Promising Development: Hong Kong Court Comes to the Rescue for Victims of Internet Fraud

Author: Stefan Schmierer, Managing Partner

Internet Fraud in Hong Kong and the Challenge of Asset Recovery

Hong Kong, renowned as a major global financial center, has witnessed a concerning surge in international internet fraud in recent years, with internet fraud Hong Kong court cases becoming increasingly prominent. Victims of such fraudulent activities often find themselves wiring money to Hong Kong‑based bank accounts held by deceitful individuals. These ill‑gotten funds are then immediately transferred through a series of international transactions, rendering them exceedingly difficult to trace and resulting in substantial losses for the victims.

The Letter of No Consent as a Key Enforcement Tool

Fortunately, a substantial and formidable tool in the battle against internet fraud emerged through the Hong Kong Police’s utilisation of a Letter of No Consent (LNC). Once a victim becomes aware of the fraudulent scheme, they can promptly file an online report with the Hong Kong Police.

Subsequently, the police collaborate with the relevant bank to ascertain if any funds, whether in whole or in part, remain within the fraudulent account. Upon identifying suspicious activity, an LNC is issued to the bank, alerting it to the potential fraudulent nature of the funds. As a result, the bank commonly freezes the associated account, affording the victim adequate time to pursue legal action and recover their funds via a civil court proceeding based on the principle of unjust enrichment.

Setback in 2021: Legal Challenge to the LNC Regime

Regrettably, the efficacy of the LNC regime was challenged in 2021 in the case of Tam Sze Leung & Ors v Commissioner of Police. The Hong Kong court initially ruled that the LNC regime was unlawful and unconstitutional, citing infringement of property rights under the Hong Kong Basic Law.

This decision created uncertainty for victims, as previously issued LNCs were called into question. Victims were forced to rely on expensive injunction applications to freeze fraudulent accounts, without knowing whether funds still remained in those accounts at the time of filing.

Court of Appeal Restores the LNC Regime

A recent turn of events has reignited hope. The Hong Kong Court of Appeal overturned the Court of First Instance decision, reinstating the LNC regime and confirming its consistency with Hong Kong law, regulatory framework, and the Basic Law.

This ruling provides meaningful relief to victims of internet fraud and restores a powerful enforcement mechanism for police to freeze bank accounts linked to fraudulent activity.

The Importance of Acting Quickly

It is crucial to remember that the effectiveness of an LNC depends heavily on how quickly a victim identifies the fraud and reports it to the Hong Kong Police. Fraudsters often transfer or dissipate funds within one or two days, making swift action essential.

A Positive Step in Combating Cybercrime

In an increasingly digital world, this decision stands as a promising milestone demonstrating judicial resilience in the face of cyber deception. The ruling strengthens Hong Kong’s legal response to internet fraud and empowers authorities to protect victims against increasingly sophisticated cybercriminal networks.

How Ravenscroft & Schmierer Can Help?

Victims of internet fraud in Hong Kong often face urgent decisions involving banks, police investigations, and potential civil recovery proceedings. Ravenscroft & Schmierer advises individuals and businesses on coordinating with law enforcement, pursuing asset recovery through court action, and assessing available legal remedies following fraud incidents.

If you have been affected by online fraud or require guidance on recovery options, contact us to discuss your situation and the steps available to you.

FAQ: internet fraud Hong Kong court

What is a Letter of No Consent (LNC)?

An LNC is a notice issued by Hong Kong Police to banks indicating suspected criminal proceeds, often resulting in account freezes.

Can stolen funds be recovered through Hong Kong courts?

Yes. Where funds are successfully frozen, victims may pursue recovery through civil proceedings.

Was the LNC regime found unconstitutional?

No. The Court of Appeal confirmed that the LNC regime is lawful and compatible with the Hong Kong Basic Law.

How quickly should internet fraud be reported?

Immediately. Delays significantly reduce the chances of freezing funds.

Does freezing an account guarantee recovery?

No. Recovery depends on whether funds remain in the account and the outcome of civil proceedings.

How can Ravenscroft & Schmierer assist victims of internet fraud in Hong Kong?

Ravenscroft & Schmierer advises victims on coordinating with banks and law enforcement, assessing recovery prospects, and pursuing civil court proceedings to recover fraudulently transferred funds.

Can Ravenscroft & Schmierer help recover funds frozen under a Letter of No Consent?

Yes. Where funds have been frozen under a Letter of No Consent, Ravenscroft & Schmierer can advise on unjust enrichment claims, court applications, and enforcement options to seek recovery.

Does Ravenscroft & Schmierer advise on urgent steps after an internet fraud incident?

Yes. We advise on immediate next steps following detection of fraud, including evidence gathering, police reporting, and legal options to preserve assets before funds are dissipated.

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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For specific advice about your situation, please contact:

Stefan Schmierer

Managing Partner

+852 2388 3899

sschmierer@rs-lawyers.com.hk