On 30 December 2021, the Hong Kong Court of First Instance (CFI) handed down a judgment in Tam Sze Leung & Ors v Commissioner of Police HCAL 191/2021, in which it held that the longstanding practice of the Commissioner of Police to issue “Letters of No Consent” (LNC) was unconstitutional.
What is an LNC? To put it simply, under sections 25(1) and 25A(1) of the Organised and Serious Crimes Ordinance (Cap 455) (OSCO), once a bank knows or suspects that the money in a bank account is connected in some way to an indictable offence, it must not deal with the account and must file a Suspicious Transaction Report (STR) to the Joint Financial Intelligence Unit of the Hong Kong Police (JFIU). In response, the JFIU may either give its consent to the bank to deal with the said account, or issue an LNC to the bank stating that it does not have the requisite consent to do so. With the necessary consent, under section 25A(2), the bank may deal with the account in question and will not contravene the OSCO. Without the consent, the bank is at risk of money laundering.
Over the years, the LNC regime has slowly become a tool for the Police to “informally freeze bank accounts”– it is a quick and cost-effective administrative measure for which no court order is required.
Nonetheless, the decision in Tam Sze Leung seems to have put the regime to an end. In that case, the JFIU issued LNCs which ultimately resulted in the freezing of certain bank accounts for some 10 months. The CFI decided that the LNC regime as operated was not constitutional for the following reasons:-
The CFI noted that a similar challenge had been brought in 2015 in the case of Interush Limited v Commissioner of Police, HCAL167/2014 before the Court of First Instance and in CACV 230/2015 before the Court of Appeal, where the LNC regime in that case was nevertheless held constitutional. What makes Tam Sze Leung different from Interush is the change of the Police’s purpose in utilising the LNC regime – In Interush, the regime provided the banks with consent in appropriate cases to deal with the account and let them decide whether or not to do so in spite of having an LNC in place; On the contrary, the LNC regime as operated in Tam Sze Leung has become an informal freezing regime which mandates the bank to freeze the accounts in question.
It should not be lightly taken from the Tam Sze Leung case that the LNC regime in general is altogether rejected, because the Court only found that the LNC regime as operated in that case was unconstitutional. As the Court has postponed the granting of any relief, the question as to how the Police may operate the current regime constitutionally remains to be seen.
Meanwhile, banks are still under the obligation not to deal with accounts which they reasonably believe hold proceeds of an indictable offence, and file STRs with the JFIU in appropriate cases. Although they would be exposed to the risk of being sued by their customers affected by not having access to their accounts, it remains good practice to keep close communication with the authorities, and to seek proper legal advice so as to make the right decision in relation to dealing with the accounts in question. At all times it is also recommended to keep a good and complete record of all relevant documents and correspondence in the process.