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| Project Details |
| Funding Scheme : | General Research Fund | ||||||||||||||||||||
| Project Number : | 17603319 | ||||||||||||||||||||
| Project Title(English) : | An Empirical Study of Money Laundering Offending in Hong Kong | ||||||||||||||||||||
| Project Title(Chinese) : | 香港洗錢罪案之實證研究 | ||||||||||||||||||||
| Principal Investigator(English) : | Prof Young, Simon Ngai Man | ||||||||||||||||||||
| Principal Investigator(Chinese) : | |||||||||||||||||||||
| Department : | Faculty of Law | ||||||||||||||||||||
| Institution : | The University of Hong Kong | ||||||||||||||||||||
| E-mail Address : | snmyoung@hku.hk | ||||||||||||||||||||
| Tel : | 39172719 | ||||||||||||||||||||
| Co - Investigator(s) : |
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| Panel : | Humanities, Social Sciences | ||||||||||||||||||||
| Subject Area : | Social and Behavioural Sciences | ||||||||||||||||||||
| Exercise Year : | 2019 / 20 | ||||||||||||||||||||
| Fund Approved : | 719,984 | ||||||||||||||||||||
| Project Status : | Completed | ||||||||||||||||||||
| Completion Date : | 30-6-2022 | ||||||||||||||||||||
| Project Objectives : |
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| Abstract as per original application (English/Chinese): |
I aim to study money laundering offending in Hong Kong, its causes, typologies and implications for law reform. I am interested in why and how money laundering is done in Hong Kong and how our criminal law captures offenders within its net. My main question is whether there should be alternative legal measures not involving criminal prosecution and punishment to address money laundering in non-high profile cases. Would such alternative measures be sufficiently effective to be compatible with Hong Kong's international commitments and would they be acceptable to the local community?
Prosecutors can bring money laundering cases in one of three levels of court: (1) High Court, where the maximum sentence is 14 years imprisonment, (2) District Court, maximum of 7 years imprisonment, and (3) Magistrates Court, maximum of 3 years imprisonment. I will study cases prosecuted in the District Court and, where judgments are available, the Magistrates Court.
There are approximately 600 District Court money laundering decisions (English and Chinese) in the Hong Kong Judiciary's database available since 2009. The decisions are of two kinds: reasons for sentence, typically where there has been a guilty plea, and reasons for verdict (guilty and not guilty). I will read and analyse these decisions both qualitatively and quantitatively. I aim to generate a body of knowledge of the characteristics of offenders who commit money laundering, the ways in which they commit the offence (typologies), their motivations and reasons for offending, the sentences imposed, the cases in which the prosecution could only prove the lower standard of having reasonable grounds to believe, and the circumstances giving rise to acquittals. From these empirical findings, I will publish at least one referred output in an international journal.
I also plan to use the empirical findings to inform law reform thinking, particularly the feasibility of introducing non-criminal law measures to address money laundering. The offence is often criticised for casting the net of criminal liability too wide. From interviews with experienced defence lawyers, prosecutors, law enforcement agents and other government officials, I hope to gain their perspectives on possible alternative measures such as civil penalties, injunctions, disqualifications, confiscation and other coercive orders. The knowledge gained from these interviews will help to frame and assess reform options. I will publish at least one referred output in an international journal that discusses reform options and their compatibility with international standards. 筆者希望探討在香港洗錢罪案的現況、起因、類型，以及後續可能的法律改革。筆者對於洗錢罪案為何和如何在香港發生，以及我們的刑事司法系統如何將罪犯繩之於法的問題特別感興趣。筆者的主要問題在於為何應以替代性的且不牽涉刑事檢控和刑罰的法律措施去處理一些較為不受關注的案件。這些替代性的措施是否足夠配合香港的國際責任？這些措施是否被本地社區所接納？檢控官可以在以下三個級別的法院就洗錢案件提訴：（1）高等法院，其可判處最高刑罰為監禁十四年；（2）區域法院，其可判處最高刑罰為監禁七年；（3）裁判法院，其可判處最高刑罰為監禁三年。筆者研究了在區域法院和有判決可供參考的裁判法院的洗錢案件。現時，香港司法機構的資料庫收載了從二零零九年起計的大約六百宗區域法院的中英判決。這些判決可分為兩個類型：判刑理由（通常於被告認罪時發下），和裁決理由（罪成與否）。筆者將研讀，並從質性和量性角度分析這些判決。筆者希望能歸納出一包含以下資訊之知識體系：犯下洗錢罪行之涉事者的特質、犯案的形式（類型）、犯案動機和理由、被判處刑罰、控方只能證明被告有理由相信的較低舉證程度的情況，以及引致被告脫罪的因素。就這些實證研究結果，筆者將於設同儕審查的國際學術期刊發表最少一份論文。筆者亦希望以這些研究結果推動尤其是關於以非刑事措施處理洗錢的可行性方面之法律改革。洗錢罪行素來被指刑網過闊，透過訪問有經驗的辯護律師、檢控官、執法人員和其他政府官員，筆者希望就可能的替代性措施，例如民事懲罰、禁制令、資格取消、沒收、和其他強制命令等，取得他們的觀點。從訪談中歸納出的資料將有助塑造及評估法律改革方案。筆者將於設同儕審查的國際學術期刊發表最少一份探討法律改革方案及其與國際水平相容性的論文。 |
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| Realisation of objectives: | There are four objectives and the extent of their realisation will be separately discussed. 1. Working with a large dataset, it has been challenging to identify useful typologies for analysis. Almost all cases simply involve funds being transferred through bank accounts. The exotic cases of money laundering (which one hears about in the media, e.g. crypto assets, precious stones, art, etc) are almost non-existent in the cases studied. Hence, it has been difficult to identify distinct typologies, beyond general categorisations based on the local or foreign origins of the predicate offence and the offender. An enormous amount of data has been collected and coded from the court judgments studied. More than 900 defendant entries (District Court) have been made in the Excel table. For each entry, 62 columns of data have been entered relating to the circumstances of the offence and offender. While some patterns have emerged, more time is needed to analyse this large data set to determine if some patterns might qualify as a typology of money laundering for purposes of this study. It should be noted that each court judgment needs to be read very closely (multiple times) to be able to extract the necessary data for entry into the Excel table. 2. An analysis of the case for law reform has been done and written in draft. The proposal is not to reform the existing wide money laundering criminal offence but to introduce an alternative civil penalties regime for money laundering which would serve two important policy purposes. First, to decriminalise the existing practice of prosecuting money laundering by having an option of pursuing a civil penalty in less serious cases. Second, to have a broad civil penalties regime to promote prevention and deterrence of money laundering in cases where the evidence falls short of justifying a criminal prosecution. The project at the time of conception only had the first aim in mind as a hypothesis; the research done for this project yielded evidence to suggest that the same reform could also achieve the second useful aim, which would probably be more appealing to policymakers in the government. 3. The paper drafted and presented at the SLSA Annual Conference for this project provides a discussion of the merits and possible criticisms of introducing a civil penalties regime for money laundering. It is a preliminary discussion and can be further developed. 4. A literature review in the form of a bibliography was published by Oxford University Press early in the project period. A paper discussing the case for adopting a proposed civil penalties regime has been drafted (mentioned above) and is now being finalised. It can only be finalised after the data set has been fully updated and checked for accuracy. This process has taken longer than expected, especially after funding for staffing ended. As this research project developed, it became apparent that the rich dataset collected could be the basis of a monograph on money laundering offending in Hong Kong. Such a work would address a wide range of issues which have not been the subject of research and study thus far. In addition to constructing typologies, the data can also be the basis for analysing the characteristics of those convicted and acquitted of the offence and also the sentences handed out by the courts in conviction cases. Within the next 6 to 12 months, the PI aims to make substantial progress on a monograph that would cover the history of the offence, the law of money laundering and its development, the typologies of offending, the characteristics of the convicted and acquitted, the harms of the offence, the punishment for offenders, and finally the proposed reform of an alternative civil penalties regime. When the grant was applied for in mid-2018, it was anticipated that the project could be completed in 2 years’ time. On reflection now and with the hindsight gained after the Covid-19 pandemic, the project probably required five years to complete. The data collection and analysis turned out to be much more daunting than expected. The staffing budget was not able to cover all the efforts required and hence progress slowed in the typologies construction objective of the project. However, on the positive side is that progress has been made on the law reform objective of the project. It now needs to be published and disseminated. The other positive side is that a detailed dataset has been constructed that will not only serve the typologies analysis but also lead to other original empirical insights on police, prosecutor and court practices in charging, prosecuting and trying money laundering cases in Hong Kong. | ||||||||||||||||||||
| Summary of objectives addressed: |
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| Research Outcome | |||||||||||||||||||||
| Major findings and research outcome: | This study found that more than 100 people are convicted of money laundering each year in Hong Kong. Almost all of them would be sentenced to a term of imprisonment, typically of less than 4 years. Given the wide scope of Hong Kong’s money laundering offence, persons can be convicted of the offence even though there is no evidence of any criminal origins of the property and the defendant believes the property may be clean property. This is because liability is based on an objective standard of having reasonable grounds to believe the property is the proceeds of crime. The study found many cases where defendants were convicted and imprisoned for simply assisting a relative to hold property without knowing or believing the property may be illicit. Under Hong Kong law, there is no viable alternative to regulating such carelessness/recklessness than by prosecuting the individual. The study also found that the Financial Action Task Force, in its mutual evaluation of Hong Kong in 2019, was critical of the number of prosecutions for money laundering being incommensurate with the large number of money laundering investigations. This interesting finding suggested that there was a gap in the current law in that there are many reported suspected money laundering activities which do not meet the threshold for prosecution. At present, the law does not allow for any legal remedies against such suspected cases. Thus, the study finds the current money laundering criminal offence is both overinclusive (in capturing cases at the low end of severity which one might say should not be subject to criminal punishment) and underinclusive in failing to provide any remedy for the large number of suspected cases that do not meet the threshold for prosecution. The study proposes a solution to these two problems: introduce a new civil penalties regime for something known as money laundering misconduct which would not be labelled a crime or offence. The misconduct would be defined according to the typologies identified in the study (e.g. lending one’s bank account to another followed by irregular funds flow in the account) and individuals would be subject to pecuniary penalties rather than imprisonment. As with other civil penalty regimes, less restrictive civil procedures and rules would apply to ensure the greatest effectiveness and deterrence. | ||||||||||||||||||||
| Potential for further development of the research and the proposed course of action: |
As mentioned under section 5.3 above, the dataset compiled for this study has great potential to inform several new lines of inquiry related to the money laundering offence. The plan is to write a monograph on money laundering offending that brings greater understanding to questions of the history and development of the offence, the types of cases prosecuted from 2009 to 2022, the acquittal cases and why they occurred, the typologies of money laundering offences, the characteristics of money laundering cases and offenders, and the sentences given for money laundering offending. | ||||||||||||||||||||
| Layman's Summary of Completion Report: | Money laundering is a serious crime best to be avoided if possible. In Hong Kong, the offence is very wide and can trap persons unaware of its reach. For the authorities, there are few alternatives to criminal prosecution once a case surfaces. But the threshold for prosecution is high and mere suspicion is not enough to mount a criminal case. If convicted, the offender will invariably be jailed. The research project proposes an innovative legal regime of civil penalties to prevent and deter money laundering misconduct. The new regime will exist alongside the criminal offence. With civil penalties, the authorities will have an additional tool to deal with money laundering risks, especially where the evidence is insufficient to meet the threshold for prosecution. It is also an alternative to criminal prosecution in minor cases such as where property is dealt with in a negligent manner without knowledge of any criminality. The project’s study of money laundering offending typologies provides the basis for defining the different categories of money laundering misconduct in the civil penalty regime. The reform serves to decriminalise money laundering while raising increasing prevention and awareness of money laundering risks with a new law on civil penalties. | ||||||||||||||||||||
| Research Output | |||||||||||||||||||||
| Peer-reviewed journal publication(s) arising directly from this research project : (* denotes the corresponding author) |
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| Recognized international conference(s) in which paper(s) related to this research project was/were delivered : |
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| Other impact (e.g. award of patents or prizes, collaboration with other research institutions, technology transfer, etc.): |
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| SCREEN ID: SCRRM00542 |