Hong Kong lawmakers have urged the government to plug “loopholes” in the city’s legislation to better regulate crowdfunding, after police launched a national security law probe into a fund that provided financial support to pro-democracy protesters.
Police demanded information from the 612 Humanitarian Relief Fund last Wednesday, two weeks after the fund announced it would halt operations at the end of October. The fund, founded during the early days of the 2019 pro-democracy protests and unrest, provided financial support and loans to arrested demonstrators.
DAB lawmaker Elizabeth Quat questioned how the fund was allowed to provide financial services without a licence under the Money Lenders Ordinance: “I don’t understand why there is no regulation for online crowdfunding. A virtual bank needs to obtain a licence. How come [the fund] didn’t need to obtain a licence?” she asked during a Legislative Council (LegCo) meeting on Wednesday.
Quat also accused the government of dragging their feet over enforcement actions against the group: “I don’t understand why the government hasn’t taken any action. This fund is helping those who have conducted illegal activities.”
Her party colleague Ben Chan also called on the government to enforce more comprehensive measures to regulate crowdfunding: “A non-registered fund asking for funds online has been in operation for two years without being regulated. Is this actually a loophole that exists?” he asked. “If we cannot take regulatory action against such a fund, then this is really a loophole that needs to be plugged.”
Chan also questioned how the fund had been allowed to receive funds from another company’s account: “How can a fund that does not have a bank account receive donations through a bank account of another party?… Is this a problem in our Companies Ordinance?”
The fund announced it was shutting operations after the Alliance for True Democracy Limited, the company whose account it had been using to receive donations, decided to liquidate.
Secretary for Financial Services and the Treasury Christopher Hui declined to comment on an ongoing investigation, but said the government will consider implementing other measures to target crowd-funding and money-lending activity.
Hui said that the government needed to address both online and offline crowdfunding in tandem, adding that existing legislation such as the Anti-Money Laundering and Counter-Terrorist Financing Ordinance already regulated crowdfunding activity.
‘Whether these ordinances are sufficient… this is something we will have to look into,” the secretary said.
The secretary also said the fund has also not been properly registered as required under the Societies Ordinance. Hui added that the Companies Registry was investigating whether the Alliance for True Democracy had been providing money-lending services without a proper licence.
“The government has to emphasise that any funds raised, transferred and used must be in accordance with regulatory requirements stipulated in the relevant laws,” he said.
The secretary called on the public to disassociate themselves with any group suspected of breaching the security law: “We strongly appeal to the public to distance themselves from fundraising activities of funds which are suspected of contravening the Hong Kong national security law or other Hong Kong laws, so as to avoid being deceived or of bearing any legal risks.”
HKFP has reached out to fund trustees for comment.
Following the police data request, the fund suspended donations on Monday, saying the Alliance for True Democracy will no longer help it process funds.
The fund had launched one last crowdfunding campaign to cover the costs of winding up its operations. It had strategically kept few funds in its account, and appealed to the public for monthly donations when funds were low as to avoid a possible freezing of its account by the authorities.
Administered by five trustees, the fund has aided thousands of protesters by giving legal assistance, funds for psychological counselling and medical treatment and emergency relief. Its trustees include barrister Margaret Ng, Cardinal Joseph Zen, singer-songwriter Denise Ho, jailed former lawmaker Cyd Ho and cultural studies scholar Hui Po-keung.
Organisers of Hong Kong’s annual pro-democracy July 1 marches disbanded last month, citing an inability to see a way forward in the political climate, after police also launched a probe into the group for alleged violations of the Societies Ordinance.