The “No Consent Regime” Of Hong Kong Police Upheld By CFA.
When investigating scam, fraud or deception cases, the Hong Kong Commissioner of Police (“CP”) may issue Letters of No Consent (“LNCs”) to banks regarding their dealing with property which is suspected to be proceeds of an offence. The practice is useful to assist victims of fraud to recover the defrauded monies. However, this operational practice of CP in issuing and maintaining LNCs to banks was challenged in the case of Tam Sze Leung and Others v Commissioner of Police [2024] HKCFA 8.
Background
The appellants in this case are members of the same family who were suspected by the Securities and Futures Commission (“SFC”) in 2019 for stock market manipulation of over ten different stocks in Hong Kong. Proceeds from these unlawful transactions had been transferred to accounts held by the appellants with four different banks in Hong Kong.
The SFC referred the case to the Hong Kong police and the police then took certain actions which led to the banks disabling or “freezing” the appellants’ accounts. These actions included the police issuing LCNs to maintain the freeze on the accounts.
The appellants applied for leave to seek judicial review of the CP’s decision to issue and maintain the LNCs. They argued that the practice, referred to as the “No Consent Regime,” was ultra vires and unconstitutional. On 4 March 2021, the appellants were arrested on charges of money laundering but were released on police bail without charges being laid.
Later, the Secretary for Justice obtained a restraint order from the Court of First Instance, preventing the appellants from disposing of or diminishing the value of their bank funds. The police then informed the banks that the refusal of consent to deal with the funds was lifted in compliance with the restraint order. Coleman J initially upheld aspects of the appellants’ challenge on ultra vires and constitutional grounds, but the Court of Appeal overturned this decision, leading to the appellants’ appeal to the Court of Final Appeal.
Questions arising on the appeal
In the Court of Final Appeal, the following four key legal and constitutional questions were addressed.
Question 1 : No Consent Regime and LNCs not ultra vires
The Court determined that the No Consent Regime and the issuance of LNCs by the CP were not ultra vires. The actions of the police, including informing banks of their suspicions and issuing LNCs, were within the statutory powers provided by the Police Force Ordinance (“PFO”). These measures were aimed at preventing crime and protecting property, which fall squarely within the duties of the police. The Court emphasised that the police did not directly freeze the bank accounts but rather provided information that led the banks to act according to their regulatory obligations.
Furthermore, the argument that the police misused their power for an improper purpose was rejected. The appellants contended that the power to withhold consent under Organized and Serious Crimes Ordinance (“OSCO”) section 25A(2)(a) was misapplied to effectively freeze their accounts. However, the Court clarified that section 25A(2)(a) pertaining to the granting or withholding of immunity from liability for dealing with suspicious property was not the basis for police communications with banks. The Court found that the police’s actions were legitimately aimed at preventing the dissipation of assets suspected to be proceeds of crime and were consistent with the purposes outlined in the PFO. Consequently, the Court held that the actions were neither ultra vires nor carried out for an improper purpose.
Question 2 : Constitutional Rights not violated
On the challenge based on property rights under Articles 6 and 105 of the Basic Law, the Court found that the appellants’ allegation that the actions “froze” their bank accounts was a mischaracterisation. The Court emphasised that it was the banks themselves, rather than the police, that disabled the accounts in compliance with their own legal and regulatory obligations. The CP’s actions of informing the banks and issuing LNCs did not prevent the appellants from using their property, and therefore did not engage the protected property rights.
As for the “prescribed by law” and proportionality questions, the Court held that the impugned actions were indeed “prescribed by law” through the combined effect of the PFO and the Force Procedures Manual, which provided clear authorisation and legal principles governing the police’s interactions with banks. Additionally, the Court found the actions to have an aim of combating money laundering, both domestically and to fulfil of Hong Kong’s international obligations, and that the actions represented proportionate means of achieving those aims.
The Court also rejected the challenges based on the rights to private and family life and access to the courts, finding that the appellants had not provided any evidence of actual hardship or interference with those rights.
Question 3 : No Violation of Fair Hearing Rights
The appellants’ contention that the issuance of LNCs involved a determination of rights and obligations in a suit at law was rejected. The Court held that the police’s actions in communicating with banks and issuing LNCs did not freeze the accounts nor determine the appellants’ rights to the funds.
The Court emphasised that the police was conducting an investigation, not adjudicating a dispute, and thus was not required to provide notice, reasons, or an opportunity for representations before issuing LNCs. The purpose of the OSCO is to avoid prejudice to investigations which justifies the confidentiality of the police’s actions. Moreover, the appellants had consistently chosen to remain silent and to not assist in the investigation despite having opportunities to make representations. The appellants also had the option to seek relief through judicial review, which they did. Consequently, neither Article 10 of the Bill of Rights nor the common law fair hearing rights were engaged or infringed by the police actions.
Question 4 : The Interush Question
The Court declined to address the appellants’ challenge to the decision in Interush Ltd v Commissioner of Police, finding it irrelevant to the case at hand. The Court noted that Interush involved a direct challenge to the constitutionality of certain OSCO provisions, whilst the present appeal focused solely on the CP’s actions involving LNCs. The Court also questioned the reasoning in Interush, finding it difficult to reconcile the Court of Appeal’s acceptance that LNCs did not freeze accounts but the LNCs nevertheless engaged the right to use property.
Take Away
The above landmark decision affirms the legality and proportionality of the police’s role in the anti-money laundering framework, whilst upholding important individual rights. It also provides guidelines to banks on whether the customers should be allowed to draw on the suspected funds or whether the accounts should be disabled. The bank runs statutory, regulatory and reputational risks if it deals improperly with the funds. Unless, having made due inquiries, the bank is confident that the suspicion is dispelled, it runs the risk of incurring criminal liability under section 15(1) OSCO if it deals with the funds since information provided by the police is likely to constitute reasonable grounds to believe that those funds represent the proceeds of an indicatable offence.
Our Litigation and Dispute Resolution team has extensive experience acting for international and domestic clients in recovery of stolen funds in scam, fraud and deception cases, registration of foreign judgments, complex corporate, contractual and commercial disputes and arbitration in the Greater China region especially those of a cross-border nature. If you have any questions on the above eNews or relating to litigation and / or arbitration matters, our experienced Dispute Resolution lawyers would be happy to assist you.
For further information, please contact:
Angela Wang, Partner, Angela Wang & Co
angelawang@angelawangco.com
