HKSAR v. Wong Kin Wai and Others

DCCC 58-59 & 62/2017
(Consolidated)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NOS 58-59 AND 62 OF 2017

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REASONS FOR SENTENCE

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INTRODUCTION

1.D1 to D3 were all involved in a pro-longed fraud case involving internet transactions.  D1 and D3 were first jointly charged with one count of “Fraud”, contrary to section 16A(1) of the Theft Ordinance, Cap 210 (Charge 1) whereas D1 to D3 was separately and individually charged with another count of “Dealing with property known or believed to represent proceeds of indictable offence”, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 (Charges 2 – 4).  All the defendants came before me this morning.  D1 and D3 pleaded guilty to all the respective charges that they are facing whilst D2 pleaded not guilty to Charge 4, the only charge she was facing.  As a result of plea bargaining, the prosecution offers no evidence against D2 on Charge 4 upon convictions entered on the remaining charges facing by both D1 and D3.  Charge 4 is dismissed and D2 is discharged accordingly.

FACTS

Fraud (Charge 1)

2.Between January 2015 and January 2016, the police had received reports from 60 victims, who had either saw posts on Facebook or discussion forum ‘UWants’ that online virtual goods for use in online games were on sale or had themselves posted on Facebook or ‘UWants’ that they wanted to purchase those online virtual goods.  They then established contact with the purported sellers via online or phone messages.  After they paid the purchase price of the online virtual goods into designed bank accounts or the Hong Kong Jockey Club betting account as instructed by the purported sellers, the latter ceased contact and the purchased goods were not delivered to them.  Total amount of loss involved was HK$52,181.

3.Investigation revealed that the funds paid by the victims were deposited into the Hong Kong Jockey Club betting account 14677720 held in the name of D1 and a total of 11 bank accounts from 21 January 2015 to 22 January 2016, namely:-

(1) account numbered 012-584-1-010894-7 in the name of D1 held with Bank of China (Hong Kong) Limited (“BOC”);

(2) account numbered 237-390-380-668 in the name of D1 held with Hang Seng Bank Limited (“HSB”);

(3) account numbered 012-584-1-026575-2 in the name of D2 Wong Kin Wing (D1’s younger sister) (“D1’s Sister”), held with BOC;

(4) account numbered 237-424007-882 in the name of D1’s Sister held with HSB;

(5) account numbered 012-584-1-019561-7 in the name of D3 held with BOC;

(6) account numbered 237-468020-668 in the name of D3 held with HSB;

(7) account numbered 442-325122-292 in the name of Chan Tak Fai (“CHAN”) held with the Hongkong and Shanghai Banking Corporation Limited (“HSBC”);

(8) account numbered 237-430723-668 in the name of Lam Cheuk Fai (“LAM”) held with HSB;

(9) account numbered 012-584-1-012230-7 in the name of LAM held with BOC;

(10) account numbered 012-802-1-033476-3 by KK Shop held with BOC; and

(11) account numbered 033-874710-838 by KK Shop held with HSBC.

4.At that time only around 30 victims had made reports to the police, on 1 June 2015, D1 was first arrested for obtaining property by deception.  Then on 10 June 2015, D3 was also arrested for the same offence.

5.At cautioned video-recorded interviews, D1 confessed that:-

- he was unemployed since September 2014 and he had no property or stock;

- D3 was his close friend;

- he and D3 published posts on social media regarding sale of the online virtual goods; when victim purchasers approached them, he and D3 liaised with them and directed them to deposit money into his, D1’s Sister or D3’s bank accounts; they then withdrew the money from the bank accounts and shared the profit;

- he was instructed by D3 to borrow others’ bank accounts as well because their accounts had been repeatedly used to deceive people and had been exposed; he thus asked his friends, CHAN and LAM, to lent their bank accounts to him; both had no knowledge of the fraud;

- KK Shop also had no knowledge of the fraud; he asked some victims to deposit money into KK shop’s bank accounts direct so he could purchase game points from the shop.

6.At cautioned video-recorded interviews, D3 confessed that:-

- he voluntarily committed the fraud with D1 by using their bank accounts to receive payments from victims who wanted to purchase the online virtual goods;

- he did so out of greed and as he was jobless;

- sometimes he was responsible for liaising with the victims and instructed them to pay to designated bank accounts and sometimes he was responsible for providing the bank accounts and withdrawing money therefrom to share with D1; all the money were spent by them on entertainment;

- CHAN and LAM were D1’s friends and they had lent their bank accounts to them without knowing the fraud.

7.Regarding the cases reported after D1 and D3 were released on police bail since the initial arrest, on 6 June and 14 June 2016, D3 and D1 were respectively arrested again for obtaining property by deception.

8.At the subsequent cautioned video-recorded interview, D1 admitted that he had withdrawn money deposited by the victims into his, D1’s Sister and D3’s bank accounts and spent it together with D3.

9.At the subsequent cautioned video-recorded interview, D3 also admitted that he had withdrawn the money and spent it with D1.

Money laundering (Charge 2)

10.From 31 December 2014 to 22 January 2016, D1, knowing or having reasonable grounds to believe that all the withdrawals in his two bank accounts, D3’s two bank accounts and his sister’s two bank accounts mentioned above, totaling HK$253,628.82, represented proceeds of indictable offence, made and/or allowed all these withdrawals be made.

Money laundering (Charge 3)

11.From 31 December 2014 to 22 January 2016, D3, knowing or having reasonable grounds to believe that all the withdrawals in his two bank accounts and D1’s two bank accounts mentioned above, totaling HK$223,947.87, represented proceeds of indictable offence, made and/or allowed all these withdrawals be made.

CRIMINAL RECORDS AND BACKGROUNDS OF D1 & D3

12.D1 has a clear record.  He is 27 years old and was born in Hong Kong.  He received his tertiary education in Australia and returned to Hong Kong in 2012.  He used to be a goods vehicle driver and also a company clerk.  He has been unemployed since October 2014.  He is married with three children with the eldest child being only 6 years old.  Two days ago, the fourth child was born.  He is living with his parents, wife and children and his younger sister, D2 in Fanling.

13.D3 is 25 years old and about 10 years ago when he was still extremely young, he has committed two previous records of Thefts and Common Assault for which he was sentence to receive 12 month Probation supervision.  His last conviction is a shop theft in 2010 for which he was sentenced to the Rehabilitation Centre.  He was born in Hong Kong and he was educated to F4 level.  He used to work as a transportation worker and started working in a restaurant as a chef since 2010.  He is reportedly single and living with parents and elder brother in Fanling.

MITIGATIONS

14.In mitigation, Mr Boyton, counsel for D1, informed the court that D1 was living in Sydney Australia for two years and studied a diploma in hairdressing before coming back to Hong Kong but he did not take up any job about his training since returning to Hong Kong.  Mr Boyton told the court that D1’s wife is now still in the hospital after giving birth although he properly acknowledged that in a case like this, family circumstances is no mitigation and is not of much assistance.  He stressed however that the internet fraud is not sophisticated and according to his instructions, it was D3 who taught D1 how to make use of the internet to deceive other buyers.  A letter of mitigation was written by D1 and produced in which D1 said he was deeply remorseful.  He also converted to Christianity during incarceration and determined to turn a new leaf.

15.Ms Lai, counsel for D3, informed the court that D3 has actually married.  The wife has a 4 years old son from her previous marriage and D3 needs to take care of them.  He is the sole bread winner of the family and each month he contributed about $8,000 to the family.  Ms Lai told the court that the reason why D3 committed the offences was because D3’s father had a gambling debt in Macau for about $500,000 and because of this the family has to re-mortgage the house and D3 was in great financial difficulty.  According to her instruction, D1 is the prime mover and he stated that he only joined D1 to commit the crime in March 2015.  D3 also submitted a letter of mitigation written by himself, his wife and a social worker.  I am not going to refer to the contents of these letters.  Suffice it to say that D3 is very remorseful and asks the court to be as lenient as possible.  His wife is now pregnant and the new baby is expected to be delivered in September and she asks the court to impose a suspended sentence.

SENTENCING CONSIDERATION

16.As said, the subject-matter of the fraud relates to what can be described as internet fraud which involves the defendants posing as sellers for online virtual goods for use in online games on Facebook or discussion forums requiring the purchasers to transfer money into a designated account.  After the money is transferred into the account, the purchasers lost contact with the sellers and the “goods’’ were never received.  In such a transaction, the transaction is done remotely so that the seller and purchaser are in contact only through the means of the relevant social medium that they operate the transaction under.  Charge 1 alone refers to the reported cases of 60 victims who had reported their cases to the police involving a total sum of $52,181.  The offences were committed during the 12 months between January 2015 and January 2016.

17.The two remaining charges of “Dealing with property of the proceeds of an indictable offence” relate to other unreported cases where money that had been obtained and placed into the bank accounts through the fraudulent sale of the virtual goods used in the online games were withdrawn or allowed to be withdrawn by D1 and D3.

18.Charge 1 can be properly described as a fraud committed on the Internet and such an offence is increasing quickly over the recent years with the popularity of internet trading.  The fraud is practiced on the general public at large and the number of victims can be high. Offence of this kind has serious negative impact on internet trading activities and they also seriously jeopardize the interest of decent and honest traders and buyers acting in good faith in these activities.  The offence is easy to imitate and easy to put into practice if one simply has the right technology.  Such an offence is suitable for a deterrent approach in sentencing.

19.The prominent feature of internet transaction is that there is no face-to-face interaction between the perpetrator of the offence and the victim.  It is therefore easy for the offenders to use false identities and it is hard to uncover these offences and to prosecute.  It is also easy for the offender to cover his trails by the use of false identity and for non-traceable communications devices, and the loss of the victims is difficult to recover.

20.In offences involving such fraud aimed at gullible victims and the public at large which is dispicable, the court can and have adopted a stringent deterrent approach.  These kind of offences, even when they do not involve large sums as losses, can involve starting points of sentence in the region of 3 to 4 years’ imprisonment even for a person with no previous conviction record (see HKSAR v Liang Yaqiong & Others [2009] 1 HKLRD 334 and HKSAR v Wu Mudi [2008] 5 HKLRD 179).

21.In HKSAR v Leung Yiu Fai (unreported) CACC 100/2014 (a Chinese judgment), the Court of Appeal in dealing with an appeal of sentence involving internet fraud commented that the offence committed by the applicant were, to some extent, akin to street deception and telephone deception cases.  The reason being that these offences are all targeted against the public at large and were also despicable and shameless in their nature.  The Court of Appeal made it clear that this kind of offence must be deterred so as to prevent the innocent people from falling to the traps by the fraudsters.  In that case, the applicant adopted the same modus operandi and deceived 36 victims in a short period of within two months to buy Ocean Park tickets in the internet platform and the total sum involved is $63,180.  The Court of Appeal approved the starting point of 30 months adopted by the trial judge and said it was not excessive.

22.Although the sum involved in Charge 1 is somewhat lesser but the numbers of victims involved is far much bigger and the offence has been carrying on for a whole year.  Having regard to the factors that I have set out, I consider that the appropriate starting point for sentence in respect of Charge 1 for each defendant - and I do not think it is necessary to distinguish between them although they blamed each other as the prime mover - should be one of 3 years’ imprisonment.  D1 and D3 both had indicated their pleas of guilty at the first available opportunity and for which is entitled to a full one-third discount from sentence.  That will lead to a sentence of imprisonment in Charge 1 for each defendant of 2 years’ imprisonment.

23.Regarding the “money laundering offence” faced by each of the defendant, the black money that they have withdrawn or allowed to be withdrawn could only represented monies deposited by the other victims of internet frauds into their designated bank accounts during the period who did not report the matter to the police.  Mr Boyton conceded, and in my view properly, that this is the only and reasonable inference in the circumstances and he could not dispute that D1 has actual knowledge of the predicate offence in the money laundering charge.  Ms Lai did not make any submission on this point during her mitigation and she also did not seek to argue the otherwise.

24.In the case of HKSAR v Boma [2012] 2 HKLRD 33, the Court of Appeal stressed that deterrence is a paramount objective of the sentence and that the amount of money laundered is a significant feature.  The sentencer should also take into account features such as the nature of the predicate offence; the state of the offender’s knowledge; whether there is an international dimension; the sophistication of the offence including the degree of planning; whether the offence was committed by or on behalf of an organised criminal syndicate; whether there was one transaction or many and the length of time over which the offence was committed; whether the offender continued to launder after discovering the nature of the funds; and the role of the offender and the acts performed by him.

25.In the present case, I note the following aggravating factors:-

(a) both defendants dealt with the money with actual knowledge of the predicate offence;

(b) there were 694 and 576 impugned transactions in relation to D1 and D3 respectively spanning one year, which involved a not insubstantial total amount of money of about $230,000 to $250,000;

(c) there must be a high degree of planning as it involves the setting up of two local bank accounts by each of the defendant and also the borrowing of bank accounts from D1’s sister. Also there was the use of pre-paid or unregistered sim cards for contacts with buyers;

(d) both defendants played an active role in the commission of the offence and arranged for the deposits and withdrawals of those deposits;

(e) the circumstances in which the defendants came to commit the offence arose from their commission of another criminal offence by them in Charge 1, namely internet frauds.

26.In Secretary for Justice v Ngai Fung Sin Apple [2013] 5 HKLRD 104, Yeung VP said:

“Generally speaking, the sentence passed in a “money laundering” case is primarily to reflect the amount of the “illicit/black money” involved. Neither the fact that the “illicit/black money” was actually not derived from an indictable offence nor the defendant’s ignorance of the actual source of the “illicit/black money” is necessarily a valid mitigating factor. On the other hand, if there is evidence which can prove from what serious crime the “illicit/black money” was derived and if the defendant was aware of the origin of the “illicit/black money”, that would be an aggravating factor (see HKSAR v Xu Xia Li [2004] 4 HKC 16). Based on the same rationale, the fact that the defendant of a “money laundering” case has not obtained any financial benefit was not a mitigating factor.” (emphasize added)

27.In Secretary for Justice v Wan Kwok Keung, Yeung JA noted that in the judgment in HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, Cheung JA had set out a schedule of starting points taken for sentence for a range of offences of dealing in the proceeds of an indictable offence.  Yeung JA said:

“The sentencing starting point is 3 years or so where the “black money” involved is between $1 million and $ 2 million.”

28.As Charge 2 and Charge 3 involves about $250,000, arithmetically the starting point should be only about 9 months but because of the aggravating factors that were present, the starting points should be increased.  In HKSAR v Hsu Yu Yi(supra), Cheung JA had also said that:-

“The offence of dealing with the proceeds from an indictable offence does not necessarily have any direct correlation with the indictable offence in question. However, if the relevant indictable offence can be identified, the court may take into account the sentence imposed on the indictable offence per se when determining the sentence of the dealing offence.”

29.For these reasons, I consider the appropriate starting point for each money laundering offence should be 15 months.  I shall similarly afford a one-third discount to reflect the guilty plea.  The sentence for Charge 2 and Charge 3 is therefore one of 10 months’ imprisonment.

30.As said, these two money laundering offences were involving black monies received by these two defendants arising from internet fraud practiced on the other victims who did not report their losses to the police.  There is therefore no overlapping with Charge 1 as such and in principle, the offences are separate and distinct and the sentences on Charge 2 and Charge 3 can run wholly consecutively with the sentence on Charge 1.  However, because of the totality principle, I will still adjust the sentence by ordering 2 months of the sentence on Charge 2 and Charge 3 to run concurrently and the remainder of the sentences to run consecutively with the 24 months’ imprisonment on Charge 1.  As a result, D1 and D3 each has to serve a total sentence of 32 months’ imprisonment.

31.I shall ask the Probation Service to contact the wife of D3 to see if there is any assistance that is required to help the family during this difficult period.