For discussion
on 20 November 1997

Provisional Legislative Council
Panel on Security

Policy and Arrangements on Sharing of Assets Confiscated from Drug Traffickers


This paper sets out the Administration's policy and arrangements on the sharing of assets with foreign jurisdictions. The sharing only relates to assets which have been confiscated from drug traffickers.


2.A proposal to share with the United States Government (USG) assets confiscated from an absconding drug trafficker was submitted to the Finance Committee (FC) at its meeting on 17 October 1997 for approval of appropriation. Given that Members would like to know more about the policy and arrangements on asset sharing, the Chairman of FC advised the Administration to brief Members of the Security Panel first before re-submission of the proposal to the FC for funding support.


3.We have been co-operating with foreign jurisdictions in suppressing drug trafficking and combating money laundering. In such mutual assistance, we feel that financial gain arising from assets confiscated from drug traffickers should be nothing more than an additional benefit. However, in recognition of the importance of foreign jurisdictions' contribution in combating the drug problem, our policy is :

  1. to consider requests to share assets on a case-by-case basis, given that the circumstances surrounding each cooperation differ and the extent of assistance is not the same. This is in line with paragraph 5 of Article 5 of the 1988 United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances which provides that a party may share with other parties, on a regular or case-by-case basis, assets confiscated from drug proceeds in accordance with its domestic law, administrative procedures or bilateral or multi-lateral agreements;

  2. to have the Committee on Asset Sharing (the Committee) to examine all requests on asset sharing on a case-by-case manner. The Committee is chaired by the Secretary for Security, or his representative, and attended by the Secretary for Justice, the Commissioner for Narcotics, the Secretary for the Treasury, the Commissioner of Police, the Commissioner of Customs and Excise, and the Commissioner of the Independent Commission Against Corruption, or their representatives; and

  3. not to accept requests from foreign jurisdictions for assets sharing involving confiscated assets when the total amount is HK$10 million or less. Establishing a threshold value is necessary as asset confiscation is a time-consuming process, and a considerable administrative effort is involved in processing of the court orders and other confiscation procedures on the part of the requested party in each confiscation.

4.The Executive Council was consulted in April 1993 and supported this policy on asset sharing. A Legislative Council Brief on this subject was subsequently issued in May 1993. A Bills Committee under the former Legislative Council was formed in 1995 when the legislative amendments relating to confiscation provisions under the Drug Trafficking (Recovery of Proceeds) Ordinance were proposed.

Detailed Arrangements

Criteria for Asset Sharing

5.Having regard to the policy on asset sharing, the Committee would examine the extent of contribution that the requesting jurisdiction has made to the work which has resulted in the confiscation. Moreover, while the sharing of confiscated assets is based on international comity, the requesting party needs to be a government with which we have entered into an agreement on mutual legal assistance in criminal matters, or previously a bilateral agreement on the suppression of drug trafficking. This is to ensure reciprocal sharing treatment if we are to raise a similar request with them.

Ratio of Sharing

6.To ensure our administrative costs are recovered and to take account of costs incurred in those cases where no assets are confiscated, we will retain at least 60% of the assets confiscated in any particular case. In other words, the assets to be shared with a requesting jurisdiction will be the net confiscated assets, after the deduction of administrative costs to Hong Kong. In order to avoid the lengthy process of assessing those costs on each occasion, the administrative costs have been set at 20% of the gross confiscated assets in all cases. This 20% is supported by detailed calculation for one of the cases. Thus, the amount to be handed over to the requesting jurisdiction will range from zero to a maximum of 40% depending on its contribution. Moreover, where some of the assets are located in the other jurisdiction, they will be taken into account and only a net amount will be paid over.

Mechanism for Asset Sharing

7.Under section 13(7) of the Drug Trafficking (Recovery of Proceeds) Ordinance, the balance of the proceeds of confiscation, after the settlement of specific payments stipulated in the section, shall be deposited in the General Revenue. However, recognising this requirement would unduly inflate both general revenue and public expenditure, as well as lengthen the administrative procedures involved in processing requests for asset-sharing, amendments had been introduced to the Drug Trafficking (Recovery of Proceeds)(Designated Countries and Territories) Order in 1995 to provide that assets confiscated as a result of the enforcement of overseas orders shall be placed in a Deposit Account for a period of five years, or until they are shared, whichever is the earlier. The confiscated assets, or our share remaining, shall then be transferred to the General Revenue. Our share of assets confiscated in and received from other jurisdictions shall be transferred directly to the General Revenue.

Present Position

8.Hong Kong has cooperated with the US on 15 drug cases which have resulted in drug proceeds amounting to about $360 million being frozen or confiscated in Hong Kong. Up till now, we have received two requests from the US Government for sharing of confiscated assets. We have also forwarded two requests to the US Government for sharing of drug trafficking proceeds confiscated on their side.

Security Bureau
November 1997