Cloaking White-Collar Crime in Hong Kong's Property Sector

Yujing Fun

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN: 9781349556335, 9781137506764
• eBook ISBN: 9781137506771
• Topic: Social Sciences
• Subtopic: Criminology
• Index: Social Sciences

Hong Kong's anti-corruption agency, ICAC, is hailed as among the world's best having almost completely purged systemic corruption within a decade of its inception. This book explains how Hong Kong maintains the myth of a clean city and examines the prevalence of white collar crime in the city's property sector.

1

No Smoking Gun: Methodology in the Uncovering of White-Collar Crime

Researching white-collar crime has always been difficult because the work usually meets heavy resistance. Most white-collar criminals hold positions of privilege that enable them to deny culpability or to channel discussion of such criminality in certain directions; thus, while it is not hard to see the patterns and behaviors of white-collar criminality, it is a challenge to speak of and address it without having the blessing of someone already in power. My research journey began with a methodology that deliberately held the naïve expectation that Hong Kong’s authorities were really as open as they proclaimed to be, and I also held a still-forming view of white-collar crime and its place in Hong Kong.

As research progressed, it became increasingly clear that the problem of studying white-collar crime was not showing that it exists, since examples of wrongdoing by powerful corporations and individuals in the city abounded in the news. Instead, the question of researching white-collar crime could be more accurately seen as a problem of discourse and, more specifically, of how such crime is defined. Hong Kong’s white-collar crime was invisible, not because there was an absence of cases, rather, it was invisible because the city could not recognize what it was.

The chapter works through this research’s early life, which was a proposed investigation into underground banks and money-laundering vulnerabilities. The chapter presents the initial resistance encountered when overtly researching white-collar crime in Hong Kong. The setbacks of that initial study were instructive in conducting white-collar crime research in jurisdictions that have strong law-enforcement ownership of the topic but are unacquainted with its being researched academically.

Slow beginnings and social realities

All social science research begins with surveying the repository of methods to find the right tools and analytical strategies to draw out, clarify, and define a topic. This research begins by looking at the advantages between qualitative and quantitative methods, their feasibility for exploring the subject under investigation, and the kinds of conclusions they are able to deliver. For criminological research, there is an added dimension of reactivity,¹ which is how much would individual subjects being studied modify their behavior in response to a researcher’s observations. This is especially true in criminological research because discussions of crime and criminal behavior tend to elicit guarded responses, regardless of whether the interviewee is a convicted criminal, a victim, or a law enforcement agent.

Keeping that in mind, the study was originally designed using both qualitative and quantitative strategies that attained validity and reliability through data triangulation. To be clear on what white-collar crime means, the study subscribed to the legal interpretation of the concept and looked at Hong Kong’s private remittance agencies – which provide services similar to underground banks in other jurisdictions – and at their role in money laundering. The original study aimed to use intensive interviews with interested parties, analysis of official records, and case law² to understand the gaps in Hong Kong law that allow money laundering to occur, and how this has impacted the city.

Through these basic methods, the study at first submitted inquires to law enforcement and remittance agencies about their activities. All of this was properly done, with consent forms bearing official letterheads and text translated into Chinese to facilitate interviewee comprehension. Several strategies were used to obtain participants for the study: email; through personal contacts; and visits to remittance agencies or offices of enforcement personnel. Remittance agencies themselves are not a controversial topic in Hong Kong, as they are properly registered to provide services; however, the plan was to extrapolate the findings to identify possible legal lapses and loopholes.

The purpose for taking this roundabout way to seek out gaps in the law and to understand the issue was because money laundering, quite frankly, is a sensitive topic in Hong Kong, where there is a common perception that the city’s economy benefits from such activity. Thus, looking at the legal gaps in this way allowed the study to acquire comments from the authorities in order to discern the vulnerable areas in Hong Kong’s financial system – areas that still needed to be addressed in order to minimize money-laundering opportunities. The study was a compromise in the hope of securing cooperation from as many involved parties as possible.

This compromise, however, was not enough, as my correspondence with the Hong Kong Monetary Authority (HKMA) illustrated. After sending out an initial email to the authority inquiring about general information on Hong Kong remittance agents, I also asked to get in touch with anyone from the HKMA to briefly discuss these matters. I made it a point not to mention money laundering in the inquiry. The response returned about a month later in a short but polite email stating, ‘Thank you for your email. Your queries can be better addressed by the JFIU [Joint Financial Intelligence Unit].’

This response appeared out of place because my inquiry made no reference to crime, and the HKMA served as the primary regulator for remittance agents in the city. Still, I redirected my queries to the JFIU via phone because, at the time, the unit was unreachable by email. The JFIU, after hearing my queries, pointed me back to the HKMA. No further responses were forthcoming from the HKMA despite four separate attempts to establish communication over a six-month period after first communicating with the JFIU.

Email was not the only strategy employed: I also leveraged personal contacts in law enforcement to reach people in positions of authority. This, too, did not yield much: a good example of this involved an interview with an individual from one of Hong Kong’s financial regulators.³ During the session, the interviewee was cautious with the choice of words but, at one point, seemed to slip and revealed the incapacity of the agency to handle the large number of cases coming in on a daily basis. I asked if I could use this information for my work and was given a flat, ‘No,’ despite my guaranteeing the subject’s anonymity. Other interviews did not manage to get even this far and, essentially, the data collected was not very meaningful, since all interviewees were protective of what they knew.

I turned to the third strategy, which involved going to regulator offices and remittance agencies, but this did not pan out either. The regulators stated they were unavailable to assist on these matters, while the remittance agencies were unwilling to talk about the way they do business. The agencies simply changed, sent out, and received money for some folks – that was all there was to it. Yet, there was something in the attitudes of those I contacted that was not adding up. They always appeared guarded and were alert to topics on the periphery of money laundering.

The reason for such caution in their general demeanor soon became clear. At the time of my inquiries, French President Nicolas Sarkozy was calling for Hong Kong and Macau to be added to a blacklist of countries classified as tax havens.⁴ This developed into a spat between France and China and required the intervention of the United States to resolve.⁵ Thus, while a general research question on remittance agents may seem apolitical, those in the financial industry saw it quite differently. As Gordon Hughes so rightly observed, ‘It [is] evident that the collection of data is far from a purely technical exercise, but is itself a form of political activity.’⁶

In the end, my study’s original assumption that authorities would be willing to share relatively harmless information needed to be placed in context. The nature of the information itself did not determine its potential impact as much as did the nature of the political context at the time the information was requested. The difficulties in moving the research forward, and the noted protectiveness in responses, made it clear that methodologies relying on interviews with officials would not be the best approach to researching white-collar crime in Hong Kong. Research now had to adopt an altogether-different approach: one that did not rely on official input.

The search for white-collar crime in law

One of the major challenges for white-collar crime research is that there are actually two different ways to understand it. On one hand, there is the sociological definition, which can be deemed too ambiguous for law enforcement; and, on the other, there is the legal definition, which is too narrow for the researcher to properly grasp the intrinsic character of the concept.⁷ My original approach focused on white-collar crime, the legal term as defined by law enforcement. This focus is also known as the crime-based approach,⁸ because white-collar crime, in this definition, is identified by the crimes committed instead of by the criminals who committed them. This definition was originally used because it was more straightforward: if one could literally ‘observe’ the crime, then the topic of white-collar crime is immediately discussable, and there would be no need to explain what white-collar crime is, as the behavior would already be understood in relation to ongoing white-collar crime.

Unfortunately, the legal enterprise of white-collar crime neglects the purpose of having the concept in the first place, which was to draw attention to power and its abuse criminological discourse. Power is an unavoidable topic in research on white-collar crime, and even if I were to use the legal definition of crime to avoid that discussion, the problem of power remains. By nullifying the influences of power in using strict definitions of crime to shape criminological discourse, we essentially blind ourselves to the original purpose of the term white-collar crime. The concept was developed to point to the problem of power – not intelligence – in crime discourse; and although the legal definition was proposed to end ambiguity, the definition of white-collar crime remains elusive.

Of course, studying the problem does not depend so much on its definition as much as it does on how society understands this crime. As Stuart Green argued, behavior considered to be white-collar crime also tends to be morally ambiguous. The ambiguity stems from many sources in society, all of which have difficulty ‘seeing’ white-collar criminality as it happens.⁹ Kelly Wand, having compiled a volume on white-collar crime debates in America, pointed to the shifting boundaries of law and the influence of politicians and lobbyists as factors adding to the moral ambiguity.¹⁰

In his paper, Green focused on making sense of the sources of ambiguity and how they work to cloud even the presumed clarity of the legal definition. Indeed, crimes themselves are normally seen as clear-cut because

Criminal sanctions, the most serious kind of sanctions we have in a civil society, have traditionally been reserved for conduct that not only causes or risks serious harms but is also unambiguously wrongful.¹¹

Green points out two general truths: first, that laws are ever-shifting in a social and political landscape composed of competing interests; and, second, crime is generally perceived as clearly reprehensible. The latter conviction of obvious reprehensibility makes white-collar crime confusing because it tends to be non-violent, diffuse in the harm it causes, and difficult for victims to recognize their own victimization. These qualities of white-collar crimes have a knock-on effect that makes it difficult for independent observers to determine whether such behaviors are morally wrong. And where there is difficulty determining moral wrongness,¹² there is even more difficulty seeing how these behaviors are criminal.¹³ Complicating things further is the fact that these crimes also tend to require some level of technical knowledge to comprehend their criminality.¹⁴

For instance, insider trading is a serious offense in Hong Kong, especially since the introduction of the Securities and Futures Ordinance on April 1, 2003.¹⁵ An individual found guilty under this legislation can be jailed for ten years and fined up to HK$10 million (US$1.3 million).¹⁶ Based on that penalty alone, a layperson would understand that insider trading is somehow a serious offense; however, to properly understand why it is so serious, the same person would have to understand the basic principles of the free market in relation to stock prices alongside the efficient-market hypothesis.¹⁷ Without grasping these principles, it would be difficult for a person to reconcile how insider trading, which is simply the act of trading stock based on information not available to the general public, is such a heinous crime.

From that example, we could see that white-collar crime is not as morally straightforward as ‘normal’ crimes such as theft, murder or rape. Of course, not all white-collar crimes are so unclear: Green notes that ‘bribery, fraud, tax evasion, obstruction of justice, perjury, and extortion involve conduct that is morally wrongful.’¹⁸ However, even in these cases, he observed that such crimes had to attain a certain level of ‘obvious wrongfulness’ before observers would indisputably agree they are wrong. Falling short of obvious wrongfulness allows for alleged white-collar criminals to become re-categorized as understandably aggressive businessmen or politicians.¹⁹ This problem of moral wrongfulness does not arise in discussions of normal crime – the morals this relates to are firmly established, hence, normal crimes are not placed...

Table of contents

• Cover
• Title
• Introduction: White-Collar Crime Where Is It?
• 1  No Smoking Gun: Methodology in the Uncovering of White-Collar Crime
• 2  Against White-Collar Crime
• 3  Here We Go Again: What Is White-Collar Crime?
• 4  Hong Kongs Surreal Estate: Hong Kong and Its Property Sector
• 5  Tokyo Connection: Comparative Insights for Hong Kong from Japanocentric Crime Theories
• 6  Hong Kong, Power, and White-Collar Crime Discourse
• Notes
• References
• Index