Suspicious Transaction Reporting: Case Studies & Detection Methods

1. Suspicious Transaction Reporting: Case examples Detective Senior Inspector TSANG Chiu-fo Joint Financial Intelligence Unit

2. Joint Financial Intelligence Unit • Established in 1989 • Jointly operated by Police and Customs & Excise Department • Housed in Police Headquarters • Member of FAFT, Egmont Group & Asia/Pacific Group on Money Laundering • JFIU’s functions • Primarily receive, analyze and disseminate STR • Exchange financial intelligence with overseas Financial Intelligence Units • Outreach and training • Maintaining registration of remittance agents and money changers

3. Role of JFIU AML Guideline Regulators/ Professional association Financial institutions & DNFBPs Liaison Liaison Information Financial Services and the Treasury Bureau JFIU Feedbacks Liaison Security Bureau Intelligence Intelligence Law Enforcement Agencies Overseas FIUs

4. Filing of STRs Suggested format & content detailed in JFIU website (www.jfiu.gov.hk) • STREAMS • Email • Fax • Post • Verbal (only in case of urgency – must be followed-up with a hardcopy)

5. Screen – initially assess if any suspicion arouses; Ask – put questions to clarify those suspicion aroused from ‘Screen’; Find – retrieve the customer’s past records, if any, and other available information to see if those suspicion is cleared out; Evaluate – re-assess if the suspicion is still in existence. If positive, file a STR. “SAFE” Approach

6. Case Study(1) • Mr. X was charged with ML in HK and the proceeds derived was estimated to be around HK$500M. • Accountant’s Expert report showed that Mr. X had benefited about HK$50M from the offence, and he also made substantial payments to his claimed overseas partner. • The report was served to Mr. X and his solicitor. • Restraint and Charging Order were obtained in respect of the identified assets of Mr. X & his wife, at just around HK$3M. • Application for variation of the Restraint Order by Mr. X to allow for drawing funds for legal and living expenses from the restrained funds was unsuccessful, as court believed that Mr. X should have hidden asset.

7. Case Study(1) – Cont’d • Despite being unable to draw on his restrained property to pay his legal expenses, Mr. X was able to fund through his solicitors a 47-day trial in the Court of Final Instance using two counsels and produced his own expert accountant report to challenge the prosecution expert. • After conviction, Mr. X could still be able to fund different counsels through the same solicitor to appear for him in Appeal Court. • After issue of Confiscation Order, Mr. X was able to settle the order without selling his charged property. Part of this was by using a cashier’s drawn from the client account of his solicitor. • Mr. X was definitely using his hidden assets to fund his costly legal defence and all through the client account of the solicitor. But no STR has been filed.

8. Case Study(2) • Mr. Y was arrested in a neighbouring country for ‘Bookmaking’ and ML, and was detained in goal. • Mr. Z, a solicitor from HK who had been used by Mr. Y and his family to purchase considerable assets and nominee companies over the past years, visited Mr. Y in custody by instruction of Mr. Y’s wife, and gave a ‘Power of Attorney’ (“PoA”) for Mr. Y to sign to allow his wife to act on his behalf. • Mrs. Y then subsequently used his PoA to sell a number of assets to the value of HK$35M which subsequent investigation found that the assets were directly derived from Mr. Y’s ‘Bookmaking’ activities. • Mrs. Y was subsequently arrested and charged with ML in HK. However, no STR was filed by the solicitor.

9. Thanks for attention !