The Hong Kong Court of Appeal considers constitutionality of the requirement to disclose suspicious transactions

In Interush Limited & Anor v The Commissioner of Police, the Commission of Custom & Excise and Mak Wing Yip Cyril, Superintendent of Police [2019] HKCA 70, the Court of Appeal ("Court") dismissed a challenge to the constitutionality of an aspect of Hong Kong's money laundering legislation.

The Court held that the statutory regime which obliges banks to disclose suspicious transactions relating to property known or believed to represent proceeds of a crime is not unconstitutional. In the circumstances of this case, the Court held that although property rights under the Basic Law were engaged, the regime was no more than necessary for the legitimate purpose and societal benefit of anti-money laundering and a reasonable balance had been struck.

Facts

On 1 November 2013, alerted by newspaper coverage, officers of the Commercial Crime Bureau of the Hong Kong Police ("CCB") commenced an investigation into Interush for promoting an alleged pyramid scheme. If a bank reasonably suspects that the credit balance in an account are the proceeds of crime, then it is legally obliged under section 25 of the Organised and Serious Crimes Ordinance (Cap 455) ("OSCO") not to deal with it. As a result, various bank accounts held by Interush at different banks were frozen following the issuance of letters of "no consent" by the Joint Financial Intelligence Unit ("JFIU"). CCB's investigation led to the arrest of 5 members of senior management of Interush and the CEO.

The applicants applied by way of judicial review for a declaration that sections 25(1) and 25A of the OSCO are unconstitutional for being inconsistent with the following rights under the Basic Law and/or Hong Kong Bill of Rights:

• property rights; and
• access to court rights.

The applicants also sought declarations that various decisions of the third respondent (the Superintendent of Police), the CCB and the JFIU were null and void and of no legal effect. These included decisions to withhold consent to certain banks to deal with funds in the applicants' various accounts or to maintain the "no consent" decisions.

The Court refused the judicial review, and the applicants appealed to the Court.

Property rights

Are property rights engaged?

The first issue the Court considered was whether the constitutional right to property was engaged. The Court held that section 25 of the OSCO did not engage property rights, as the section merely sets out the offence of dealing with property known or believed to be the proceeds of an indictable offence. However, the position in relation to section 25A of the OSCO is different. Section 25A requires a person to disclose to an authorised officer if the person believes that property (ie funds) are the proceeds of crime. The Court held that the deprivation of property must be subject to law. Property is not confined to tangible assets but includes any right which has an economic value. The letter of no consent did not by itself freeze the accounts of the applicant but had, in substance, affected the applicants' use of their money in the bank accounts. Therefore, the Court held that property rights were engaged in relation to section 25A of the OSCO.

Prescribed by law

The applicants submitted that the Court should first examine whether the consent regime was "prescribed by law". Notably, this issue was not initially raised in the judicial review application. The applicants argued that the consent regime under sections 25 and 25A of the OSCO fall foul of the requirement that law should be adequately accessible and sufficiently precise to enable individuals to regulate and foresee the consequences of their conduct. The Court held that the applicants were not entitled to rely on this issue for the first time before it.

Justification: Proportionality

The Court also considered whether the infringement of property rights was justified under the proportionality test.

The Court dismissed the applicants' submission that the procedures set out in the Police's internal manual are so vague as to fall foul of this requirement. The Court also dismissed the applicants' submission that the consent regime is disproportionate because it severely affects fundamental rights (by indefinitely freezing accounts of unlimited value with no right to compensation), and there are less intrusive alternatives available.

In particular, the Court noted that the consent regime is part and parcel of the measures used to combat organised crime in money laundering. A reasonable balance has been struck between the societal benefits of the consent scheme and constitutionally protected rights of the individual. It cannot be said that the pursuit of the societal interest results in an unacceptably harsh burden on the individual.

Access to court rights

The Court held that access to court rights were not engaged because of the judicial remedies available to the applicants by way of judicial review against the respondents and civil claim against the banks.

Key takeaways

This case helpfully reinforces the legitimacy of Hong Kong's money laundering legislation. The regime set out in section 25A of the OSCO is no more than necessary for the legitimate purpose and societal benefit of anti-money laundering. Also, judicial remedies are available in Hong Kong against the Hong Kong police and related divisions, and against the banks. Lastly, where there is no express statutory time limit, reasonableness is not measured by the court reading into time limits. Accordingly, the Court held in this case that the decisions by the members of the Hong Kong police and related divisions to withhold consent to banks to deal with the accounts and the alleged delay in applying for a restraint order were not unreasonable.