Following is a question by the Hon James To and a written reply by the Secretary for Transport and Housing, Mr Frank Chan Fan, in the Legislative Council today (March 21):
 
Question:
 
     Last year, the Consumer Council received 35 complaints concerning the sale of overseas properties, which more than doubled the figure of the previous year.  In some of the cases, the uncompleted properties involved subsequently "failed"; in other cases, the estate agents were alleged to have failed to disclose to the buyers the risk that a property valuation might be lower than what had been expected; and in other cases, the buyers demanded, upon discovery that the estate agents concerned had made statements inconsistent with the contents of the sale and purchase agreements, for refund, but to no avail.  Furthermore, according to the Estate Agents (Exemption from Licensing) Order (Cap. 511B), any person who deals exclusively with overseas properties and states in all his documents (including pamphlets, brochures) and in any advertisement that he is not licensed to deal with properties within Hong Kong may be exempted from obtaining an estate agent's licence or a salesperson's licence.  However, if the person concerned also deals with properties within Hong Kong, he is required to obtain a licence.  Regarding the monitoring of the sale of overseas properties by estate agents and salespersons, will the Government inform this Council:
 
(1) whether it knows (i) the number of complaints concerning the sale of overseas properties received, and (ii) the number of such complaints for which follow-up actions have been taken, by the Consumer Council since last year; whether the Consumer Council will consider using the Consumer Legal Action Fund to help complainants recover their losses through legal means; if the Consumer Council will, of the considerations; if not, the reasons for that;
 
(2) among the complaints mentioned in (1), of the number of those which have been found to be substantiated; regarding those substantiated cases where the estate agents concerned have refused to offer compensation, whether the authority knows if the Consumer Council will consider making public the names of such agents as well as those of the relevant property projects and developers so as to prevent more consumers from suffering losses;
 
 
(3) of the number of cases, discovered by the Estate Agents Authority (EAA) in the course of enforcing Cap. 511B in the past three years, in which the sale of overseas properties was alleged to have been conducted unlawfully, and the details of the irregularities concerned;
 
(4) of the total number of cases mentioned in (3) which have been referred to the Police by EAA for follow-up; among those referral cases, the respective numbers of those where (i) both the estate agent and the salesperson involved were unlicensed and (ii) the estate agent involved was licensed but the salesperson involved was not; among the cases in (i) and (ii), the respective numbers of estate agents and salespersons involved; the follow-up actions taken by the Police in respect of such cases;
 
(5) whether the Police instituted prosecutions in the past three years against the estate agents or salespersons alleged to have sold overseas properties unlawfully; if the Police did, of the number of such prosecutions; if not, the reasons for that; the difficulties encountered by the Police in gathering evidence;
 
(6) whether EAA conducted in the past three years surprise inspections on fairs relating to the sale of overseas properties, including checking on such publications as pamphlets, brochures or advertisement, for the purpose of investigating if there were estate agents or salespersons not exempted from obtaining a licence selling overseas properties unlawfully; if EAA did, of the outcome; if not, whether the authorities will allocate additional resources to EAA for conducting surprise inspections;
 
(7) given that the authorities undertook in 1998 to a Subcommittee set up by this Council to examine the subsidiary legislation made under the Estate Agents Ordinance (Cap. 511) that the drafting of the regulations in respect of estate agency work relating to overseas properties would be completed by the end of 1999 for the protection of the rights and interests of consumers in such property transactions, of the latest progress of the work in this respect;
 
(8) whether the authorities will consider abolishing the exemption granted to persons dealing exclusively with overseas properties from obtaining a licence, and bringing such persons within the ambit of Cap. 511; if so, of the implementation timetable; if not, the reasons for that; and
 
(9) given that it is stipulated in the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) (Amendment) Ordinance 2018 (Ord. No. 4 of 2018) which came into operation on the first of this month that designated non-financial businesses and professions (including estate agents) are required to observe the requirements relating to customer due diligence and record-keeping when engaged in specified transactions, whether those persons being exempted from obtaining a licence because of engaging exclusively in the sale of overseas properties are required to observe such requirements; if not, how the authorities will curb the money laundering activities conducted through the buying and selling of overseas properties via such persons?
 
Reply:
 
President,
 
     Having consulted the Commerce and Economic Development Bureau, the Security Bureau, the Financial Services and the Treasury Bureau and the Estate Agents Authority (EAA), I set out my consolidated reply to various parts of the question raised by the Hon James To as follows:
 
(1) From January 2017 to February 2018, the Consumer Council received 41 complaint cases relating to the sale of properties situated outside Hong Kong.  After reviewing the nature of the complaints, the Consumer Council followed up with 17 cases and resolved four of them through conciliation.  The Consumer Legal Action Fund has not received any application relating to this category of complaint.
 
(2) The Consumer Council has an established mechanism for considering cautiously and comprehensively whether to publicly reprimand a trader by naming.  Relevant factors include the trade practices adopted by the trader, the number of complaint cases involved and the trader's attitude in dealing with complaint cases, etc.  If the Consumer Council finds that a trader adopts unscrupulous sales practices and is not amenable to repeated advice of the Council, the Council may consider publicly naming the unscrupulous trader.  Besides, the Consumer Council strengthens consumer education through various channels to remind consumers of the risks associated with and the points-to-note in purchasing non-local properties.

(3) & (4) Pursuant to the Estate Agents (Exemption from Licensing) Order (Cap. 511B), if a person engages in estate agency work exclusively in relation to properties outside Hong Kong, and states in all his letters, accounts, receipts, pamphlets, brochures and other documents (hereinafter referred to as "all his documents") and in any advertisement that he is not licensed to deal with any property situated in Hong Kong, he shall be exempted from the requirement for obtaining an estate agent's licence or a salesperson's licence from the EAA.
 
     If a licensed estate agency company employs an unlicensed person as salesperson to engage in the sale of properties situated outside Hong Kong, and the unlicensed person does not state in all his documents and in any advertisement that he is not licensed to deal with any property situated in Hong Kong, he will not be exempted from being licensed and may be in breach of section 16(1) of the Estate Agents Ordinance (EAO) (Cap. 511) for practising estate agency work without a licence.  The licensed estate agency company who employs such unlicensed person as a salesperson may also be in breach of section 39(1) of the EAO for employing or continuing to employ a person who for the time being is not the holder of an estate agent's licence or salesperson's licence as a salesperson.
 
     Practising estate agency work without a licence or employing unlicensed person to practise estate agency work is a criminal offence.  If the EAA is aware of such cases, it will refer them to the Police for follow-up.
 
     From 2015 to 2017, the EAA referred four cases, under which the person/company failed to state in all his/its documents and in any advertisement that he/it is not licensed to deal with any property situated in Hong Kong, to the Police for follow-up actions.  Details of the four cases are as follows:
 

	Company and salesperson involved	Police's follow-up action
Cases 1 and 2	Involving one unlicensed company and one unlicensed salesperson	Under investigation by the Police.
Case 3	Involving one unlicensed company and one unlicensed salesperson	The Police finished its investigation.  No prosecution was made due to insufficient evidence.
Case 4	Involving one licensed estate agency company and one unlicensed salesperson	The Police finished its investigation.  No prosecution was made due to insufficient evidence.

(5) Apart from the four cases mentioned in parts (3) and (4) above, from 2015 till now, the Hong Kong Police Force has handled three cases involving 190 complainants who alleged to have been cheated when purchasing overseas properties through property sale agents or intermediaries.  The three cases involved 19 property development projects in Japan, the United Kingdom and the United States, as well as a person who claimed to be a property agent and two real estate intermediaries.  The Police has arrested a man with regard to the case involving a property development project in Japan.  The investigation is still underway and no prosecution has been made.
 
     Cases involving overseas properties unavoidably involve the laws and powers of different jurisdictions.  The Police encounters various difficulties in the course of investigation, evidence collection, arrest and prosecution, and the process is time-consuming.  As in other cases involving cross-boundary crimes, the Police will conduct intelligence exchange and seek cooperation with relevant overseas law enforcement agencies.
 
(6) The EAA is a self-financing statutory body that exercises its powers in accordance with the EAO.  To regulate licensed estate agents, the EAA conducts compliance inspections from time to time.  The inspection targets are mainly licensed persons/companies.  To ensure effectiveness of inspections, the EAA considers it inappropriate to disclose details of its inspection work.
 
     As mentioned above, practising estate agency work without a licence or employing unlicensed persons to practise estate agency work is a criminal offence.  If the EAA is aware of such cases, it will certainly refer them to the Police for follow-up.
 
(7) & (8) Regulation of sale of non-local properties in Hong Kong involves complicated issues and requires careful deliberation.  The Government consulted the EAA on this subject matter.  The EAA advises that there would be substantial differences between the sale of properties situated outside Hong Kong and those located in Hong Kong from both the perspectives of market operation and conduct regulation.  Besides, as the sale of non-local properties involves laws and regulations and tax regimes of different jurisdictions, as well as various stakeholders (e.g. non-local developers, intermediaries and agents), the issues concerned are rather complicated and extensive.  In addition, with the advancement of information technology, vendors of non-local properties can now carry out sale and promotional activities easily through the Internet, thereby increasing difficulties in law enforcement.
 
     In light of the above, the Government considers that enhancing public education, with a view to reminding investors and the public alike the risks involved and the issues that they need to pay attention to in purchasing non-local properties (especially uncompleted properties), should be a more effective way.  The EAA has all along been putting much efforts in educating the public.  It has from time to time reminded consumers of the issues that they need to pay attention to before deciding to purchase non-local properties through news articles, publications and other media.  The EAA also issued a practice circular in December 2017 to remind estate agent licensees of the matters they need to comply with and pay attention to in handling the sale of uncompleted properties situated outside Hong Kong.  The circular will take effect on April 1, 2018.  Licensees who breach the guidelines may be subject to disciplinary actions.  The Government will continue to work with the EAA and pay close attention to the situation.
 
(9) In December 2017, the EAA issued a practice circular to provide guidelines on the appropriate practices and measures to be adopted in handling the sale of uncompleted properties situated outside Hong Kong.  These practices and measures, amongst others, include due diligence measures and record keeping requirements.  The best practices set out in the guidelines are not only binding on the licensed estate agents, but also serve as a reference for exempted persons and help enhance their professional conduct and mitigate the risk of their being abused for money laundering purposes.  Further, the guidelines provide a yardstick for consumers to assess whether the sales methods adopted by individual persons are appropriate.
 
     Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) that comes into effect on March 1, 2018, licensed estate agents must comply with statutory customer due diligence and record keeping requirements when carrying out specified transactions.  It should be noted that all persons, licensed or not, are required to comply with other legislations that are relevant to the combat against money laundering and terrorist financing, including the Organized and Serious Crimes Ordinance (Cap. 455), the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405), the United Nations (Anti-Terrorism Measures) Ordinance (Cap. 575), and the United Nations Sanctions Ordinance (Cap. 537), and report to law enforcement agencies if they encounter suspicious transactions.

Ends/Wednesday, March 21, 2018
Issued at HKT 14:40

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