OPERATIONAL HISTORY AND INSTITUTIONAL FRAMEWORK
HK's main intelligence unit in anti-money laundering activities
The primary unit for receiving and analysing financial intelligence in Hong Kong is the Joint Financial Intelligence Unit (JFIU). Established in 1989, the unit operates under a joint management structure and is staffed by members of the Hong Kong Police Force (HKPF) and the Customs and Excise Department (C&ED).
The JFIU operates as a financial-intelligence unit rather than a field investigation team. It receives, analyses and stores Suspicious Transaction Reports (STRs), develops financial intelligence and, where appropriate, disseminates that intelligence to local law-enforcement agencies and overseas financial- intelligence counterparts. Since its restructuring in October 2020, it has also strengthened strategic analysis, international cooperation, training and policy functions.
Suspicious Transaction Reports
Financial data and intelligence
To appropriate local or overseas agencies
THE STATUTORY PROCESSING OF STRs
A positive duty to report
An STR is a mandatory statutory disclosure used within Hong Kong's anti-money-laundering and counter-terrorist-financing framework. Under section 25A(1) of OSCO and DTROP, and section 12(1) of the United Nations (Anti-Terrorism Measures) Ordinance, any person must report as soon as reasonably practicable where that person knows or suspects that property represents proceeds, was used in connection with, or is intended to be used in connection with the relevant criminal conduct, or is terrorist property.
Suspicious Transaction Report
A confidential disclosure of statutory knowledge or suspicion to the JFIU.
The duty applies to any person. Financial institutions, virtual-asset service providers and designated professions ordinarily maintain formal internal reporting systems because of their regulated activities.
As soon as it is reasonable to do so after the knowledge or suspicion arises. No minimum transaction value is required, and the duty may arise even where no transaction is completed.
Regulated entities submit electronically through STREAMS 2. The JFIU also provides a prescribed route for persons who are not regulated entities.
LEGAL IMPLICATIONS OF FILING AN STR
Statutory protection for disclosed acts and genuine reports
A disclosure may provide important protection under section 25A of OSCO or DTROP. The protection is tied to the disclosed acts and the statutory conditions. However, filing an STR is not a general immunity from investigation or liability unrelated to those conditions.
Disclosure before dealing
If the disclosure is made before the act and the act is carried out with the consent of an authorized officer, the disclosure may provide a statutory defence to the money-laundering offence in respect of that act.
Disclosure after dealing
Protection may also apply where the disclosure is made after the act, provided it is made on the person's own initiative and as soon as it is reasonable to do so.
Protection against breach of confidence
A disclosure made under the statutory provision is not treated as a breach of a restriction imposed by contract, enactment, rule of conduct or other provision, and does not attract liability in damages merely because the disclosure was made.
LETTER OF NO CONSENT AND ITS IMPLICATIONS
The legal implications of a Letter of No Consent
When a scam, cybercrime or money-laundering scheme is reported, a victim, financial institution or law-enforcement agency may provide information that leads to an STR. Before a restraint order or civil injunction can be obtained, an authorized officer may withhold consent for continued dealing with the specified property. The resulting Letter of No Consent (LNC) does not itself legally freeze an account: the bank remains the decision-maker, but will commonly disable the account because dealing may expose it to criminal and regulatory risk.
A suspicious transaction disclosure
A bank or another reporter submits an STR concerning property or an account to the JFIU after statutory knowledge or suspicion has arisen.
Consent is withheld
If withholding consent is considered reasonable, necessary and proportionate on the facts, an authorized officer may issue an LNC to the reporting institution.
The bank commonly disables the account
The LNC states that consent under section 25A(2) is withheld. To avoid the risk of dealing with suspected criminal proceeds contrary to section 25, the bank will commonly decline transactions or restrict account access.
Normally no more than six months
An LNC should normally last no longer than six months. It may continue beyond that period only in exceptional circumstances, which may include a complex, large-scale or cross-border investigation.
Continuation must be reconsidered and documented
The Superintendent commanding the investigating unit reviews each active LNC monthly and records the decision and reasons electronically. Once an LNC has operated for more than three months without a restraint order or civil injunction, the Formation Commander must also review the investigation monthly.
No consent must cease when it is no longer justified
If the circumstances no longer justify the LNC, its operation must cease as soon as practicable. Unless an exceptional continuation is properly approved and documented before six months expires, the LNC lapses and the JFIU issues a Consent Letter to the reporting entity.
LEGAL IMPLICATIONS OF FAILING TO FILE
Failure to disclose is a standalone criminal offence
Under section 25A(7) of OSCO and DTROP, a person who fails to disclose the required knowledge or suspicion as soon as it is reasonable to do so commits an offence. Liability is not confined to a corporation: the statutory duty may apply directly to the individual who holds the relevant knowledge or suspicion.
3 months' imprisonment
and a fine of HK$50,000Additional regulatory consequences
A reporting failure may also expose a regulated entity or individual to investigation and disciplinary action by the relevant regulator, including reprimands, remedial directions, pecuniary penalties or licensing consequences where authorized by the applicable regulatory regime. The available sanction and maximum amount depend on that regime and the person concerned.