Can victims of fraud seek help from the police in ‘freezing’ suspicious proceeds of crime in bank accounts? What are the sources of the police’s powers in issuing ‘no consent’ letters to banks?
Until Tam Sze Leung v. Commissioner of Police [2024] HKCFA 8, the legality and constitutionality of this ‘informal’ property freezing regime faces challenge and mounting criticisms. Tam settles this debate by confirming that this long-standing police practice is lawful and constitutional. The Court’s answer was simple: it is not the police, but the banks, who freeze the accounts.
Tam and others were suspects of laundering funds from stock market manipulation. They held accounts with four banks. The police issued a ‘letter of no consent’ to their banks - refusing to consent (‘no consent’) to any withdrawal of suspect funds. The appellants challenged the legality and constitutionality of this ‘no consent’ regime by judicial review.
The gravamen of the challenges was that the police froze their assets, infringing their property rights. The police action was ultra vires (ie beyond the police power), unconstitutional (i.e. not ‘prescribed by law’ and disproportionate). These arguments succeeded at first instance ([2021] HKCFI 3118), but failed on appeal ([2023] HKCA 537, [2023] 2 HKLRD 839).
When the case reached the Court of Final Appeal, the key issues were the legality and constitutionality of the no consent regime. The Court of Final Appeal found for the police.
The Court held that it was the banks, and not the police, who ‘freeze’ the suspect’s bank accounts. Put simply, the bank assumes the gatekeeper role. The police gave no instruction at all, and the ‘no consent’ regime does nothing to interfere private property rights. The Court stressed that it is the bank which maintains the accounts in accordance with the statutory anti-money laundering requirements; it is the bank who decides whether the customer should be allowed to draw on the suspect funds (at [47]).
The Court of Final Appeal’s arguments boils down on two points. First, the police actions were not ultra vires (beyond the police’s lawful authority), nor did they constitute any misuse of police power. The police’s communications with the banks have statutory backing under the Police Force Ordinance (Cap 232) to prevent crime and to protect property. Therefore, there was no breach of the constitutional rights.
The ultra vires concept has its root in company law (at [60]). But in the public law, it is wrong to ‘fasten upon the wrong statute’ (ibid). The police powers come from the Police Force Ordinance, and are exercised for lawful purposes (at [73]). On this point: it was wrong to look at the money laundering legislation. The disclosure immunity (conferred by section 25A(2)(a) of the Organized and Serious Crimes Ordinance) is not the source of the police powers to deal with the bank. In a key passage, Cheung CJ and Ribeiro PJJ said (at [74]):
The improper purpose argument again involves mischaracterising the actions of the police as freezing the accounts. For the reasons given above, it is not the police, but the banks, which freeze the accounts so that the alleged misuse of powers is not made out. Moreover, even if the “freezing” were properly attributed to the actions of the police, this occurred, as the appellants accept, “pending any restraint under OSCO sections 14-15”. Such a temporary measure aimed at preventing dissipation of suspect assets pending further investigation and possible invocation of the court’s jurisdiction is not a misuse of, but consistent with, the powers conferred by the PFO [Police Force Ordinance].
Our corporate team advises and represents clients in complex, multi-jurisdictional cases. Recent experience includes:
- Acting for victims of fraud (cyber-fraud) in obtaining injunctions on recovery of cash that were remitted to Hong Kong and China.
- Advising licensed bank on anti-money laundering issues, internal investigations, disclosure of bank staff’s personal data as requested by the Authority.
July 2024
Dr. Anthony Lai and Dr. Rita Cheung
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