HKSAR v. Li Zhanquan

DCCC 701-703 & 705/2019

(Consolidated)

[2020] HKDC 1073

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NOS 701-703 & 705 OF 2019 (CONS)

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Reasons for Sentence

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1.The original charge sheet contains a total of four defendants. On 13 May 2020, I dealt with D1 and D2 and sentenced them to 26 months and 28 months respectively. On the last occasion, the proceedings were conducted in Chinese. At the request of the prosecution counsel, the present proceedings relating to D3 is conducted in English. D3 faced one charge of conspiracy to deal with property known or believed to represent proceeds of an indictable offence, the property being a sum of HK$10,000 and US$1.87 million-odd. He pleaded guilty to the charge and was convicted accordingly.

Brief Facts

2.In the morning of 13 February 2019, the Bank of Valletta in Malta discovered a cyber-attack on their banking system (cyber-attack). A total of 11 unauthorised transactions involving EUR $13 million was made to various banks around the world.

3.Around HK$89 million was remitted to eight bank accounts in Hong Kong, four of which (involving HK$52 million) were successfully deposited into two accounts held at DBS Bank and two at the Bank of Communications (BoComm) the same day. Most of the funds were further dissipated into 2^nd and 3^rd tier accounts on the same day. A report was made to the Hong Kong Police.

4.Another fraud involving a Brazilian company called Boston Cons Group Business Registry LTDA was deceived into transferring various sums (Brazilian deception) totalling US$3.81 million-odd (approximately HK$30 million) into a Bank of China account held by Kaisheng Technology Company Limited (Kaisheng).

5.D3, a PRC citizen, was the sole signatory of one of the accounts that received some of the proceeds of the cyber-attack and the Brazilian deception. This account was held at the Bank of Communication (BoComm) with the account number 382 549 101 238401 under the name of a company called Kay Trading Limited (Kay Trading).

6.From the Companies Registry records, Kay Trading was established on 21 December 2018 by D3 who was the sole director and shareholder. The company office was registered at an upstairs unit in Kwun Tong. No tax returns were recorded with the Inland Revenue Department. The Business Registry documents showed that the nature of the company’s business was “textile sales, e-commerce, mainland trading, import and export business, and electronic products”. The company’s business address was that of a secretarial company’s office.

7.The BoComm bank account was opened by D3 on 2 January 2019. The travel index records show that D3 was in Hong Kong on the day. D3 was the sole authorised signatory to the account. This bank account comprised of HK dollar and US dollar savings accounts, and the HK dollar account had two cash deposits totalled HK$10,000 on 2 January 2019. 

8.The transaction records of the USD savings account show that the number of transfer deposits during the period of 11 February 2019 to 28 February 2019 was 10 with the amount of US$1,872,964.1 with an interest credit of US$4.29. During the same period of time, there were four transfer withdrawals totalled US$725,400.

9.On 13 February 2019, Kay Trading received three deposits as follows: (l) a sum of US$200,000 from Rongwei Technology Company Limited (Rongwei); (2) US$260,825 from Dabary Grand Limited (Dabary) and another sum of US$164,804 from Dabary in connection with the cyber-attack. These deposits totalled US$625,629 (approximately HK$4.9 million) were remitted to two companies, namely, Minghongsheng Limited (Minghongsheng) and Hong Kong Bentley Group Limited (Bentley) within a few minutes. The accounts of these two companies recorded huge number of transactions within a short period of time.

10.Rongwei was a trading company established by Tian Xijun who was the sole director and shareholder. D2, Li Chengyong, replaced Tian as its sole director and shareholder on 26 October 2018. The company bank account was opened by D2 who was the sole signatory. No tax returns were filed by Rongwei.

11.Dabary was a company purportedly trading in building materials and was established by one Yang Guojing.

12.Minghongsheng, purportedly trading in fashion products, was established on 3 December 2018 by one Zhou Houming who was the sole director and shareholder. The company office was registered at its secretarial company office. No tax returns were filed.

13.Minghongsheng’s bank account was with DBS which was opened by Zhou on 14 December 2018 as the sole signatory. In the USD savings account of the company bank account, there were 385 deposits amounting to US$78.2 million-odd and these monies were transferred out through 605 withdrawals between 23 January and 6 April 2019.

14.Bentley was established on 25 February 2013 with one Wang Wenxi (Wang) as the sole director and shareholder. The company office address was registered as that of its secretarial company office. Only one tax return was filed in 2014 and it showed no actual business in Hong Kong.

15.As regards the Bentley’s bank account with BoComm (account number 382 549 100 766501), it was opened by Wang on 9 August 2018 as the sole signatory. In its USD savings account, there were 71 deposits amounting to US$29.3 million-odd and 70 withdrawals amounting to US$29.4 million-odd between 1 January and 18 February 2019. The proceeds were remitted out to various unknown entities on the same day.

16.Kaisheng was incorporated on 20 June 2017 with Shui Yunxia (Shui) as the sole director and shareholder. The office address was a registered unit of a commercial building in Mongkok. No IRD documents were available, and the nature of the company’s business was unknown.

17.Kaisheng held a bank account with BoComm with the account number 5351 0040 0701. Shui was the sole signatory.

18.From the sum of US$3.8 million-odd arising from the Brazilian deception, a sum of US$650,000 was transferred into D3’s bank account with the BoComm on 15 February 2019.

19.The branch manageress of BoComm confirmed that she handled the account opening application for D3 on 2 January 2019. She checked D3’s identity and D3 signed all the papers.

20.On 13 March 2019, another branch manager said D3 visited his branch in Tsuen Wan. D3 enquired about the status of his bank account and wanted to withdraw the remaining balance. D3 was later arrested at the branch office when the manager made a report to the police.

Mitigation

21.D3 is aged 24 and is a PRC resident. He had no criminal record in Hong Kong. His parents and sister are now living in China. Defence lawyer submitted a mitigation bundle and said that D3 has a minor role. It was submitted that D3 was asked by his cousin to set up a company and open a bank account in Hong Kong in late 2018, and eventually Kay Trading was incorporated. D3 did not question the arrangement. Pursuant to his cousin’s instruction, D3 passed the company documents and bank’s security device to his cousin. When D3 was told to sort out certain banking matters with the bank, D3 came to Hong Kong and eventually was arrested by the police inside the bank branch.

22.Defence lawyer referred to the cases of HKSAR v Hsu Yu yi [2010] 5 HKLRD 536 and HKSAR v Boma [2012] 2 HKLRD 33 as the sentencing considerations and principles. Defence lawyer submitted that in the present case, there is no evidence to suggest that D3 worked for an organised criminal syndicate. D3 was not aware of the nature of the illicit monies and was not involved in the operation of the bank account. D3 did not deal with the proceeds of the crime personally and did not know other defendants in this case. D3 has a minor role and was acting on the instruction of his cousin. The court was told that D3’s cousin committed suicide in January this year.

23.The court enquired about the TIC record of D3 and was told that the defendant had been granted police bail at the very beginning. D3 came back to Hong Kong to answer police bail. The credit balance of D3’s bank account has been returned to the victim’s company in January this year (see paragraph 18 of the defence mitigation bundle).

24.It was said D3 was remorseful, and defence submitted mitigating letters from D3, his parents, his sister, his girlfriend and his another cousin. They all plead for leniency so that D3 can return home as soon as possible.

25.Defence lawyer also accepted that because of D3’s late plea, he cannot get a full one-third discount in sentence, but submitted that the court can grant D3 25% discount.

Sentence

26.D3, who is aged 24 and had a clear record in Hong Kong, indicated his plea on 22 October 2020 when the trial proper was to commence next week, that is, 9 November. D4 will be the only defendant left in the charge sheet facing trial. I am going to be lenient to D3 and allow 25% discount in sentence in light of his late plea (see HKSAR v Ngo Van Nam [2016] 5 HKLRD l).

27.There is no sentencing guideline for offences of money laundering, and conspiracy to commit this substantive offence attracts similar sentence.

28.In his mitigation letter, D3 narrated the background and history of the events leading to his arrest. He was paid about RMB $4,000 per month for working in a jewellery shop run by his late cousin. D3 said he did not know the “truth” of this incident but he chose to believe his cousin who committed suicide later. D3 felt sorry for the victims’ loss. D3’s parents, sister and girlfriend all asked the court to impose lenient sentence on D3 so that they can reunite soon.

29.I accept that D3 occupied a minor role in this incident, but obviously, the whole scam was operated by an international criminal syndicate given the fact that the swindle originated from the cyber-attack in Malta and the Brazilian deception. Without the stooge figure like D3, it is not easy for syndicates to launder illicit money globally.

30.The sum of monies involved in the cyber-attack and the Brazilian deception is huge, but as far as D3 is concerned, he was involved in the total sum of around US$1.8 million plus the original sum of HK$10,000. With the exchange rate of 7.8, the total sum involved in Charge 3 is about HK$14.6 million.

31.I have considered the sentencing considerations expounded by the Court of Appeal in the abovesaid Hsu Yu Yi, Boma and also SJ v Wan Kwok Keung [2012] 1 HKLRD 197. I have also taken into account of the sentence of this court imposed on Dl and D2 on the last occasion. On that occasion, I adopted a starting point of 3 years and 3 months for Dl relating to the illicit money amounted to about HK$11 million and 3 years and 6 months for D2 relating to the illicit money amounted to about HK$13 million respectively.

32.As regards D3, Charge 3 related to about HK$14.6 million. Taking all factors into consideration, I would adopt a starting point of 3½ years (that is 42 months). I would give D3 25% discount for his late plea, and reduce the sentence to 31.5 months. I would also give credit to D3 for his return to Hong Kong to answer police bail consistently. To that extent, I further reduce the sentence to 30 months.