Legitimacy of the Letter of No Consent regime confirmed - the case of Tam Sze Leung & Ors v Commissioner of Police [2024] HKCFA 8

With the Court of Final Appeal (CFA) decision of Tam Sze Leung & Ors v Commissioner of Police¹ [2024] HKCFA 8 being handed down on 10 April 2024, the legality and constitutionality of the use of “Letters of No Consent” (LNCs) by the Police has been finally confirmed.   

Rulings by the CFA

The CFA raises/re-affirms the following important points in its decision:

1. No property belonging to the suspect was ever held or seized by the Police.  Although it was the Police who sent emails to the banks informing them of the police suspicions and requesting the banks to submit Suspicious Transaction Reports, the CFA confirmed that it was “the bank which maintains the account for the customer and, in accordance with the anti-money laundering requirements… decides whether the customer should be allowed to draw on the suspect funds or whether the account should be disabled” (§47). While the “freeze might have been instigated by the police”, the bank was motivated by the desire to avoid risks of incurring statutory, regulatory and reputational risks, and it represents the “bank’s own act, done in compliance with its legal and regulatory duties” (§48). The issue of the LNCs by the Police, therefore, only makes it clear that the Police are not conferring immunity to the banks dealing with the property under OSCO s.25A(2)(a) or otherwise, but “it does not mean that the Police thereby freeze or order the bank to freeze the account” (§51);
2. Not ultra vires and no improper purpose. The CFA clarified that while s.25A(2) of the Organized and Serious Crimes Ordinance (Cap. 455) concerns the granting or withholding of immunity, it is not intended to govern police communications with the bank(s) or the issue and maintenance of LNCs. Rather, the basis of such power lies in common law and section 10 of the Police Force Ordinance (PFO), where the latter provides that duties of the police force shall be to take lawful measures for, among others, preventing and detecting crimes and offences and for preventing injury to property.  Hence, in communicating with the bank(s), “the police were taking lawful measures to prevent the crime of money laundering; to seek information in aid of their investigations aimed at detecting crime; and to prevent the flight and dissipation of (and thus loss and injury to) property suspected of being the proceeds of crime with a view to its possible confiscation” (§65). Again, as the freezing of accounts was the bank’s own doing upon exercise of its own judgment and does not involve actions of Police, it was “fallacious” to conclude that the police action was ultra vires (§69);
3. No violation of constitutional rights.
   1. Basic law (BL) rights under Article 6 (right of private ownership of property) and Article 105 (right to use property etc.): Given the freezing of accounts remains the bank’s own doing, there is no engagement (hence, no infringement) of BL rights under Article 6 and Article 105 by virtue of the Police’s acts (§81). However, even if the Police actions did “freeze” the accounts, they are governed by clear provisions under the PFO and the Force Procedures Manual and are no more than is necessary to achieve legitimate aims (§83 – 87).  Such limited interference with the account holders’ use of funds for a finite duration “would reflect a reasonable balance between the anti-money laundering aims of society and the protection of individual property rights” (§87).
   2. BL rights under Article 14 (right not to be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence etc.):  As to the alleged violation of basic law rights under Article 14, the CFA held that the appellants failed to adduce any evidence of hardship and refused to entertain a constitutional challenge based on “a merely hypothetical supposition that “all (or substantially all) of [a] person’s assets” are frozen” (§90).
   3. Bill of Rights (BOR) Article 10 (right to fair hearing): Based on the same reasoning that it was the banks who decided to freeze the accounts but not the Police, the CFA further rejected that there was procedural unfairness by the issuance of LNCs. In any event, the appellants were open to (i) “make representations with a view to dispelling the suspicion”, or to (ii) “seek relief against the banks in a ‘suit at law’ for withholding their funds”, or, as in what the appellants had done in this case, to (iii) resort to the courts in bringing judicial review proceedings against the Police (§99 – 100). Hence, there was no procedural unfairness.

Takeaways

With the legality and constitutionality of the LNCs regime being affirmed, the key takeaways in our May 2023 legal update continue to apply. Cybercrime victims, therefore, have a higher chance of recovering their lost funds against fraudsters while exploring other possible recourses for recovery of funds with their legal representatives.

Given the CFA has repeatedly emphasized that any “freeze” is the bank’s own doing upon exercise of independent judgment based on the terms and conditions provided under the relevant banking contracts with their customers, banks should stay vigilant to any suspended frauds and should exercise their judgment carefully when being asked by an account holder to honour his/her instruction to pay out funds in such circumstances, whilst also balancing their legal and regulatory duties and their potential exposure to criminal liability.