There’s a new AML ruling in Hong Kong

with contributing authors Richard Sharpe, William Wong and Nick Turner

Hong Kong’s Court of Final Appeal (CFA) has reaffirmed that a person can be sent to jail for handling money that they had reasonable grounds to believe derived from a crime, whether it did or not. If a defendant thinks he’s laundering criminal proceeds, Hong Kong thinks he’s guilty, with no need to prove an underlying offense.

The former Birmingham City Football Club chairman Carson Yeung was appealing his 2014 conviction on five counts of laundering HKD721 million (USD9.3 million) through five different Hong Kong bank accounts. He was sentenced to six years in jail.

The day after the ruling in Yeung’s case, the CFA gave leave to appeal to the former chief secretary of Hong Kong, Rafael Hui, and the former chairman of Hong Kong property developer Sun Hung Kai Properties, Thomas Kwok, against their 2014 convictions for misconduct in public office. At issue is whether it was enough to prove that the public officer was “favorably disposed” toward Kwok as a result of receiving millions of dollars from him, when no quid pro quo could be established. Are “positive thoughts” a sufficient benefit to be deterred by the threat of criminal conviction?

While the two rulings seem to be contradictory – the first in upholding a “thought crime” and the second in reconsidering one – the CFA’s doublethink (holding two seemingly contradictory ideas simultaneously) may be the inevitable result of trying to ease the burden of proving complex crimes. In other words, don’t even think about committing a crime in Hong Kong.

Where’s the Crime?

The judgment in Yeung was criticized for justifying the concept of “thought crime” when Hong Kong’s CFA reaffirmed that, on a charge of dealing with proceeds of crime, prosecutors only have to prove the defendant had reasonable grounds for believing the property is the proceeds of crime. Section 25(1) of the Organised and Serious Crimes Ordinance (OSCO) says that “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.”

In Yeung’s case, the prosecution did not attempt to identify the offenses from which the money was derived. Instead, its case was that Yeung must have had reasonable grounds to believe that the money was the proceeds of crime.

Yeung gave evidence that the money in the accounts in his name had come from legitimate sources, including his casino winnings and share trading. The trial judge, however, pointed out that Yeung had used his father’s name to open the accounts he had used to conceal the source of the funds.

Thought Crime?

Yeung argued that accepting the prosecution case meant a defendant could be convicted for a “thought crime.” The CFA rejected this defense, observing that if a defendant does not know, but has reasonable grounds to believe that funds are tainted, the defendant can claim immunity by disclosing his suspicion to an authorized officer with legal powers to investigate the source of the funds. Critics point out, however, that the test in Hong Kong means that a person has to prove himself innocent rather than have others proving him guilty, effectively turning the law on its head.  One commentator went so far as to call it a “sad day for justice in Hong Kong.”

“Sweetener” Enough?

The day after the Yeung ruling, the CFA granted leave to appeal to former chief secretary Hui and former Sun Hung Kai chairman Kwok their 2014 convictions for misconduct in public office. The Court granted the appeal to determine whether it is sufficient for the prosecution to prove a public officer is “favorably disposed” to another person, without having to point to any specific criminal act. At issue is the so-called “sweetener” doctrine, which says it is not necessary for prosecutors to prove a specific quid pro quo to establish misconduct in public office offenses.

Prosecutors had successfully argued at trial that Hui had received USD8.5 million from Kwok to help ensure that the government maintained a “favorable disposition” toward the property group. As with Yeung, the ruling as it stands means no underlying crime needs to be proved. The hearing will take place in May 2017.

A Helping Hand for Prosecutors

Taken together, these two decisions show the continuing trend in Hong Kong to lessen the burden on prosecutors in cases involving financial crimes such as money laundering and bribery. In some ways, the decisions assist prosecutors arguing complex patterns of transactions or conduct yet who find proving crimes, in the words used in Yeung,  “complex and cumbersome.” The fight against corruption continues apace in Hong Kong, despite the unanswered questions left behind.


Wendy Wysong

Wendy L. Wysong, a litigation partner with Clifford Chance, maintains offices in Hong Kong and Washington D.C.  She offers clients advice and representation on compliance and enforcement under the Foreign Corrupt Practices Act, the Arms Export Control Act, International Traffic in Arms Regulations, Export Administration Regulations, and OFAC Economic Sanctions.  She was appointed by the State Department as the ITAR Special Compliance Official for Xe Services (formerly Blackwater) in 2010.

Ms. Wysong combines her experience as a former federal prosecutor with the United States Attorney for the District of Columbia for 16 years with her regulatory background as the former Deputy Assistant Secretary for Export Enforcement at the Bureau of Industry and Security, U.S. Department of Commerce.  She managed its enforcement program and was involved in the development and implementation of foreign policy through export controls across the administration, including the Departments of Justice, State, Treasury, and Homeland Security, as well as the intelligence community.]

Ms. Wysong received her law degree in 1984 from the University of Virginia School of Law, where she was a member of the University of Virginia Law Review.

Contact information:

Wendy L. Wysong
Clifford Chance
28th Floor Jardine House
One Connaught Place
Hong Kong
+852 2826 3460
+852 9280 3612 (cell)

And

2001 K Street, NW
Washington, DC 20006
+1 202 912 5030
+1 202 290 7634
Wendy.wysong@cliffordchance.com

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