On 11 July 2016, the Hong Kong Court of Final Appeal (CFA) in HKSAR v. Yeung Ka Shing Carson, FACC Nos. 5 and 6 of 2015, dismissed Mr. Yeung's appeal against his conviction of five counts of "dealing with property known or believed to represent the proceeds of an indictable offence", or simply "money laundering", contrary to Section 25(1) of the Organized and Serious Crime Ordinance (OSCO).
Among the four questions considered by the CFA, the following two clarify what needs to be proven to establish guilt:
- whether it is necessary for the prosecution to prove, as an element of the offence, that the proceeds being dealt with were in fact proceeds of a predicate offence; and
- in considering the mens rea element to what extent does a trial judge need to make positive findings as to a defendant's belief, thoughts and intentions at the material time even though the judge rejects the defendant's testimony.
The "Conduct" Element
Under Section 25(1) of OSCO, "a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person's proceeds of an indictable offence, he deals with the property".
The first question concerned whether or not the proceeds in question must be proven to be proceeds of an indication offence to find guilt. The court considered the positions of OSCO before and after the major amendments in 1995 and answered this question in the negative. It was held that by abandoning the original requirement of proving the defendant's involvement in an arrangement dealing with criminal proceeds, the true nature of the proceeds is no longer relevant.
The court explained the strong policy reasons behind this amendment: the possibility for the offence having taken place in multiple jurisdictions which are not susceptible to proof in Hong Kong, and that the proceeds are likely to have passed through various layers and transformation for concealment, making it difficult or impossible to prove the tainted nature of the proceeds.
The "Mental" Element
The second question relates to the requisite mental element (mens rea) of the offence, i.e., whether the defendant had reasonable grounds to believe that the proceeds were proceeds of crime.
At trial, Mr. Yeung testified to give purportedly innocent explanations to negate the existence of reasonable grounds on his part to believe the funds he dealt with were proceeds of crime. His testimony was rejected by the trial judge. That gives rise to the second question, namely, where the judge rejects the defendant's testimony, to what extent can the judge remain oblivious to consider the defendant's actual reason(s) for dealing with the specified proceeds to find that the defendant possessed the necessary mens rea.
It was held that the defendant's evidence being rejected does not necessarily lead to conviction. The practical difficulty lies in situation where the defendant avowed far-fetching and bizarre beliefs that "no one could be expected to regard the matters relied on as displacing the [necessary mens reas]." In such cases, the court is not required to make positive findings as to the necessary mens rea. It may reject the evidence of the defendant's state of mind and rely on the remaining evidence to decide whether all the elements of the offence have been proven.
A narrow issue was also considered to reconcile the test of "reasonable grounds" with the formation "knew or ought to have known" considered in HKSAR v. Pang Hung Fai, an earlier judgment of the CFA on the subject offence. It was held that the phase "ought to have known", which was offered as a rendering of "having reasonable grounds to believe", was merely a generalisation of the detailed mens rea analysis and "should not be invested with any greater significance".
This latest judgment has removed any doubt concerning the relevance of the true nature of the proceeds in establishing the elements of the offence. It is significant to persons and entities who regularly deal with other people's money, because even if the money in question was as matter of fact "clean" money, other circumstantial elements can still give rise to investigation and prosecution of a money laundering offence.
Originally published 19 July 2016.
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