HONG KONG SAR, CHINA Law and Practice Contributed by: George Lamplough, Vanessa Cheng and Curtis Pak, Holman Fenwick Willan
funds. Rather, criminal rings will recruit “money mules” to set up and manage Hong Kong bank accounts to launder the proceeds of fraud. These account holders frequently live in Main - land China, beyond the jurisdiction of the Hong Kong courts and police. Such bank accounts are usually corporate accounts held by shell companies, with nominal share capital and a single director and sharehold - er. The signatories are usually individuals resid - ing in Mainland China and the account-opening documents will usually state low monthly sala - ries. Tracking the signatories down for arrest is not just difficult, because they are outside the jurisdiction, but of limited utility when found. Civil claims against the account holder compa - ny are limited to proprietary claims against the company (or individual bank account holder, if the account is not a corporate account) such as money had and received and unjust enrichment, to recover any remaining funds. Those who knowingly assist in money-launder - ing operations risk being charged with several criminal offences, such as conspiracy under Section 159A Crimes Ordinance (Cap 200) or the common law offence of conspiracy to defraud. Civil causes of action commonly pleaded against accessories to wrongdoing include knowing receipt and dishonest assistance. The Organised and Serious Crimes Ordinance (Cap 455) (OSCO) empowers the police to charge individuals who deal with property that they know or have reasonable grounds to believe are the proceeds of an indictable offence. The prosecution may also apply for a restraint order to prohibit a person from dealing with their property (Section 15, OSCO). Restraint orders
can effectively freeze bank accounts holding the proceeds of fraud. Second-, Third- and Higher-Level Recipients There are usually several rounds of dissipation. First-level recipients usually quickly transfer the funds on to second-level recipients, who often then transfer the funds onwards. These higher- level recipients tend to have less knowledge of the underlying fraud than those from whom they received the funds. Victims may be entitled to bring a proprietary claim in equity over the funds found in the hands of the second- or third-level recipients. Recipi - ents often argue that they received the funds pursuant to a legitimate business transaction or through an underground currency exchange. Recipients often seek to rely on the equitable defences mentioned above (change of position or bona fide purchaser for value) to defeat a pro - prietary claim. The Hong Kong courts have ruled that defendant recipients may not invoke these defences where they use underground banking to circumvent the foreign exchange laws of Mainland China (DBS Bank (Hong Kong) Ltd v Pan Jing [2020] HKCFI 268 (in which Holman Fenwick Willan acted for the successful bank); Taihei Dengyo Kaisha Ltd v Zhao Yizhe [2024] HKDC 222). However, some recent cases suggest that the use of underground banking does not auto - matically render the transaction unenforceable. Rather, the courts may consider the severity of the illegality on a case-by-case basis, having regard to a range of factors. The courts have held that the question of whether illegality bars the defences of bona fide purchase and ministe - rial receipt should not be summarily determined
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