence. (Reasons

for Verdict) Whether D benefited from that offence. Value of his benefit (proceeds) from that

offence. Court determine the amount to be realised. Fix a period of imprisonment in default

Broad – any payments or other rewards received in connection with an offence

Any property derived or realised directly or indirectly from above

Any pecuniary advantage in connection with the offence

Shing Siu-ming (No.2) [2000] 3 HKC 83 Osei [1988] Crim LR 775

Court will fix a term of imprisonment in default. (Time to pay)

Appointment of receiver to realise assets. Variation of confiscation order :

Realisable assets inadequate. Actual value of realisable assets greater than

that at the time of assessment. *Property jointly owned. *Victim.

Confiscation: the actual proceeds of crime? No

Court shall determine whether the person has benefited from the specified offence

And if he has whether his proceeds of that offence total at least $100,000

If court determines he has benefited to an amount of at least $100,000

THEN in accordance with Section 11, the court shall determine the amount to be recovered and

A confiscation order shall then be made for that amount

The amount to be recovered by the confiscation order

Shall be what the court assesses to be the value of the defendant’s proceeds of the specified offence(s) of which he was convicted

Therefore, the confiscation order is for the value of what the court assesses is the benefit (proceeds) derived by a convicted person from his specified offence

The order is not asset based and not based on actual stolen or defrauded monies

This is why for criminal asset recovery there is no difference in white or black

The confiscation order should be looked on as a determination by the court of what a criminal owes Hong Kong – he is obliged to pay us from whatever sources

Property acquired through inheritance Property acquired through a legitimate

business Property acquired through savings from

earlier legitimate employment Property acquired through share

trading or other market investments

Confiscation Order is deemed to be a sentence passed on D in respect of convictions for appeal purpose

Submit s.10 statement to the trial judge which states : D convicted of a specified offence. (Reasons

for Verdict) Whether D benefited from that offence. Value of his benefit (proceeds) from that

offence. Court determine the amount to be realised. Fix a period of imprisonment in default

Broad – any payments or other rewards received in connection with an offence

Any property derived or realised directly or indirectly from above

Any pecuniary advantage in connection with the offence

Shing Siu-ming (No.2) [2000] 3 HKC 83 Osei [1988] Crim LR 775

Court will fix a term of imprisonment in default. (Time to pay)

Appointment of receiver to realise assets. Variation of confiscation order :

Realisable assets inadequate. Actual value of realisable assets greater than

that at the time of assessment. *Property jointly owned. *Victim.

In every case of specified offences is there a benefit? Should we not deny him of it?

Tracing of Black money some value Prove offence and if easily confiscated

should be a target of restraint and confiscation

If 2 or more benefited should the benefit be split? (divided between Ds)

Not necessarily, depends on evidence Can be joint and several (ie one

accused owes all of a joint benefit) Can be split if reasonable evidence of a

division

What is his benefit from the crime? (not what was stolen or defrauded or laundered, necessarily)

How large is it? That is, what would be the value?

What assets does he have? Which are the easiest to restrain and

confiscate?

Have other defendants benefited that may not be obvious at first glance?

Should restraint of assets be done before the case goes overt or simultaneously? Risk of dissipation.

Are there assets overseas? Are there victims?

Emphasise denying the fruits of crime It is not a revenue raising exercise It is part of the penalty (purpose of

appeal deemed to be part of a sentence, Section 8(8A))

It is punishment, deterrence and prevention of serious crime

OSCO and DTROP are powerful Underused, but why? Mind set, includes training to prosecute

core offences Troublesome- bank docs, account

records Hard work Need to increase awareness and use

No provision to restrain some property for a victim and some for confiscation; and

No provision to allow victims to be allocated a share of a confiscation

Boiler rooms 419 Scams No easy solution Group actions Recourse to the Executive

Share with other jurisdictions

Share with other Government bodies domestically

Asset sharing agreements

What is meant? Forfeiture of assets without having any

conviction for a crime Civil proceedings are used based on

civil procedure In some cases no evidence called all

based on affidavits

Why? Thought easier to achieve to get the big fish

senior figures in organised crime keep distant from the crimes committed but controlled by them

Difficult to prove their guilt so assets remain not confiscated

A civil forfeiture system therefore provides a method to effectively disgorge assets from such senior figures

Disadvantages: Seen akin to convictions based on evidence

that would be inadequate for a criminal case Effectively reverse onus provisions are used Often not used for big fish but indiscriminately

Both Criminal and Civil forfeiture Nearly all cases today are civil Sue item of property not the person Probable cause established Owner must prove on a ‘preponderance

of evidence“ that it is not Cost high and can take years

Political will required Chief Executive and Exco Legco Is there a real need? Will resources be put in that justify the

effort to change? Can more resources be put in to the

present system?

Conviction based Restraint preventative and facilitates

confiscation Realisable property and benefit from

proceeds broadly defined Confiscation follows conviction and

part of sentencing Confiscation may be appealed

Restraint and Confiscation Basic premise conviction equals

confiscation simple and easy to justify but

conviction based therefore cumbersome/slow

subject to too many qualifications In personam worldwide

Welcome exchange of views Hope you have had benefit from the

course Rights of the author are asserted