Clifford Chance

Global Investigations Review (GIR) has published the fifth edition of its practical guide for external and in-house counsel, compliance officers and accounting practitioners. Members of the Clifford Chance global RIFC practice are editors and authored several chapters including the Hong Kong chapter.

In the Hong Kong chapter of the Practitioner's Guide to Global Investigations 2021, members of the Clifford Chance Litigation and Dispute Resolution team, Donna Wacker, Edward Johnson, Jimmy Chan, Anita Lam, William Wong and Michael Wang answer 75 questions regarding corporate investigations in Hong Kong, including the recent high-profile investigations, changes to emerge in the next year and other key principles and hot topics.

In terms of the recent focus of investigations, there has been a shift towards anti-money laundering and counter-terrorist financing, and the related deficiencies in internal controls. A string of reprimands and significant fines by the SFC began in February 2019 with the fining of a securities brokerage company in the amount of HK$15.2 million (about US$2 million) for internal control failures in relation to third party fund deposits and failures to timely report suspicious transactions. Where similar internal control failures were involved, as well as breaches of other regulatory requirements, even higher fines were imposed, including fines of HK$19.6 (about US$2.5 million) in April 2020 and HK$25.2 million (about US$3.2 million) in June 2020. More recently, in a case concerned with 1MDB, a record fine of HK$2.71 billion (US$350 million) was imposed for anti-money laundering and bribery internal control failures in October 2020. Enforcement actions against individuals (involving suspension of license or banning from acting as directors or even entering the industry) continue to be active.

In terms of key regulatory or legislative changes to address corporate misconduct, we do not expect the formalisation of DPAs in Hong Kong anytime soon. Corporate misconduct, in particular, by listed companies and their directors, will however remain a key enforcement priority under the current framework. Such misconduct includes organised corporate fraud and failures by directors of listed companies in handling conflicts of interest.

We also expect closer co-operation between the SFC and the CSRC in cross-border investigations, in particular, concerning market manipulation in the context of the China-Hong Kong Stock Connect programme, and increased joint operations between enforcement agencies within Hong Kong, apparent from the memorandums of understanding signed between the SFC and the ICAC, as well as the SFC and the Competition Commission in 2019 and 2020.

The Hong Kong chapter of GIR also addresses the key principles and hot topics of corporate liability, compliance programmes, cyber-related issues, data protection, attorney-client privilege, exterritorial effect of criminal law, cross border investigations and information sharing, economic sanctions enforcement, whistle-blower protection and employee rights, internal investigations, reporting to authorities, responding to notices and subpoenas, witness interviews, dawn raids and search warrants, penalties, immunity and leniency cooperative agreements, and publicity and reputational issues.

For a description of the publication, see here. The team will be circulating the Hong Kong chapter to key clients and contacts, and are happy to discuss.