Recovery of Fraud Assets in Hong Kong: Hong Kong Litigation, Enforcement in China
Beneficiary Bank Account Holders in Hong Kong Telecommunications Fraud Cases
In a large number of civil litigation cases of Hong Kong cyber fraud handled by our firm, obtaining the identity of the holder of the recipient bank account who received the fraudulent payment by applying for a disclosure order from the Hong Kong court and instituting civil litigation against him is a common method of recovering the defrauded funds. A large number of cases have shown that in fraud cases in Hong Kong, the identity of the payee account holders are most often Mainland residents, followed by Hong Kong residents. Although we do not have accurate statistics, based on past experience, I estimate that more than 80% of the payee account holders should be Mainland residents.
Defendants in civil proceedings for cyber fraud in Hong Kong: beneficiary bank account holders
In the article Email Fraud Litigation in Hong Kong, we said that in Hong Kong cyber-telecommunications frauds, as it is often difficult to track down the actual fraudsters who commit the fraudulent acts, the most effective way for the victims to recover the fraudulent money is to file a civil action against the receiving bank account holder through the civil litigation procedures in Hong Kong, claiming for the return of the money received or compensation for the damages suffered by the victim on the grounds of unjust enrichment, proprietary rights, or holding on a constructive trust. In Hong Kong civil proceedings, a civil action may be brought against the holder of the receiving bank account for restitution of the money received or damages for loss, whether for unjust enrichment, proprietary rights or on the basis of a constructive trust. In such an action, unless the recipient can successfully establish a defense, such as that he was a bona fide third party who paid the consideration, or that he spent the funds in good faith after receiving them (change of location), the court will judge that the holder of the receiving account should return the funds. In practice, on balance, it is not easy for a defendant to establish a defense that recognizes any of these grounds. Therefore, in Hong Kong, the chances of winning a civil action for the return of funds brought by a victim against a payee in a civil action for cyber fraud are generally higher. The question is, after obtaining a judgement in favour of the defendant, how can the judgement be realized so as to obtain monetary compensation from the defendant?
If the Defendant (the beneficiary bank account holder in a cyber fraud case) still has funds in his/her bank account
If the Defendant’s bank account is frozen and there are still funds in it, the solicitor may be able to satisfy the Defendant’s obligations to pay benefits and damages under the judgment obtained in favour of the Plaintiff by applying to the Court for a Garnishee’s Attachment Order, whereby the Court may grant an order to the bank holding the Defendant’s funds to attach and pay the Defendant’s funds from the bank account directly to the Plaintiff’s victim.
No funds in the Defendant’s bank account: the Defendant is a Hong Kong resident
If the Defendant’s bank account is empty but the Defendant is a Hong Kong resident, the Plaintiff may consider applying to the Court through his solicitor for the Defendant to be made a Hong Kong resident bankrupt, so as to compel the Defendant to pay the Judgment Debt, or to pay the Debt from his assets during the Bankruptcy Proceedings.
Defendant’s bank account is empty: Defendant is a resident of Mainland China
Where a defendant’s bank account is empty but the defendant is a resident of Mainland China, in the past it was often not possible to proceed with the enforcement of a Hong Kong judgement as it could not be enforced in the Mainland. However, with effect from 29 January 2024, as the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region has come into effect and is being enforced, it is easier to apply for enforcement of civil judgments obtained by a Hong Kong court against a Mainland resident in a Mainland court. Against this background, there is a new and more effective means of enforcing civil judgments obtained in Hong Kong courts against Mainland defendants (payee bank account holders): applying to the Mainland courts for enforcement of Hong Kong judgments.
Advantages of Enforcing Hong Kong Judgements in Mainland Courts
An obvious advantage of applying to the Mainland courts for enforcement of Hong Kong judgements is that the Mainland courts are very strong in enforcing civil judgements in force as compared to the enforcement system of the Hong Kong courts. Once a successful plaintiff has filed an application for enforcement with the Mainland court, the court will take the initiative to enquire about, freeze and seize all assets under the defendant’s name in the Mainland, including bank accounts, properties, securities, etc., without the need for the plaintiff to provide information on the defendant’s assets. Moreover, if there are no assets under the name of the defendant or if it is not possible to execute all of them, the Mainland courts will take quite proactive and forceful enforcement measures such as restricting the defendant from spending money at a high level, placing him on the list of persons with defaulted enforcement actions, and making fresh enquiries on the assets under the name of the defendant at half-yearly intervals. According to experience, if there are assets in the name of the defendant (regardless of whether the plaintiff is aware of the details of the assets or not), the chances of obtaining enforcement through the Mainland courts are quite high.
One-station Legal Service on Hong Kong Civil Litigation and Enforcement in the Mainland
An important aspect of recovering losses from fraud victims through civil litigation in Hong Kong and enforcement in the Mainland is that it requires both the work of Hong Kong lawyers (obtaining a judgement in favour of the plaintiff in Hong Kong through civil litigation) and Mainland lawyers (applying for enforcement of the Hong Kong judgement on behalf of the client in the Mainland). Bob Yan, the firm’s principal attorney, is qualified as both a Hong Kong lawyer (since 2013) and a mainland lawyer (since 2004) and has set up law firms in Hong Kong and Shenzhen, China, respectively, which allow him to seamlessly connect his clients’ civil litigation work in Hong Kong and their applications for enforcement of Hong Kong judgments in the mainland.
(Bob Yan, principal solicitor of Yan Lawyers, solicitors. Email: [email protected], WhatsApp: +852 51039249)