The Three-Year Financial Analysis
Mr Ho Chun-kit, a senior technical officer, was subject to a financial investigation covering 1 January 2021 to 31 December 2023. Records establish: monthly salary of HK$62,000 in 2021, HK$66,000 in 2022 and HK$70,000 in 2023, plus annual bonuses of HK$55,000, HK$60,000 and HK$62,000. His wife earned HK$20,000 a month from January 2022 onwards and had no income in 2021; she received a HK$60,000 bonus in December 2023. Identified household expenditure was HK$22,000 a month on mortgage, HK$18,000 a month on living costs, HK$5,000 a month on school fees, HK$4,500 a month on car running costs, HK$48,000 in insurance premiums and HK$90,000 on overseas travel. Combined bank balances were HK$195,000 on 1 January 2021 and HK$1,860,000 on 31 December 2023. In August 2023 he bought a car for HK$380,000 in cash. He explains HK$320,000 as an inheritance from his late father, HK$150,000 as an insurance maturity payout and HK$250,000 as 'a loan from a friend' for whom no records exist; the inheritance and payout are documented.
1. Calculate the unexplained amount for the three-year period, showing every step.
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Step 1 - Ho's emoluments
| Year | Salary | Bonus | Total |
|---|---|---|---|
| 2021 | 62,000 x 12 = 744,000 | 55,000 | 799,000 |
| 2022 | 66,000 x 12 = 792,000 | 60,000 | 852,000 |
| 2023 | 70,000 x 12 = 840,000 | 62,000 | 902,000 |
| Total | 2,553,000 |
Step 2 - Wife's income: 20,000 x 24 months (2022-2023) = 480,000, plus bonus 60,000 = 540,000.
Step 3 - Total household income: 2,553,000 + 540,000 = 3,093,000.
Step 4 - Expenditure: mortgage 22,000 x 36 = 792,000; living 18,000 x 36 = 648,000; school fees 5,000 x 36 = 180,000; car running 4,500 x 36 = 162,000; insurance 48,000; travel 90,000. Total = 1,920,000.
Step 5 - Available surplus: 3,093,000 - 1,920,000 = 1,173,000.
Step 6 - Increase in assets: (1,860,000 - 195,000) = 1,665,000, plus the car acquired for 380,000 = 2,045,000.
Step 7 - Unexplained: 2,045,000 - 1,173,000 = 872,000.
Step 8 - Documented explanations: inheritance 320,000 + insurance payout 150,000 = 470,000. Residual = 872,000 - 470,000 = 402,000.
Step 9 - Sensitivity: if the disputed 250,000 'friend's loan' were accepted at face value, 152,000 would still be unexplained.
2. Does the HK$402,000 figure prove corruption? Explain what it does and does not establish, and identify the evidence that would give it value.
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No. On its own it is an analytical indicator, not proof.
What it shows: that over three years the household's identifiable assets grew faster than its identifiable lawful income could support, after allowing for documented gifts and insurance. That justifies further inquiry and is the kind of comparison relevant to s 10 POBO, which is concerned with property disproportionate to present or past official emoluments, or a standard of living above that commensurate with them.
What it does not show: the source of the money, or that any of it came from a person having dealings with the department. Unexplained funds may be gambling winnings, undocumented family support, an undeclared second job, or simply poor record-keeping. The calculation also rests on estimates: if actual expenditure is higher than HK$1,920,000, the surplus is overstated and the true discrepancy is larger - so HK$402,000 is best treated as a floor, not a ceiling. Conversely, if any income stream has been missed, the figure falls.
Evidence that would give it value:
- Traced deposits - statements showing who paid, when, and whether the payers or their employers are contractors, suppliers or applicants dealt with by Ho.
- Proof on the disputed 250,000 - the alleged lender's identity, his bank records, his relationship to Ho, and whether he has the means to lend it.
- Corroboration of the lifestyle estimate - utilities, school invoices, travel bookings, credit card statements - so the expenditure figure cannot be attacked.
- An explanation interview in which each large credit is put to Ho individually and his account tested against documents. Without source evidence, a discrepancy figure alone should not be put as the case; it should be put as a question requiring an answer.
3. List the records you would obtain first, and state for each what it proves or excludes.
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- Full bank statements, all accounts, 24 months before and after the review period (Ho, wife, joint, credit cards). Proves the timing and identity of large credits, and excludes the possibility that the closing balances came from a pre-2021 source.
- The alleged lender's bank account and personal records. Either corroborates a genuine loan or excludes it; an unsupported 250,000 credit is the most vulnerable part of Ho's account.
- Car dealer invoice, payment record and the cash withdrawal trail for HK$380,000. Cash purchase of a depreciating asset is a classic placement route; the record shows whether the cash existed in identifiable funds.
- Employer payroll and Inland Revenue records. Confirms the emoluments used in the calculation and excludes undeclared allowances, which would otherwise inflate the discrepancy and expose the analysis to challenge.
- Probate documents and the insurer's payout advice. Verifies the two documented explanations, so that the residual 402,000 cannot be attacked as overstated.
- Contract and procurement records showing which contractors, suppliers and applicants Ho dealt with in 2021-2023. This is the bridge between an arithmetic discrepancy and a bribery or s 10 case: without it the calculation proves only that Ho's affairs are unexplained.