Reed Smith Client Alerts

The Hong Kong police have wide-ranging powers to prevent parties from dealing with property believed to represent the proceeds of crime. This includes cryptocurrency. The letter of no consent (LNC) has been a commonly used instrument to freeze assets without the need for the police to obtain a court order. 

On 30 December 2021, the High Court in Tam Sze Leung & Ors v. Commissioner of Police [2021] HKCFI 3118 determined the informal police freeze regime in Hong Kong to be unlawful. We explore the ramifications of this in the context of crypto-related fraud and disputes.

Authors: Jonathan Tsang

What happened in Tam Sze Leung?

Members of the family in Tam Sze Leung were accused of a ‘pump and dump’ scheme. They had not been arrested or charged with any crime, but their bank accounts were all subject to LNCs issued by the police. When the family challenged this, the police refused to withdraw the LNCs or provide consent for the family to deal with their monies.

The Organized and Serious Crimes Ordinance (Cap. 455) (OSCO) provides for an offence when a person deals with property that they know or suspect to represent the proceeds of crime. It also compels anyone with such knowledge or suspicion to file a suspicious transaction report (STR) with law enforcement.

Immunity may be granted if a person files an STR and obtains consent to deal with the property under suspicion. If consent is not given, the asset is effectively frozen as no one would take the risk of dealing with it.

The High Court found that (a) OSCO did not confer powers for the police to operate a de facto property freezing regime; (b) the family’s constitutional rights were interfered with; and (c) the LNCs disproportionately interfered with rights to property under Hong Kong’s basic law.