How jailing old ladies on suspicion aids Hong Kong's anti-crime image

You don't have to be guilty of money laundering. If someone can prove they think you're guilty, your jailing boosts the city's anti-crime image

He [the Director of Public Prosecutions, Kevin Zervos] said the onus was still on the prosecution to prove beyond a reasonable doubt that defendants had committed the crime … "We are dealing with the proceeds of serious crime. If countries and states do not have anti-money-laundering regimes and measures in place, they get blacklisted and cannot function as a viable and legitimate financial centre."

SCMP, March 18

As Zervos knows, there is an easy way of making this onus of proof less burdensome for the prosecution. All we have to do is make it a crime to be suspected of a crime.

Zervos knows it because it is what our government has done for his prosecutors with its latest money-laundering legislation. This outrageous breach of our civil rights says that you can be sent to jail for 14 years if you deal with money "known or believed to represent the proceeds of an indictable offence".

It does not take much effort to prove beyond a reasonable doubt that something is believed by someone or other. Just spin the right web of suspicions in court, and you no longer have to prove any underlying crime against your victim, or even accuse him of one. It is believed. That is enough.

And don't laugh. This is exactly what Zervos' prosecutors have now repeatedly succeeded in doing.

But I understand the pressures placed on him. He is right about the danger of Hong Kong being blacklisted. The blacklister in this case is an unelected and unregulated Paris-based money laundering watchdog called the Financial Action Task Force. We signed up to it in 1991.

FATF has 40 different recommendations that it wants its members to implement and has embarked on a new round of assessments to see whether they are doing so. If they are not, FATF can list them as non-compliant, which could trip up the cross-border money flows of their banks.

How can you tell whether any country is taking proper action against money laundering? Think about that question and you will see that there is no easy answer. We presume innocence unless guilt is proven. If guilt is rarely proven, it can just as easily mean that there is little money laundering as that there is little action taken against it.

But FATF simply assumes guilt and then measures enforcement action by prosecution and conviction rates. It does not say so directly, but the key passages in its latest directives, issued last month, make it evident.

For instance, it recommends that enforcement agents should look at the "number of investigations and prosecutions for ML (money-laundering) activity; proportion of cases leading to prosecution or brought to court".

They should ask "to what extent are different types of ML cases prosecuted (eg, foreign predicate offence, third-party laundering, stand-alone offence, etc) and offenders convicted?"

To drive the point home, it commends Norway for "a particularly high conviction rate", praises Germany for an "above average conviction success rate", lambasts Greece for a "very low rate of conviction", and says that a 50 per cent conviction rate in Ireland "whilst … not particularly unusual for a common law jurisdiction … could be improved".

So, yes, Zervos is under pressure to get our money laundering conviction rate up to FATF approval levels.

But in his latest success, a 61-year-old public housing tenant was sent to jail for 10 years (10 years!) for having transgressed before the year 2005 a law that was only passed last year.

It was not yet a crime in 2005 to be suspected of a crime. Nonetheless, she now sits in jail for it. What a mockery of justice.

No underlying crime was proven against her in court or even indicated. She transferred a lot of money in small amounts between different bank accounts for four years, which has all the hallmarks of helping ordinary people sneak money in and out of the mainland. This is not a crime here.

But she is certainly doing Hong Kong a signal service right now by sitting behind bars. She has helped improve our money-laundering conviction rate, which could make it easier for HSBC to move billions of dollars around.

Mainlander jailed for 10 years for laundering HK$13 billion in Hong Kong

Judge says maximum penalties should be reviewed after mainlander launders record amount in Hong Kong in just eight months

A young mainlander was yesterday jailed for 10-1/2 years for laundering a record HK$13.1 billion over just eight months.

Madam Justice Esther Toh Lye-ping said Luo Juncheng's crime was the most serious of its kind to have come before the courts and she could not find a case involving anywhere near such a large amount.

She said there was now an urgent need to review the maximum penalties for the offence, which was becoming more prevalent.

Luo, 22, from Guangdong, was convicted on Tuesday by a Court of First Instance jury. He had pleaded not guilty to one count of dealing with property known or reasonably believed to represent proceeds of an indictable offence.

An earlier hearing was told that before his arrest, Luo had rung police to ask why his bank account in Hong Kong had been frozen. He was arrested on January 28 while entering the city at Lok Ma Chau.

Toh agreed with defence counsel Joseph Tse Wah-yuen SC, who said in mitigation yesterday that Luo, who had set up a corporate account with Chiyu Banking Corp, a subsidiary of Bank of China's Hong Kong unit, was not the mastermind.

Luo, a middle school dropout, said he had been acting on behalf of a family friend, Uncle Pang. He said he was one of four brothers and worked as a delivery man for factories in Shenzhen until he quit to care for his ailing mother. His mother had introduced him to Uncle Pang, who had helped pay for his father's medical bills before he died in 2002. Uncle Pang approached Luo to go to Hong Kong to set up a company and accounts after Luo's mother died in 2010, Luo testified.

Outside court, Gloria Yu Yin-ching, of the narcotics bureau's financial investigation division, confirmed that it was the city's largest money-laundering case.

Prosecutor Thomas Iu told the court earlier that Luo made 4,800 deposits and 3,500 transfers through the Chiyu Bank account between August 2009 and April 2010, with most of the funds funnelled via internet transfers.

On July 30, 2009, Luo bought a company called Ace Creation Development from a secretarial company in Hong Kong. On August 3, he came to Hong Kong as a visitor to set up the account with Chiyu Bank in the name of the company. Ten days later, he came to Hong Kong again and set up a personal account with the same bank.

Toh said that on one occasion Luo transferred HK$2.6 million from his personal account to the company account. She said international elements were involved, as some of the proceeds had originated on the mainland and in Macau.

Toh quoted a previous judgment from Court of Appeal vice-president Mr Justice Frank Stock who said that "given the signal importance of preserving Hong Kong's reputation as an international financial centre of integrity", increased penalties "may merit some debate and consideration by policymakers". Toh said: "The words [of Stock] are even more urgent as larger and larger sums of money are laundered."

A police spokesman said the number of suspicious transactions reported to the Joint Financial Intelligence Unit in the year to September was 17,795, while the figure in 2011 was 20,287.