H. Dealing with property known or believed to represent proceeds of drug trafficking

H. Dealing with property known or believed to represent proceeds of drug trafficking 

Section 25 of the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405) makes it an offence to deal with property that the offender knows or has reasonable grounds to believe that such property in whole or in part directly or indirectly represents any person’s proceeds of drug trafficking offences. It is closely related to the offence of “money laundering”, i.e. dealing with property known or believe to represent proceeds of indictable offence under section 25 of the Organised and Serious Crimes Ordinance (Cap. 455).  

“Drug trafficking offences” is defined widely and includes trafficking in dangerous drug (section 4 of the Dangerous Drugs Ordinance), trafficking in purported dangerous drug (section 4A), supplying or procuring a dangerous drug to or for unauthorised persons or unlicensed persons (section 5), manufacturing dangerous drugs (section 6), cultivating or dealing in cannabis or opium poppy (section 9), keeping or managing a divan (section 35), permitting premises to be used for trafficking, manufacturing or storage of dangerous drugs (section 37), conspiring with others, inciting others, attempting, aiding abetting counselling or procuring others to commit these offences. 

It is however not an offence if a person knows of or suspects that any property in whole or in part represents proceeds of, or used in connection with, or intended to be used in connection with drug trafficking offences, he discloses that knowledge or suspicion together with any matter on which that knowledge or suspicion is based to a police officer or the Customs and Excise Department, before he deals with that property. 

This offence is designed to cover both the offender who committed the serious drug offences and any other person who later deals with the proceeds of the offence.  The criminal act is completed with the dealing with the property.  It is not necessary for the prosecution to prove that the property in fact represented proceeds of drug trafficking.  In dealing with the property, it must be proved that the defendant knew or had reasonable grounds to believe that the property represented proceeds of drug trafficking offences. 

Knowledge is usually proved by the offender’s involvement with the drug trafficking offences or by his own admission that he knew the property was proceeds of drug trafficking offences.  Deliberately turning a blind eye to the obvious or refraining from inquiry may allow the court to draw the irresistible inference that the offender knew that the property was such proceeds. 

For “reasonable grounds to be believe”, it needs to be shown that, based on the facts and circumstances known to the offender, any reasonable person who shared such knowledge would be bound to believe that the property was tainted. 

Sentencing  

The maximum penalty for dealing with proceeds of drug trafficking is a fine of $5,000,000 and imprisonment of 14 years if tried on an indictment.  On a summary conviction, the maximum sentence is a fine of $500,000 and imprisonment for 3 years. 

Imprisonment upon conviction for this offence is almost inevitable even for a first offender. 

Restraint and Confiscation of Proceeds of Drug Trafficking 

A conviction for trafficking in dangerous drug (section 4), trafficking in purported dangerous drug (section 4A), supplying or procuring a dangerous drug to or for unauthorised persons or unlicensed persons (section 5), manufacturing dangerous drugs (section 6), cultivating or dealing in cannabis or opium poppy (section 9), keeping or managing a divan (section 35), permitting premises to be used for trafficking, manufacturing or storage of dangerous drugs (section 37), and dealing with property known or believed to represent proceeds of drug trafficking will permit the Department of Justice to apply to the Court of First Instance or the District Court to restrain and confiscate realisable property of the person convicted. 

A restraint order may be made where proceedings have been instituted against the defendant, before there is a conviction.  It prohibits the dealing with the realisable property, subject to such conditions and exceptions as may be specified in the court order.   Once an order is made, the Court of First Instance may appoint a receiver to take possession and manage the property subject of the order. The court may also order the person subject to the order to disclose to the court all the assets he holds, and the source of the assets, covering a period of up to 6 years before the date of the order. 

A charging order can also be made by the Court of First Instance on realisable property for securing payment to the HKSAR Government. It is usually made at the time when a restraint order is made and that there are assets such as real property, stocks and shares that need to be charged. 

A person affected by a restraint order or charging order may apply to the Court of First Instance to discharge or vary the order.  Variation is usually applied for to make allowance for legal fees and his/his dependants’ ordinary and reasonable living expenses, not dictated by the person’s previous lifestyle.  The applicant for such a variation must satisfy the court that he has no other assets to pay for these expenses. 

The prosecution can apply for a confiscation order in proceedings before the Court of First Instance or the District Court when a person is to be sentenced for one or more serious drug offences.  The purpose of the confiscation is to place the offender into the financial position in which he would have found himself if he had not received his proceeds of drug trafficking.  The court will consider the amount of benefit obtained by him and not merely profits. 

Upon the making of a confiscation order, the court will stipulate in the order the amount the defendant is liable to pay and the period within which it is to be paid. A period of imprisonment the defendant is to serve if any of that amount is not paid within the set period is also set out in the order.  The prosecution and the defendant can apply to vary the confiscation order, which must be made within 6 years from the date of the confiscation order.