Money laundering: English football, Hong Kong law

On 11 July 2016, Carson Yeung, the former owner and chairman of Birmingham City, lost his appeal in Hong Kong against his conviction of five counts of money laundering. Whilst the decision of the Hong Kong Court of Final Appeal (CFA) might not be debated on Match of the Day, it underscores the importance of having effective anti-money laundering (AML) systems in place. 

In what was the third in a series of appeals to the CFA relating to money laundering, the CFA gave further attention to the elements which need to be proven for an offence to be committed. 

The facts

Carson Yeung was convicted in March 2014 of five counts of money laundering offences – dealing with the proceeds of crime – in relation to sums held in five bank accounts exceeding HK$700 million (£69 million). The offending took place between 2001 and 2007. As a result of the conviction, Mr Yeung received a six year custodial sentence. 

The prosecution did not allege that Mr Yeung had known that the money concerned had represented the proceeds of crime, but advanced its case on the basis that he had reasonable grounds to believe that the monies were the proceeds of crime. 

Mr Yeung initially appealed unsuccessfully to the Court of Appeal in Hong Kong in 2015. His further appeal to the CFA was similarly dismissed on 11 July 2016.

CFA decision 

In summary the CFA declined to follow the law in England & Wales and held that:

• The prosecution does not have to prove that the property being dealt with was, in fact, the proceeds of crime.
• It is only necessary for the prosecution to establish that an accused dealt with certain property, in circumstances where s/he knew, or had reasonable grounds to believe, that the property represented the proceeds of an indictable offence. The court noted that often, the alleged crimes will have been committed overseas and may be “cloaked in secrecy”, so may not be easily susceptible to proof in Hong Kong.
• The mental element necessary to the offence is either knowing or having reasonable grounds to believe that property being dealt with represents the proceeds of an indictable offence, committed either in Hong Kong or overseas.
• The effect of the money laundering regime can be avoided by disclosing suspicious transactions to the authorities.
• On the precise form of the test to be used, the CFA endorsed that adopted in its decision in Seng Yuet Fong [1999] 2 HKC 833: “To convict, the jury had to find the accused had grounds for believing; and there was the additional requirement that the grounds must be reasonable: That is, that anyone looking at those grounds objectively would so believe.”
• Accordingly if a defendant does not give evidence as to his belief at the relevant time, a court will have to draw appropriate inferences based on the available evidence. If a defendant gives evidence which is rejected, this does not automatically mean that a defendant will be convicted, and a court will still need to be satisfied that the prosecution has been proved beyond reasonable doubt. There is however no need for a court to reach findings on a defendant’s belief when doing so.

Comment 

Although the CFA applied a different test to that under the English Proceeds of Crime Act 2002 the decision is consistent with the current hard line approach to money laundering taken in the UK. The case is therefore a timely reminder of the importance of having in place adequate AML procedures, not least an effective system whereby concerns can be communicated promptly to the National Crime Agency in the form of a Suspicions Activity Report (SAR). 

Steps that should be taken to ensure that an appropriate AML process in place will include:

• Knowing your client, including the on-going monitoring of their risk profile and the source of their funds.
• Establishing effective protocols to identify and, if necessary, report suspicious transactions.
• Holding AML training for employees at regular intervals.
• Obtaining expert legal advice where necessary to address suspicious transactions and any need for or the content of a SAR.
• Having an effective internal audit system in place for both your actual business and your AML processes.
• Ensuring that you keep up to date with all relevant national and international AML rules, regulations and policy statements.

In consequence of these proceedings – and the failure to follow prudent AML procedures – Mr Yeung has long since given up his involvement with Birmingham City and the club starts the new season without the benefit of his support.

[1] The other two appeals were Pang Hung Fai (2014) 17 HKCFAR 778 and Li Kwok Cheung George (2014) 17 HKCFAR 319

[2] The relevant offences were under s.25 Organized and Serious Crime Ordinance (cap 455).