HKSAR v. Zhan Xueru

DCCC 760/2017

[2018] HKDC 604

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 760 OF 2017

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Reasons for Sentence

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1.The defendant pleaded guilty to one charge of dealing with property known or believed to represent proceeds of an indictable offence, commonly known as the ‘money laundering’ offence.

Summary of facts

2.In November 2013, a Taiwanese lady came to know an unknown male in Hong Kong via Facebook who claimed to have insider investment information and offered her investment opportunities.

3.The victim agreed to invest and was instructed to remit USD$7,321.86 to a Hong Kong HSBC account (499-734010-838) held in the name of Hoi Kim Tong Int’l Trading Company Limited (Hoi Kim Tong). The money was remitted on 6^th January 2014 and the victim had since been unable to contact the unknown male. The matter was reported to the Hong Kong Police.

4.Police investigation showed that the defendant has been the sole shareholder and director of Hoi Kim Tong since its incorporation on 20^th July 2011.

5.The HSBC account was opened by the defendant with her as the sole signatory on 27^th July 2011.

6.Fund flow analysis of the HSBC account revealed that from its opening to 20^th May 2014, there had been deposits totalling USD$23,388,908.37[1] and HKD$399,201.62 into the account.

7.Withdrawals of similarly substantial amount usually followed on the same or within a few days of the deposits. There were 609 transactions in total.

8.The top 10 fund depositors were either mainlanders or companies owned by them. They contributed to 57% of all deposits, which amounted to around USD$13.3 million.

9.The top 10 fund recipients were also either mainlanders or companies owned by them. Some of the recipients were also the top 10 depositors. The recipients together received 89% of all withdrawals which amounted to around USD$20.8 million.

10.The mainlanders and the companies either could not be located or had refused to assist in the Police investigation.

11.The account was closed by the bank on 21^st May 2014 with no remaining balance.

12.Movement record of the defendant indicated that she was present in Hong Kong when the HSBC account was opened.

13.Despite the massive amount of money going through the company bank account, neither Hoi Kim Tong nor the defendant had filed any tax returns with the Inland Revenue Department from 2008 to September 2014.

14.Neither Hoi Kim Tong nor the defendant had been registered owner of any property in Hong Kong.

15.The defendant was arrested for laundering money on 18^th July 2017 when she entered Hong Kong via Lo Wu.

16.In the subsequent cautioned video recorded interview, the defendant claimed that she lived alone in mainland China and worked as an insurance agent, earning around a few thousand to several tens of thousand dollars per month. Her husband lived and worked in Chiu Chow earning around a few thousand RMB per month. They have a 17-year old son who was at a boarding school. The defendant claimed that it was mainly she who was responsible for household expenses.

17.The defendant confirmed that the copies of her China identity card and her old two-way permit attached to the opening mandate of the HSBC account were hers and that the personal particulars including her address, mobile phone number and email were correctly stated. She was still using the same phone number.

18.The defendant said she came to Hong Kong on this occasion to shop. In fact, every time she came to Hong Kong from 2011 to 2014, she came to shop.

19.The defendant insisted that she had not opened any company or engaged in any business in Hong Kong.

20.The defendant’s conviction is on the basis that she had reasonable grounds to believe that the money that was deposited into the HSBC account represented wholly or in part proceeds of an indictable offence.

Previous conviction

21.The defendant is of previously clear record.

Mitigation

22.I heard in mitigation that the defendant is a 40-year old Chinese citizen and 2-way permit holder. She was born and educated up to Junior Secondary level in China. She worked as an insurance agent with an unstable average income of around RMB10,000 per month.

23.The defendant only started working in around 2016, after the commission period of the present offence, because of her financial problem. The defendant, therefore, only had a very short work experience. She had a shortage of funds and her son was about to enter university. She just wanted to work to earn some extra money.

24.The defendant got married over 20 years ago, right after she finished secondary school. She had always been a stay at home mother since marriage, taking care of her family and son. She lacked any societal experience.

25.That was why when her 93-year old mother-in-law’s relative 許智 (the defendant’s cousin) told her that he needed to set up a company in Hong Kong for his electronic and computer parts trading business to receive funds and pay out expenses, she did not give it too much thought and agreed to do him a favour.

26.The defendant did not receive any return or reward for her trouble from the cousin, who took care of everything, including the setting up of the company and all the relevant paperworks. All the defendant had to do was come to Hong Kong to put down her signature.

27.The operation of the account was conducted by the cousin, without the defendant’s participation in any way. The defendant had handed over all the relevant documents including the bankbook and the personal identification number for the online operation of the bank account to the cousin.

28.The defendant, nevertheless, admits that she should have some sense of legal implication about the danger that the account might be used for something illegal. That is why she decided to plead guilty to the charge.

29.Letters written in mitigation were handed up and the defendant’s family members were in court to show their support. The defendant is described as a good mother and good wife. The defendant was being naïve and was manipulated and exploited by the cousin.

30.It was put forward in mitigation that during the time the bank account was in operation between 2011 and 2014, even though the defendant did come to Hong Kong during that period, she merely came as a tourist and to do some shopping.

Sentencing considerations

31.The maximum sentence on conviction upon indictment for the offence of money laundering is that of a fine of $5 million and imprisonment for 14 years[2].

32.The gravamen of a money laundering offence is the amount of money handled, not the amount of profit to the defendant or the loss to the victims, and that in most such cases it is simply not possible to determine the question of profit to the defendant or the loss to the victim even if they could be identified: HKSAR v Chen Zhen Chu [2007] 5 HKC 505.

33.In the case of HKSAR v a male known as Boma Amaso, CACC 335/2010, the Court of Appeal specifically considered whether to lay down sentencing guidelines to be applied in money laundering cases and decided not to do so. The Court however did identify certain factors to be considered when engaging in such a sentencing exercise.

34.Before setting out the factors, the Court emphasized that deterrence is paramount in this category of offence, citing from the case of R v Basra[3]: “the criminality in laundering arises from the encouragement and nourishment it gives to crime in general. Without it many crimes would be rendered much less fruitful and perhaps more difficult to perpetrate”.

35.The Court also emphasized the importance of the amount of money laundered, although “this is not the be-all and end-all of a case but is a significant feature”. The total charged amount of money laundered in the present case is about HKD$182,364,908.

36.I set out in gist the factors below and how they might be applicable in the present case.

37.The nature of the predicate offence, if known: Apart from the USD$7,321.86 that was deposited by the Taiwanese victim, the nature of the offence or offences that generated the rest of the laundered money remains unknown. Hence nor is it known how the defendant’s laundering might have assisted the underlying crime or hindered its detection.

38.The state of knowledge of the defendant, either of the nature of the predicate offence or knowledge of the fact that the funds are the proceeds of an indictable offence: Again, this factor is not applicable to the present case given that there is no evidence to suggest that the defendant knew anything about either.

39.An international dimension, which include money laundered from or for those operating in mainland China, is a significant aggravating feature: The depositors and recipients of the laundered money were mainlanders and companies owned by them. There is an international or cross-border element in the commission of the money laundering offence. This aggravating feature is present in our case.

40.The sophistication of the money laundering: Here the only evidence available is that the defendant was the sole director and shareholder of the company and that she was the sole signatory of the HSBC account. The opening of the account by the defendant in Hong Kong to receive deposits and allow withdrawals cannot be regarded as too sophisticated, although it did require some effort on the part of the defendant to come to Hong Kong to sign the relevant documents.

41.If the money laundering offence is committed by or on behalf of an organized criminal syndicate, that is an aggravating factor: There is no evidence in our case to so suggest.

42.The fact that there had been a total of 609 transactions, including both deposits and withdrawals, as opposed to just a few is a consideration.

43.If the offender continues to launder funds after discovering as a fact that the funds were proceeds of an indicatable offence or after discovering the nature of an offence which is serious, this would be an aggravating factor: There is no evidence that such is the case in the defendant’s situation.

44.Lastly, the sentencing court should have regard to the role of the offender and the acts performed by her: The director of a laundering operation or scheme should attract a greater sentence than a person engaged by her.

45.In the present case, there is no evidence from the prosecution to suggest what exactly the role of the defendant was, although I do find that it is the only reasonable inference that she must have played a not insignificant role given that she was the sole signatory of the HSBC account.

46.On the other hand, there is no reason for me not to accept what was put forward in mitigation, that is to say, the defendant was helping out her cousin in committing the present offence, that she did not receive any direct reward from the cousin and hence did not benefit directly from either the underlying offence or the money laundering offence.

47.Bearing in mind the circumstances of the defendant’s commission of the offence, in particular the total amount of laundered money of around HKD$182 million, the laundering being conducted over a 34-month period, and the cross-border element, I find that an appropriate starting point in the present case is that of 5 years’ imprisonment.

48.I find that there is nothing in the defendant’s mitigation that would warrant a discount in sentence that is not already subsumed in the discount to be granted for her plea of guilty.

49.The defendant is granted the full one-third discount for her timely guilty plea, and is sentenced to 40 months’ imprisonment.