Hong Kong Court Of First Instance Rules JFIU's "No Consent Regime" Is Beyond The Scope Of Its Powers

• Published date: 11 January 2022
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Trials & Appeals & Compensation
• Law Firm: Mayer Brown
• Author: Mr Alan Linning, Susanne J. Harris, Raymond N. H. Chan and Wei Na Sim

Overview

On 30 December 2021, the Hong Kong Court of First Instance (CFI) issued its judgment in Tam Sze Leung and others v Commissioner of Police [2021] HKCFI 3118, which found the Joint Financial Intelligence Unit's (JFIU) letter of no consent (LNC) regime to be beyond the powers conferred on it by the Organised Serious Crimes Ordinance Cap 455 (OSCO).

The LNC regime operated in the context of section 25A of OSCO and was used by the Commissioner of Police (Commissioner) to effect an informal freeze of bank accounts as a stop-gap measure before a restraint order is obtained from the court. In summary, the Court allowed the judicial review application on three grounds: the LNC regime is ultra vires, not prescribed by law, and fails the proportionality test.

Notably, the Tam Sze Leung judgment did not criticise the JFIU's issuance of consent letters after the filing of suspicious transaction reports (STRs), which served as a defence for the STR reporter to deal with funds subject to the STR under section 25A(2)(a), OSCO, and as upheld by the Court of Appeal in Interush [2019] HKCA 70.

The full impact of the CFI's judgment in Tam Sze Leung remains to be seen as the Court has not determined the relief to be granted to the Applicants, and it noted that any relief granted would not prescribe how the constitutional problems identified in the judgment should be resolved. In addition, the case remains open for the parties to appeal the decision.

This Legal Update outlines the key findings from the CFI judgment and the takeaways for financial institutions in the meantime.

Brief Facts

The four Applicants are family members who collectively had 12 bank accounts with several banks in Hong Kong with a combined total balance of around HK$30 million to HK$40 million (Accounts). In December 2020, the Applicants noticed they were unable to withdraw funds from the Accounts. Upon making enquiries, the banks informed the Applicants that they were not in a position to provide reasons for the restrictions imposed on the Accounts. The Applicants and their solicitors inferred from the brief responses that the Commissioner had issued LNCs in respect of the Accounts.

The Applicants' solicitors then wrote to the Commissioner to seek confirmation that LNCs had been issued in respect of the Accounts and to request the legal grounds and basis for issuing the LNCs. On 14 December 2020, the Commissioner responded to state that the Applicants were currently under investigation by...