Hong Kong appeal court upholds police use of "no consent" power

The potential for injustice

In most jurisdictions the potential injustice of such a power in the hands of the police has been minimised by the imposition of statutory time limits on the withholding of consent, typically of a few weeks or months. If after that time no restraint order has been obtained, consent is deemed to have been given and the bank has immunity from prosecution if the funds turn out to be the proceeds of crime.

However in Jersey, Guernsey and Hong Kong there is no such time limit, so the potential for injustice remains very real. An innocent person, on the basis of the suspicion of a police officer, can be denied access to their funds for many years without any court approval or oversight, and can only challenge this by bringing their own court challenge at potentially great expense.

In Jersey, where we operate, there are no such published guidelines, so it is still quite possible for funds to be indefinitely frozen following a police decision to withhold consent, without a court order. The latest available FIU statistics³ show that for the first quarter of 2024 11% of 440 Suspicious Activity Reports (SARs) where consent was sought led to a “no consent”, but no indication is given that the FIU considers applying any time limit to the maintenance of its “no consent”

What did the Hong Kong court decide?

The Hong Kong Court of Final Appeal rejected the conclusion of the High Court that the Hong Kong police were using their “no consent” power for an illegitimate purpose, outside the scope of its powers. It considered various Hong Kong statutory provisions, and concluded that when they were taken into account the legislature had indeed authorised the police to use their powers as they do.

The Hong Kong Court endorsed the view taken by other courts, that the police themselves do not freeze the funds, as that is a step taken independently by the bank following the LNC. The LNC is not a binding instruction to the bank. While strictly this is correct, it is an undeniable fact that the police know that the LNC will lead to the account being frozen. That is the factual basis on which the merits of the regime should be judged. In the Leung case the police had instigated the entire process, by informing the banks of their criminal investigation, thus obliging the banks to report suspicions and seek consent to transact, which was then withheld. The Court’s conclusion that an LNC does not even make a “crucial contribution” to the bank’s decision to freeze funds appears contrary to a common-sense consideration of what really happens in these cases.

The Hong Kong Court thus rejected the approach taken by the Guernsey and Jersey courts in Garnet and Prospective Applicant respectively (see previous article), which acknowledged that the withholding of consent represented an interference by the state in the right to use property and thus engaged Article 1 of the ECHR. It concluded that if that was not the case, the legislation addressed a legitimate concern in a proportionate way, so there was no unconstitutionality.

Where does this leave matters?

It remains in our view unsatisfactory for any jurisdiction to retain a system under which funds can be indefinitely frozen without a court order or court supervision, as a consequence of a decision taken by a police officer. In Hong Kong, the guideline six-month time limit mitigates the position somewhat. Where there is no requirement to obtain an order within a short timeframe or give consent, the potential for injustice remains real.

Footnotes

1. Tam Sze Leung and others v Commissioner of Police [2024] HKCFA 8
2. Tam Sze Leung and others v Commissioner of Police  [2021] HKCFI 3118
3. FIU Statistics: https://go.fiu.je/2024Q1