How Hong Kong can put a freeze on illegal shark fin trade.
I. INTROUDCTION
The Impact of Shark Finning & Shark Fin Trade
The destructive effects of shark finning are well documented. On the ethical side, the practice involves capturing the shark, removing the fins and then dumping the shark which are still alive, back into the sea to save space on the vessel, where they either slowly drown, die of blood loss or are devoured by other predators.
The proliferation of this practice worldwide has led to the endangerment of 470 species of sharks worldwide.[1] There are also serious domino effects on the ecosystems and the wider food network. Removing an apex predator from its natural habitat inevitably leads to an overpopulation of prey species (such as smaller fish and zooplankton), an increase in biomass and therefore higher net carbon production by the system. This leads to exacerbation of climate change and global warming.[2]
For these reasons, many jurisdictions have banned or at least imposed strict regulations on shark finning and the shark fin trade. However, criminal syndicates continue to skirt these laws to generate billions of dollars every year globally.[3] Yet, there is still a widespread misconception that environmental and wildlife crimes are of minor importance compared to other cross border organized crimes.[4] It is important to also recognize that illegal wildlife trade does not only impact endangered species. It breeds corruption, undermines rule of law, and claims human lives.[5]
Hong Kong as a favoured route for Illegal Shark Fin trade
Hong Kong is well known as a leading trading hub for shark fin, accounting for about 40% globally per year. [6] Despite a recent drop in legal imports,[7] statistics of seizures indicate that Hong Kong’s infrastructure continues to be exploited by illegal shark fin traders.[8] In May 2020, a record 26 tonnes of shark fins were seized in a shipment from Ecuador, estimated to represent the deaths of 38,500 protected sharks.[9] From 2014 to 2018, a total of 6 tonnes were seized.
Hong Kong’s regulatory and enforcement environment remains low risk and highly profitable for illegal wildlife trade, as penalties and enforcement powers remain weak and policy approach is lukewarm. In 2017, The Protection of Endangered Species of Animals and Plants (Amendment) Bill was passed to phase out the ivory trade as well as increase the maximum fine and imprisonment term for unlawfully trading in endangered species. Although a laudable legislative effort, more still can be done to erase Hong Kong’s unwanted reputation as the world’s largest fin trading hub.[10]
II. LICENSING REGIME UNDER CITES AND CAP 586.
CITES and the Endangered Species Ordinance
The primary legislation in Hong Kong is the Protection of Endangered Species of Animals and Plants Ordinance (Cap. 586) (“Endangered Species Ordinance Ordinance”), which gives effect to Hong Kong’s international obligations as a party to the Convention on International Trade in Endangered Species of Wild Fauna and Flora. (“CITES.”) CITES is an international agreement that regulates the international trade of endangered species by contracting states. The Convention’s licensing regime categorizes species by degree of endangerment:
Import and export permits are required for Appendix I species, which are presently threatened with extinction. Trade must therefore be subject to particularly strict regulation and must only be authorized in exceptional circumstances.[11]
Only export permits required for Appendix II species, which are not necessarily threatened with extinction, but in which trade must be controlled in order to avoid utilization incompatible with their survival. Trade is allowed under specific conditions.[12]
Only export permits required for Appendix III species, which can be unilaterally added to by any party state that requests assistance in protecting a particular species.
The responsible government department must review import or export license applications and, after evaluating a range of factors relevant to whether it would endanger the species, either grant the license or refuse. Under CITES, only 12 species of sharks are protected out of around 470 others considered to be endangered.[13]
The Endangered Species Ordinance- The Restrictions
In Hong Kong, the Endangered Species Ordinance bans the importing, introducing from the sea, exporting, re-exporting or possession or control of any endangered species, whether alive, dead, its parts or derivatives, except under and in accordance with a licence issued in advance by Agriculture, Fisheries and Conservation Department (“AFCD”.)
Statutory Definitions:
“Export” means to take, or cause to be taken, out of Hong Kong;
“Re-export” in relation to a specimen of a scheduled species, means to take, or cause to be taken, out of Hong Kong that specimen after it has been imported;
“Import” means to bring, or cause to be brought, into Hong Kong;
“Introducing from the sea” means to bring, or cause to be brought, into Hong Kong directly from a marine environment that is not under the jurisdiction of any state.
The license required in any given case therefore depends on the 1) categorization of the species and 2) the nature of the activity. Conducting a regulated activity with an endangered species listed in CITES without a license is an offence.
Table 1: Whether and in what circumstances a license will be granted by the AFCD to conduct a regulated trading activity with an endangered species. Source: HK Shark Foundation Source: Global Rights Compliance LLP 2017
Endangered Species Ordinance - The Penalties
The penalty for committing an offence under the Endangered Species Ordinance depends on the categorization of the endangered species. They are all “dual offences,” so the prosecution can decide whether to charge them as summary or indictable offences depending on the severity in each particular case.
Offences related to Annex I species
Summary Conviction - fine up to 5 million and imprisonment up to 2 years.
On Indictment - fine up to 10 million and imprisonment up to 10 years.
Offences related to Annex II & III species
Summary conviction - fine of 500,000 and imprisonment for up to 1 year.
On Indictment - fine up to 1 million and imprisonment for up to 7 years.
The Smuggling Offences (Import & Export Ordinance Cap. 60)
Another set of related offences can be considered under Cap 60 in the form of “importing or exporting unmanifested cargo”[14] and “Assisting, etc., in export of unmanifested cargo”. “Unmanifested” means the details of the cargo have not been recorded in a manifest.
They are also dual offences and have similar level of penalties. However it should be noted that the Endangered Species Ordinance is wider as it includes unauthorized possession or control of a regulated article, meaning the recipients can also be charged.
The Problem with CITES
There are various problems with the CITES regime. Firstly, CITES only protects 14 out of 400 endangered shark species,[15] but analysis of the HK shark fin market indicates that a high proportion of non-CITES sharks present are actually considered endangered. Further, it is in practice difficult to distinguish one species of shark fin from another and therefore whether they were actually harvested from an endangered species without further laboratory analysis. It is therefore unwise to rely entirely on the CITES regime to combat the illegal shark fin trade.
III. MONITORING AND ENFORCEMENT
Institutional responsibility and powers for combating illegal wildlife trade is shared by two agencies. Whereas the AFCD is responsible for the licensing regime and investigating wildlife offences under the endangered species ordinance, the Hong Kong Customs & Excise department (C&ED) is responsible for detecting illegal import and export of endangered species. The C&ED conducts checks on passengers, cargoes, postal parcels and cross-boundary conveyances at entry/exit points and seaports using risk profiling methods.[16] The C&ED also established a Syndicate Crimes Investigation Bureau in 2013.
C&ED’s track record of enforcement has prioritized seizure of cargo and prosecution of “carriers” and “mules” rather than investigating the wider criminal network despite compelling evidence. Whilst other jurisdictions have busted entire smuggling rings,[17] Hong Kong has yet to investigate and bring to justice any of the high-level traffickers.
The government also established a Wildlife Crime Task Force in 2016 headed by the AFCD with representatives from HKPF, C&ED and Environment Bureau. According to the Government, the Task Force “facilitates communication and co-operation for combating wildlife crimes, in particular those with serious and organized crime elements.”[18] It also “develops strategies and protocols for enforcement operations and also as gathers, analyses, exchanges and reviews intelligence for more effective and targeted actions.” However, information on the Task-Force’s progress and activities are not publicly available. It is hoped that this Task Force can form the foundation for more integrated and effective inter-agency cooperation in the future, which may require structural changes
Enforcement Powers
The Endangered Species Ordinances and Import and Export Ordinance[19] vests the C&ED officers and any other authorized public officer[20] with powers of enforcement and investigation.
Require production of documents or things for inspection for compliance with ordinance
Powers of entry
Entry and Inspection of place or premises
Seizure
Search and detention,
Forfeiture of articles and vessels seized in respect of the offences
Protection of informants
Whilst these powers are broad, they do not sufficiently enable enforcement and investigation of illegal wildlife trade which are by nature complex, organized and international.[21]
IV. THE ORGANISED AND SERIOUS CRIMES ORDINANCE (CAP 455).
There is opportunity for greater oversight in this area - the government should begin targeting the financial flows of the illegal wildlife trade.
The Organized and Serious Crimes Ordinance[22] (OSCO) is Hong Kong’s primary legislation for money laundering and crimes of an organized nature. The ordinance vests various special powers to Police Officers and C&ED officers[23] to combat Organized Crime. They include:
Greater powers of investigation, which allows identification of other members of the operation:[24]
Production Order (Section 4)
Order to produce material, including any books, document or other record in any form, which are relevant to the investigation of a case within a time limit set by the court.
Witness Order (Section 3)
Requires a person having information relevant to an investigation to answer questions and furnish material.
Search (Section 5)
Search warrants to permit investigators to enter and search premises, to seize and retain any material likely to be relevant to the investigation for which the warrant was issued.
Criminalizing acts that prejudice the investigation (Section 7)
Confiscation of the proceeds of the crime[25]
Upon sentencing an accused for offences related to OSCO if the proceeds exceed 100,000 HKD.
Restraint Orders
to prohibit any person from dealing with any realisable property, subject to such conditions and exceptions as specified in the order.
These powers enable identification of the wider criminal network, discovery of related crimes as well as greater deterrence through confiscation of profits.
Money Laundering Offences under OSCO
Sections 25, and 25A lay down an Anti Money Laundering (AML) regulatory regime. Section 25(1) creates the offence of “money laundering” and states: “a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property”.[26] The maximum penalty on indictment is a HK$ 5,000,000 fine and 14-year imprisonment.
Section 25A (1) imposes a duty to report to the Joint Financial Intelligence Unit (JFIU): “If a person knows or suspects that any property… was used in connection with… an indictable offence, he shall as soon as it is reasonable for him to do so disclose that knowledge or suspicion.”
There is an consent exemption under the s25A(2)(a): If the person made a disclosure [to the JFIU].. he does not commit an offence under s. 25(1) if that disclosure is made before he does that act and he does that act with the consent of [the JFIU]. Under this regime, Authorized Officers (Hong Kong Police Force, Department of Justice, JFIU) can send a “no-consent” letter to the financial institution to inform them the funds are proceeds of criminal activity and that they do not consent to them being dealt with. In practice, this will always lead to the account being frozen.
Any indictable offence can be a predicate offence to money laundering [27] They have been prosecuted for a wide range of indictable offences, including bribery, tax evasion, fraud, trafficking. In the context of illegal wildlife trade, convictions can be pursued against Hong Kong companies and individuals involved in the syndicate.[28]
One of the changes effected by the 2017 Amendment of the Ordinance was to enable the offence to be indictable, theoretically subjecting them to Hong Kong’s money laundering regime. As such, it is now possible to obtain convictions for launder of wildlife crime proceeds, but this is difficult in practice as there must be sufficient evidence of dealing. [29] According to a July 2020 press release providing data on various investigations of environmental crimes, there have been no money laundering prosecutions related to wildlife trade commenced.[30] This is regrettable as prosecutions would lead to enhanced due diligence and deter launderers in the crime network.
“Organized” Crimes
The special powers in the ordinance can only be used to investigate “Organized Crimes” upon application to a Court. The Ordinance designates crimes as organized if they are listed in Schedule 1 and involve additional elements of either:
1) a connection with triad activities;
2) is related to the activities of 2 or more persons associated together solely or partly for the purpose of committing 2 or more acts, each of which is a Schedule 1 offence and involves substantial planning and organization; or
3) is committed by 2 or more persons, involves substantial planning and organization and involves—
(i) loss of the life of any person, or a substantial risk of such a loss;
(ii) serious bodily or psychological harm to any person, or a substantial risk of such harm; or
(iii) serious loss of liberty of any person;
Notably, the Schedule lists the money laundering and smuggling offences, but not those under the Endangered Species Ordinance. The AFCD therefore cannot exercise the wide powers under OSCO to investigate wildlife crimes. Simultaneously, the C&ED and Police Force can use such powers, but not for wildlife offences. The legislature should remedy this gap in the law as soon as possible to enable the AFCD as the responsible department to thoroughly investigate wildlife crimes. This is also a barrier to confiscating and freezing the proceeds of wildlife trafficking. Although there is currently the legal possibility for officers under OSCO to investigate organized crimes of smuggling and laundering of proceeds of wildlife crime, the track record indicates that wildlife crime has not been a priority.
As soon as the law allows, the AFCD should use their new powers to extensively investigate cases of the illegal shark-fin trade and laundering thereof. The Financial Action Task Force’s Report on Money Laundering and the Illegal Wildlife Trade provides guidelines and examples on how to conduct investigations and prosecutions for illegal wildlife trade.
V. WHAT ELSE CAN BE DONE?
Since Hong Kong is the jurisdiction of trade rather than harvest, reform options are limited to targeting trade, financial flows and the criminal network.
Jurisdictions such as Canada banned both imports and exports of shark fin. This would be the most effective and straightforward solution. Unfortunately, this is presently unfeasible in Hong Kong due to the place of shark fins in Hong Kong’s cultural cuisine.[31] Therefore, there has only been progress from the voluntary undertaking of private businesses to not supply shark fin.
There is currently a lack of coordination and information sharing between law enforcement and AML agencies. INTERPOL recommended for each country to establish a “National Environmental Security Task Force” (NEST) between government institutions to share information and allow multi-agency coordination in financial investigations of wildlife crime. A handful of other jurisdictions have since established networks accordingly. A June 2020 study concluded that cooperation mechanisms “successfully supported law enforcement to conduct effective financial investigations for wildlife crimes [and] brought together environmental and AML agencies.” [32]
However, most respondent jurisdictions including Hong Kong did not implement such networks, which is unfortunate as this means pertinent financial information is cannot be acted upon. Sharing of financial intelligence (e.g Suspicious Transaction Reports) can be used to great effect by the AFCD to initiate investigations into wildlife crimes, rather than relying solely on seizures and human sources. [33] Therefore, in the future there should be greater inclusion of the AFCD in the JFIU system.
Furthermore, there is a need for greater deterrent sentencing for these crimes. There is much room for discretion, and courts have in the past leaned towards low penalties. [34]To remedy this, the government should create a comprehensive sentencing guideline for wildlife crime to assist prosecutorial and judicial decision-making. This would enable greater penalties. Existing guidelines for drug trafficking and the guidelines of the UK Magistracy association on Wildlife Trade and Conservation Offences are instructive in this regard. Furthermore, in cases where a defendant is convicted of an “organized crime” under OSCO, the Court can take into account the organized nature in sentencing. [35] However, the sentence still cannot exceed the maximum specified in law for that offence.[36] (e.g 10 years for organized import of an Annex I species.)
Other sentencing factors could include:
Legal assistance to law enforcement (if rendered);
Financial value of cargo;
International element;
Impact on Endangered Species;
Role in holistic operation;
Cruelty involved; and
Degree of organization and sophistication.
Furthermore, CITES only provides for the minimum standard of protection, and so member states always have the freedom to do more to protect endangered species. After the May seizure this year, the Ecuadorian government extended export bans to 5 more species of sharks.[37] In Hong Kong, the Secretary for Environment could use Section 48 of the Endangered Species Ordinance to amend Schedule 1 to also include other species.
Finally and perhaps most importantly, a mindset change of all actors in the legal system is necessary to recognize that illegal wildlife trade deserves more attention, commensurate with its organized and cross-border nature as well as harm to all citizens of the world.
Courtesy of Christopher Jay.
References
[1] https://www.blueplanetaquarium.com/blog/sharks/why-are-sharks-endangered/#:~:text=According%20to%20the%20International%20Union,14.4%25%20'Near%20Threatened'.
[2] https://earth.org/hong-kong-shark-finning-trade/#:~:text=While%20selling%20and%20consuming%20shark,(US%241.3%20million)%20fine.
[3] https://www.sharks.org/shark-finning
[4] United Nations Office on Drug and Crime. (2019) FINANCIAL FLOWS from WILDLIFE CRIME
[5] https://www.hk-lawyer.org/content/rethinking-criminal-justice-responses-hong-kong-wildlife-trafficking
[6] https://www.wwf.org.hk/en/whatwedo/oceans/saying_no_to_shark_fin/
[7] https://sharks.panda.org/news-blogs-updates/latest-news/hong-kong-shark-fin-imports-down-50#:~:text=The%20volume%20of%20shark%20fin,the%20Census%20and%20Statistics%20Department.&text=Looking%20at%20the%20trade%20data,occurred%20in%202011%20to%202012.
[8] Trading in Extinction
[9] https://www.scmp.com/news/hong-kong/law-and-crime/article/3083184/biggest-shark-fin-seizure-hong-kong-history-recovers
[10] https://www.projectaware.org/themes/custom/seabed/templates/infographic/sharks/2.html#:~:text=Since%202000%2C%20Hong%20Kong%20has,the%20majority%20of%20global%20trade. ; Shea KH, To AWL. 2017. From boat to bowl: patterns and dynamics of shark fin trade in Hong Kong—implications for monitoring and management. Marine Policy 81:330–339.
[11] CITES Article II (1)
[12] CITES Article II
[13] https://www.blueplanetaquarium.com/blog/sharks/why-are-sharks-endangered/#:~:text=According%20to%20the%20International%20Union,14.4%25%20'Near%20Threatened'.
[14] Section 18, Import and Export Ordinance
[15] https://www.admcf.org/admcf-project/enhancing-regulation-of-the-shark-fin-trade/
[16] https://www.legco.gov.hk/yr18-19/english/panels/se/papers/secb2-1471-1-e.pdf
[17] http://edition.cnn.com/2015/10/31/africa/tanzania-elephant-poacher-devil ; http://www.telegraph.co.uk/news/2016/06/19/chinas-ivory-queen-in-court-for-smuggling-more-than-700-tusks/
[18] https://www.info.gov.hk/gia/general/201608/25/P2016082400515.htm#:~:text=%22With%20experts%20from%20various%20law,serious%20and%20organised%20crime%20elements.
[19] Cap. 60
[20] Section 2 Endangered Species Ordinance; Section 2 Import and Export Ordinance
[21] Trading in Extinction [9.3]
[22] Cap. 455
[23] Section 2 OSCO
[24] https://www.legco.gov.hk/yr96-97/english/panels/se/papers/se1205_3.htm#E10E3
[25] Section 8 OSCO
[26] Section 25(1) OSCO
[27] https://www.info.gov.hk/gia/general/202007/08/P2020070800288.htm
[28] Trading in Extinction: The Dark Side of Hong Kong’s Wildlife Trade
[29] Trading in Extinction
[30] https://www.info.gov.hk/gia/general/202007/08/P2020070800288.htm
[31] https://www.themantle.com/arts-and-culture/why-banning-shark-fins-controversial-hong-kong
[32] FATF [61]
[33] FATF [64]
[34] Trading in Extinction page 104
[35] Section 27(11) OSCO
[36] Section 27(13) OSCO
[37] https://www.seafoodsource.com/news/environment-sustainability/shark-fin-smugglers-using-coronavirus-as-cover-to-ramp-up-illegal-shipments-into-hong-kong