'No Consent' Procedure Confirmed Lawful By Hong Kong Court Of Appeal

• Law Firm: Mayer Brown
• Subject Matter: Government, Public Sector, Litigation, Mediation & Arbitration, Criminal Law, Money Laundering, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Author: Mr Vincent Law, Wilson Fung, Raymond Chan, Alan Linning and Wei Na Sim
• Published date: 23 May 2023

Other Authors Sara Troughton, Professional Support Lawyer (Litigation) | Ka Wai Leung, Trainee Solicitor

Overview

In Tam Sze Leung and others v. Commissioner of Police [2023] HKCA 537, the Hong Kong Court of Appeal (CA) has overturned the lower court's decision that found the 'No Consent' procedure followed by the Police and the Joint Financial Intelligence Unit to be unconstitutional.

The CA's ruling reaffirms the lawfulness of the 'No Consent' procedure as set out in the Force Procedures Manual and allows the Police to proactively inform banks of suspicions arising from their investigations. This, in practice, acted as a stop-gap measure to prevent dissipation of suspicious funds before a restraint order is obtained from court. The CA emphasised, however, that the decision on whether or not to freeze a bank account is ultimately up to the bank. The Police does not have the power to order a bank to do so.

Background

The facts of this case and our detailed comments on the lower court's decision have been set out in our previous Legal Update.

To provide a brief recap here, the applicants, who were first investigated by the Securities and Futures Commission for suspected stock market manipulation and then by the Police for suspected money-laundering activities, made an application to judicially review the Police's decision to issue "letters of no consent" (LNCs) in respect of their 12 bank accounts, effectively 'freezing' their funds totalling HK$30 million to HK$40 million for approximately ten months. On 31 December 2021, the Court of First Instance held that the 'No Consent' procedure and the LNCs were ultra vires, not prescribed by law and lacked proportionality.

The Commissioner of Police appealed, and succeeded.

Key Findings in the Appeal

Ultra Vires

The CA disagreed with the lower court's analysis that the 'No Consent' procedure was a way for the Police to exercise a "secret, informal and unregulated asset freezing power". The CA reasoned that the account is 'frozen' not because there is any enforceable order made by the Police to block that account, but because the bank is choosing not to comply with customer instructions (irrespective of whether that is permissible under the banking contract) on the basis that it does not want to act in contravention of section 25(1) of the Organized and Serious Crimes Ordinance (Cap. 455) (OSCO) i.e. dealing with property that represents proceeds of a crime.

Further, as part of its duties to prevent crime, it is...