We have previously reviewed the Court of Appeal's judgment in Tam Sze Leung v. Commissioner of Police.¹ In that judgment, the court revisited its previous decision in Interush Ltd v. Commission of Police² and confirmed the lawfulness of the police's use of the letter of no consent (LNC) under the "No Consent" regime.

On appeal from the appellants, the Court of Final Appeal (CFA) (the highest court in Hong Kong) conducted a thorough examination of the statutory and regulatory anti-money laundering framework in Hong Kong and unanimously concluded that the "No Consent" regime is constitutional.³

Background

The appellants were under investigation by the Securities and Futures Commission which subsequently referred the matter to the police on the basis that a suspected money laundering offence had been committed. The police alerted the appellants' banks, informing them of the investigation and asking them to file a suspicious transaction report (STR). Upon receipt of the STRs, the police issued the LNCs and, as a result, around HK$30 million was frozen.

The appellants commenced judicial review proceedings challenging the lawfulness of the "No Consent" regime as operated by the police. The Court of First Instance judge took issue with the way the "No Consent" regime was operated. In particular, the judge considered that the police were operating an informal asset-freezing regime which was not implied in the Organised and Serious Crimes Ordinance (Cap. 455) (OSCO), and held that it was ultra vires sections 25 and 25A of OSCO and incompatible with articles 6 and 105 of the Basic Law.

On appeal, the Court of Appeal overturned the decision and upheld the validity of the "No Consent" regime. Given that the issue of the "No Consent" regime is of great general or public importance, the Court of Appeal granted leave to appeal against its judgment to the CFA.

CFA's decision

The CFA was asked to determine four questions, namely:

1. Whether the "No Consent" regime operated by the police is ultra vires and/or the issuance of LNCs are for an improper purpose.

2. Whether the "No Consent" regime operated by the police complies with the requirement of being prescribed by law and is a proportionate restriction on fundamental rights under the Basic Law and Hong Kong Bill of Rights.

3. Whether the "No Consent" regime operated by the police was procedurally unfair at common law and/or in violation of the rights to a fair hearing under the Hong Kong Bill of Rights.

4. Whether Interush was correct in holding that the "No Consent" regime is a necessary and proportionate restriction on the right of enjoyment of private property under the Basic Law.

Question 1

In relation to Question 1, the CFA's answer is no. In reaching this answer, the CFA examined the current statutory and regulatory anti-money laundering scheme in Hong Kong, including the relevant provisions in the OSCO and Police Force Ordinance (Cap. 232) (PFO).

The CFA held that section 25A(2) of OSCO is principally concerned with the conferring of immunity on banks where disclosure has duly been made. It is not meant to be the legal authority for the actions taken by the police during the initial and pending stages of their investigations, including their communications with the banks. Therefore it is wrong to review the police's communications with the bank in the context of OSCO.

In communicating with the banks, the police were taking lawful measures to prevent crime as part of their common law duty. Such acts were also performed pursuant to the statutory duties and powers of police officers laid down in the PFO.

Agreeing with the Court of Appeal's observation in Interush, the CFA confirmed that the police have no power to require the bank to do anything. It is the bank which disables and freezes its customer's account to comply with its legal and regulatory duties.

Question 2

Following the analysis above, the CFA's answer to Question 2 is yes. The CFA emphasised that the "freezing" of accounts is carried out by the banks and therefore the acts of the police did not infringe the appellants' protected rights.

The CFA held that even if the "freezing" were attributed to the police's actions, such a temporary measure aimed at preventing dissipation of assets pending further investigation is not a misuse of the powers conferred by the PFO.

In relation to the "No Consent" regime, the CFA found that the temporary interference with the use of the "frozen" suspect funds is rationally connected with the legitimate aim. Such interference is of a limited nature and finite duration, and reflects a reasonable balance between the anti-money laundering aims of society and the protection of individual property rights.

Question 3

As for Question 3, the CFA's answer is no. The police were fully entitled to keep sensitive aspects of their investigations confidential given that the statutory purpose of OSCO is to avoid prejudicing the investigation. It defies common sense to suggest that police investigations should be treated as if the police were conducting a "suit at law" involving a public hearing in some adjudicative forum, giving the suspects notice, reasons and an opportunity to make representations.

Furthermore, the appellants had every opportunity to make representations with a view to dispelling the suspicion if they so wished. It is also open to the appellants to seek relief against the banks or bring judicial review proceedings against the police.

Question 4

In answering Question 4, the CFA held that it does not fully support the Court of Appeal's analysis, although Interush arrived at the correct result. 

The CFA took the view that the appellants' appeal focused on the "No Consent" regime, which is different from Interush in that it concerned the constitutionality of sections 25 and 25A of OSCO. Accordingly, the correctness or otherwise of Interush is not the subject of this appeal. Nevertheless, the CFA did not follow the Court of Appeal's reasoning in Interush that the LNC did not by itself freeze the accounts and yet it somehow engaged property rights.

Comments

The message from the CFA's judgment is clear – the "No Consent" regime is constitutional. Given the CFA's comprehensive review of the statutory and regulatory framework in combatting anti-money laundering in Hong Kong, it seems unlikely there will be further constitutional challenges regarding the "No Consent" regime in Hong Kong.

The CFA's judgment will be most welcomed by victims of fraud as it will undoubtedly assist them in preserving and recovering stolen monies. They will have time to seek legal advice on next steps to recover and protect their assets in the most efficient manner.

As for banks, their obligation to file an STR remains unchanged. As the CFA repeatedly emphasised in its judgment, it is the bank which decides whether or not to freeze the suspected accounts. Therefore, banks should monitor unusual activity in their customers' accounts, exercise their own judgement as to whether or not an STR should be filed and keep detailed documentary records. To minimise the risk of being sued by the accountholders for withholding funds, the banks may wish to insert a clause in customer contracts which expressly allows them to decline to execute a customer's instructions where they suspect that the account is involved in committing a crime.

1. [2023] 2 HKLRD 839. Please refer to our previous article: Hong Kong Court of Appeal reconfirms the “No Consent” regime to be constitutional↩
2. [2019] 1 HKLRD 892.↩
3. Tam Sze Leung & Ors v. Commissioner of Police [2024] HKCFA 8.↩