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What are the governing legislations?

Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405)

Organized and Serious Crimes Ordinance (Cap. 455)

United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575)

Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (Cap 615)

What are the offences?

The legislations prohibit money laundering and the financing of terrorists.

Under section 25(1) of the Drug Trafficking (Recovery of Proceeds) Ordinance and section 25(1) of the Organized and Serious Crimes Ordinance, money laundering is an offence for a person who, knowing or having reasonable grounds to believe that any property which, in whole or in part, directly or indirectly represents any person’s proceedings of drug trafficking or crime, deals with that property.

Under section 7 of the United Nations (Anti-Terrorism Measures) Ordinance, it is an offence if a person provides or collects property, with intention or knowing or having reasonable grounds to believe, that the property be used or will be used to commit one or more terrorist acts. Under section 8, it is an offence if a person makes property or financial services available to or for the benefit of terrorist or terrorists’ associate.

The Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance came into force on 1 April 2012 and seeks to align the anti-money laundering compliance processes of financial institutions with prevailing international standards including imposing on financial institutions the duty to carry out due diligence and to keep proper records. In relation to financial institutions, it is a criminal offence if a financial institution (i) knowingly contravenes a specified provision in Schedule 2; (ii) with intend to defraud a relevant authority (HKMA, SFC, Insurance Authority or Commissioner of Customs and Excise), contravenes a specified provision. In relation to individuals, it is criminal offence if a person who is an employee of or is employed to work for or is concerned in the management of a financial institution:

  1. knowingly causes or knowingly permits the financial institution to contravene a specified provision.  The maximum penalty is a HK$1 million fine and imprisonment for 2 years.  It is a defence if the individual can prove that he or she acted in accordance with the policies and procedures established and maintained by the financial institution.
  2. with intent to defraud the financial institution or any relevant authority, causes or permits the financial institution to contravene a specified provision.  The maximum penalty is HK$1 million fine and imprisonment for 7 years.

Under section 25(A) of the Drug Trafficking (Recovery of Proceeds) Ordinance, 25(A) of the Organized and Serious Crimes Ordinance, and section 12 of the United Nations (Anti-Terrorism Measures) Ordinance, when a person knows or suspects that property is proceeds of drug trafficking, a crime or terrorist act, or is intended to be used in drug trafficking, a crime or terrorist act, it an an offence to fail to report his/ her knowledge or suspicion to an authorised office as soon as practicable.

What are the sanctions?

The maximum penalty for an offence committed under the Drug Trafficking (Recovery of Proceeds) Ordinance and the Organized and Serious Crimes Ordinance is HK$5,000,000 and 14 year imprisonment.

Under the United Nations (Anti-Terrorism Measures) Ordinance, the maximum penalty is a fine and 14 year imprisonment. Further, under section 6, the Secretary for Security is authorized to freeze the property of terrorists or of persons connected with terrorists.

Under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance, the maximum penalty is a fine of HK$10,000,000 or three times of the amount of profit gained or cost avoided due to the contravention, and 7 year imprisonment

The penalty for failing to report is a fine of HK$50,000 and 3-month imprisonment.

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