On 11 February 2022, we published an article discussing the Court of First Instance’s (CFI) judgment in Tam Sze Leung & Ors v Commissioner of Police  HKCFI 3118, in which the No Consent Regime as operated by the Commissioner of Police was held to be unconstitutional. Our article published on 14 April 2022 provided an update on the relief granted by the CFI ( HKCFI 772).
As a refresher, the No Consent Regime serves a crucial role in assisting victims of fraud to preserve the stolen funds in question, as it provides a quick and cost-effective way for the Police to “informally freeze bank accounts” which received the victims’ money before legal recourse can be pursued.
In April 2023, on appeal by the Commissioner of Police from the CFI’s decision, the Court of Appeal (CA) overturned the CFI ruling in its decision  HKCA 537 for the following reasons:-
- First and at the outset, it was not clear from the CFI judgment as to what the “No Consent Regime as operated by the Commissioner of Police” entails, and this leaves one in doubt as to what precisely is unlawful, and what systematic effect this ruling has on the No Consent Regime as a whole.
- Second, the CA dismissed the “ultra vires” ground relied upon by the CFI. Based on the CA’s analysis, a bank account is “frozen” not because of any enforceable order by the Police, but because the bank chooses to withhold the funds due to its potential criminal liability for money laundering under section 25(1) of the Organised and Serious Crimes Ordinance (Cap 455) (OSCO). The issuance of Letters of No Consent (LNCs) merely means that the banks do not have the Police’s consent to deal with the funds, but the Police do not have any power to compel the banks to freeze the account, just as the issue of consent does not compel the banks to release the funds.
- The CA went further to say that even by alerting the banks to potential money laundering offences and subsequently issuing LNCs, as the Police did in this case, the Police were not acting beyond their powers (i.e. ultra vires). Indeed, it is part of the duties of the Police to take all steps necessary to prevent crime, and the Police’s power to give consent under the OSCO necessarily implies a power to withhold or refuse consent.
- Third, the CA rejected the CFI’s view that the LNCs in this case were issued for the improper purpose of securing an informal and unregulated asset freeze. Upon receiving an LNC, whether or not to deal with the property is ultimately a decision for the bank to make. In this case, the CA acknowledged that the purpose of the Police issuing the LNCs was to prevent dissipation of the funds, and accepted that this was consistent with the recognised purpose of OSCO to deprive offenders of proceeds from their criminal acts. Further, the power of the Police to withhold consent can be exercised not only where they are satisfied in fact, but also where there is reasonable suspicion that the proceeds were derived from criminal conduct. As such, the CA disagreed with the CFI that the LNCs were issued for an improper purpose.
- Fourth, the CA disagreed with the CFI’s conclusion that (a) there was no clarity or certainty as to the scope of power in relation to LNCs and the manner of its exercise in the OSCO or the guidelines published by the Police, or that (b) the law did not provide adequate effective safeguards against abuse. The CA took the view that there were sufficient published guidelines which were accessible by the public to anticipate how the Police would exercise their power. In addition, various challenges and remedies such as judicial review against the Police’s decision, civil action against the bank, the court’s power to award compensation to the account holder under the OSCO, and remedies in private law for infringement of property or contractual rights, are also available to guard the account holders against any arbitrary or capricious exercise of power by the Police.
- Finally, the CA upheld its earlier judgment in Interush Limited v Commissioner of Police  HKCA 70 that the object of the relevant provisions under OSCO was to deter criminal activity by restricting access to the proceeds of crime and that this was a legitimate societal aim. The CA clarified that the Interush judgment was still binding, and it failed to see how it could be distinguished by the CFI in this particular case in saying that the No Consent Regime was inherently disproportionate in interfering with the account holders’ fundamental rights.
The CA decision means that it remains constitutional for the Police to issue LNCs to banks where it has the requisite reasonable suspicion.
As an update, in light of the general or public importance of the decision, the CA had on 15 August 2023 ( HKCA 959) granted leave to the applicants to appeal to the Court of Final Appeal (CFA).
We await to see how our highest court decides the matter once and for all. Regardless, the CFA’s ruling will have a significant impact on how victims of fraud can preserve their stolen funds and recover their losses, as well as the banks’ compliance obligations when faced with funds suspected of representing proceeds of crime.
As the matter presently stands, the effect of an LNC informally freezes the account in question. Victims would nevertheless have to resort civil proceedings themselves to apply to the court for a formal injunction order to prevent dissipation of their money, as there is a limit as to how long the Police will maintain the validity of its LNC, and to recover the stolen money from the fraudsters. Our dispute resolution team has assisted numerous victims of such cases.