Participating in a ‘Hoi’ scheme – is it illegal?
We are frequently engaged by clients who have been charged with possessing a large amount of cash, usually upwards of $20,000. What usually happens is that the police will search a person’s home or car, locate the cash and ask for an explanation for the possession of the cash. If the person is not able to immediately provide some form of evidence that the money is legitimate the police will charge the person.
The offence most commonly charged is known as ‘possessing tainted property’, which simply means possessing property that does not have a legitimate source. If the cash is also located with a quantity of drugs or a mobile phone which contains drug-related messages, the police might charge the person with a similar offence known as ‘possessing proceeds of a drug offence’.
The difference is that with the first offence the police don’t need to prove where the cash came from, only that it was not from a legitimate source, whereas with the second the police need to prove that the cash was linked to some illegal drug activity.
A ‘Hoi’ scheme
A very common explanation for the possession of such a large amount of cash is participation in a ‘Hoi’ scheme. Most Vietnamese people will know what Hoi is, but for those who don’t, it is an informal club in which the members of the club (usually from Vietnamese families) contribute money to the club in cash on a regular basis.
The cash is lent to other members of the club to assist them when those other members have been unable to obtain financial help from banks or official lending institutions. Families and individuals deposit money with an administrator or chairman, who then lends cash with interest to the other members upon request. There will, therefore, be (at any given time) members of the club who are in possession of large sums of cash.
How to defend the charge
The difficulty in proving that a person is part of a Hoi scheme is that Hoi schemes are typically very informal. There will only be handwritten records and little contact amongst the participants and will only involve the exchange of cash, which of course can’t be traced.
At the time that the police discover the cash, if the person tells the police that the cash was from a Hoi scheme the police usually ask for proof. Because it is difficult to prove that you are part of a Hoi scheme right then and there the police often do not believe the person and will charge them. Essentially, the police take the ‘charge first and then ask questions later’ approach. If the person is charged, it means that the police have formed the view that the person is not being truthful about being part of the Hoi scheme.
With most criminal offences the defendant does not have to prove anything. It is up to the police and prosecutions to prove that the offence has been committed. However, with tainted property type offences, once charged the responsibility then shifts to the defendant to prove that the cash was from a legitimate source.
A common way to prove this is to produce records of the scheme, usually kept by the administrator or chairman of the Hoi to keep track of who has paid what amounts and when. Another common way is to produce sworn statements by other members of the Hoi, as well as the defendant themselves, confirming that the defendant is part of the Hoi scheme.
If the judge accepts that the person is part of a Hoi scheme and the cash was directly from the Hoi scheme then the person is likely to defeat the charge and have the cash returned. There are other ways to prove that a defendant is participating in a Hoi scheme but these are the most common – it is almost never enough to simply tell the police that you are part of a Hoi without producing any other evidence.
Therefore, if you participate in a Hoi scheme it is critical that you keep some form of records which can be independently verified by the police, such as the contact details of the other participants or a journal of your contributions.
One way that participating in Hoi can become illegal
Whilst participating in Hoi in itself is not illegal, it can become illegal if you don’t declare it on your annual tax return. The purpose of participating in a Hoi scheme, in addition to being able to borrow money at a very low-interest rate, is to earn money at a very high-interest rate.
The interest that is accrued every year, even if it is a very small amount, is formally considered to be a form of income and therefore something that must be declared with the Australian Tax Office. This is one of the only ways a person who is participating in a legitimate Hoi scheme can get into trouble with the law.
For more information on this topic, you might like to review the page titled “Confiscations Proceedings“.
Do you need help understanding your legal rights? We at Cridland & Hua are indisputably one of Brisbane’s top law firms. Contact us for professional guidance today.
