HKSAR v. Lin Tzu-chia and Another

DCCC 791/2010

[2023] HKDC 386

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 791 OF 2010

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REASONS FOR VERDICT

D1 and D2 are Taiwan residents. They face a joint charge of "Conspiracy to deal with property known or believed to represent proceeds of an indictable offence" (Charge 1; commonly known as "money laundering"). D1 also faces a charge of "Failing to surrender to custody without reasonable cause" (Charge 2)  alone.

Procedural History

2.D1 and D2 were arrested by Hong Kong Police on 18 February and 25 March 2008 respectively.

3.They were charged with "money laundering" on 28 June 2010.  Their trial was originally scheduled to commence in the District Court on 30 November 2010, with a pre-trial review fixed for 1 November 2010.

4.At the pre-trial review, the trial date was vacated. Both defendants were granted bail and were allowed to travel to Taiwan provided that they keep the Police informed.

5.There were mention hearings on 28 February and 30 June 2011, which both defendants attended.  In the interim, further legal advice was given on amending the charges.  To cut a long story short, both defendants failed to attend a mention hearing on 7 October 2011.  The case was further adjourned to 11 October 2011.  Both defendants were absent again and warrants of arrest were issued against them.

6.D2 was arrested by the Peruvian authorities in Lima on 5 May 2018.  Following extradition procedures, she was escorted to Hong Kong on 3 October 2021.

7.D1 has remained at large in the past 11 odd years.  On the 1^st day of trial, prosecuting counsel Mr. Mitchell applied to proceed with Charge 1 against D1 in his absence.  Having heard Mr. Mitchell's submissions[1], I was satisfied that D1 has voluntarily absented himself from his own trial.  I found it would be in the interest of justice to proceed with the trial in D1's absence and that the prejudice caused to D1, if any, is minimal.  I granted the prosecution's application.

8.D2 pleaded not guilty to Charge 1.  I entered a plea of not guilty to Charge 1 for D1.  I granted the prosecution's application to leave Charge 2 in the court file; not to be proceeded against D1 without leave of court.

The Prosecution Case

9.The evidence in this case seems voluminous and complex.  In my view, however, there is no need to go into the numbers and documents in detail.  The crux of this case is not about numbers and documents, but rather about common sense (i.e. whether the explanations provided by the defendants were plausible and made sense).

10.The Fund Flow Chart prepared by the prosecution sums up the alleged money laundering activities.  The chart itself is not evidence, but the accuracy of its contents is not challenged by D2's counsel Mr. Tsoi.

11.In a nutshell, there is almost undisputed evidence (i.e. evidence not challenged by Mr. Tsoi, but D1 was absent in this trial)  that local bank accounts controlled by D1, D2 and other named co-conspirators have received or "channelled" funds transferred by "uniquely named parties" (UNPs)  from all over the world (mainly from the United States, Australia and Malaysia).  The companies which held those bank accounts were Found Talent, Rich Intensify, Denton and Spread Eagle.  They are offshore companies registered in Belize, Samoa or the British Virgin Islands.

12.The prosecution called only one UNP to give evidence.  She is Madam Davenport (PW9), an alleged victim of fraud residing in Hawaii.  According to her evidence, PW9 was deceived by a long-time friend named Winfred Wong.  Based on allegedly false representations made by Wong about an investment in China, PW9 instructed Merrill Lynch to send US$250,000 to Rich Intensify's bank account in January 2008.  Mr. Tsoi had no cross-examination for PW9.

The Defence Case

13.D2 elected not to give evidence or call any defence witness.  This is her right; I drew no adverse inference against her in this regard.

Assessment and Analysis of Evidence

14.The burden of proof is on the prosecution to prove each element of the offence beyond reasonable doubt.  There is no evidence of D1 or D2 having a clear record.  I leave the matter as it is.  I need not direct myself on their good character, but would not draw any adverse inference against them in this regard, especially when both of them have absconded for an extended period of time.

15.According to the Fund Flow Chart, a total of 357 UNPs transferred a total sum of approximately US$18.7 million to the bank account of Found Talent during the offence period; out of which, a total sum of approximately US$17.8 million was transferred to various bank accounts held by Young Fast/Sol Young in Taiwan. At the same time, a total of 170 UNPs transferred a total sum of approximately US$11.4 million to the bank account of Rich Intensify during the offence period; out of which a total sum of approximately US$10 million was transferred to various bank accounts held by Young Fast/Sol Young in Taiwan.  This is the big picture.

16.Denton did not receive any payment directly from any UNP.  But Found Talent had by 4 transactions transferred a total of approximately US$1.6 million to Denton; and Denton had transferred a total of approximately US$8.7 million to various bank accounts held by Young Fast/Sol Young in Taiwan.

17.Spread Eagle did not receive any payment directly from any UNP either.  But Rich Intensify had by 48 transactions transferred a total of approximately US$1.4 million to Spread Eagle; and Spread Eagle had by 4 transactions transferred a total sum of approximately US$1.6 million to D1's personal account and D1 has also by 4 transactions transferred a total sum of approximately US$1.6 million to Found Talent.

18.There were also other inter-company fund transfers, but those transactions do not appear to be related to funds coming from the UNPs and the sums involved are much less significant.  I do not think those transactions would assist me in my determination of this case.

19.After their initial video recorded interviews, both D1 and D2 have voluntarily returned to Hong Kong to offer further explanations and to provide more supporting documents to Hong Kong Police.

20.According to their video recorded interviews, both D1 and D2 were employees of a well-established Taiwan company named Young Fast (subsequently changed its name to Sol Young). Young Fast/Sol Young engaged in international trading.  For the purpose of this case and based on the information provided by D1 and D2, the matter arose from Young Fast/Sol Young selling various types of goods (such as cables, wires and shoes)  to buyers in Nigeria and then sending its revenue back to Taiwan.  In gist, this is the defence story.

21.D1 and D2 explained that since the buyers made payments in Naira (the Nigerian currency), the staff of Young Fast/Sol Young stationed at Nigeria had to find ways to remit the revenue back to Taiwan.  To cut a long story short, based on professional accounting advice, D1 and D2 were instructed to open bank accounts for Found Talent and Rich Intensify in Hong Kong for the purpose of collecting remittances from Nigeria and sending them back to Young Fast/Sol Young in Taiwan.

22.In his closing submissions, Mr. Mitchell criticized the validity and practicality of the so-called professional accounting advice mentioned by D1 and D2 in their video recorded interviews.  I fully appreciate Mr. Mitchell's criticisms but I cannot ignore the fact that Found Talent has transferred about 95% of the funds it received back to Young Fast/Sol Young; whereas Rich Intensify, about 88%.  If the prosecution's case theory is that D1 and D2 were part of the scam to deceive the UNPs, Young Fast/ Sol Young had to be a part of it too because the proceeds of the scam eventually went to the "big boss" in Taiwan.  I will come back to this point later.

23.According to the evidence of Madam Lee (PW8), a manager of China Shipping, 50 out of the 56 bills of lading given to her by the Police were verifiable, thus genuine. The remaining 6 bills of lading could not be verified because the images were unclear.  Based on PW8's evidence, I find the defence assertion that Young Fast/Sol Young had engaged in genuine trading activities in Nigeria may be true.  In other words, Young Fast/Sol Young was receiving revenue in Naira may also be true.

24.Irrespective of the validity or practicality of the alleged professional accounting advice, the revenue gained by Young Fast/Sol Young in Nigeria appears to be legitimate; and the revenue in Naira had to be remitted to Taiwan in some way.  Regarding the use of remittance agents in Nigeria as well as the means of remittance adopted by those agents, Mr. Tsoi submitted that legitimate or otherwise, it would not change the nature of the funds, which were revenue earned by Young Fast/Sol Young from its genuine trading activities.

25.Mr. Tsoi may be correct in the sense that when it comes to D1's and D2's belief in terms of the nature of the funds received by Found Talent and Rich Intensify. But on its face, the nature of each UNP payment looks dubious because it did not come from Nigeria or any customer of Young Fast/Sol Young; and both D1 and D2 were aware of that.  On the other hand, both D1 and D2 claimed they believed that it was how the Nigerian remittance agents (such as Yaya, Nasiru, Annie)  transferred the Naira to Hong Kong.  D1 and D2 believed that the funds received by Found Talent and Rich Intensify were Naira belonging to Young Fast/Sol Young converted into US Dollars.  As a juror, I find D1's and D2's claim of belief may be true.  At least, the prosecution is unable to rebut their claim beyond reasonable doubt.

26.As a juror considering the evidence of this case applying common sense, it is my view that if Found Talent and Rich Intensify were set up to receive funds transferred from UNPs, Young Fast/Sol Young had to be part of the scam (assuming all the UNPs, and not just PW9, were victims of fraud)  because the "proceeds of crime" all went to the Taiwan mother company.  But at present, there is simply insufficient evidence to support such a proposition. On the other hand, there is evidence which tends to prove that Young Fast/Sol Young was engaging in legitimate trading in Nigeria and earning Naira legally. In other words, the Naira earned by Young Fast/Sol Young could not have been proceeds of crime[2].

27.The Court of Final Appeal in HKSAR v Li Kwok Cheung George (2014)  17 HKCFAR 319 held :-

32. A relationship of "reward" linking the payment and the commission of the offence must therefore exist before the payment qualifies as "proceeds of an indictable offence" under section 2(6)(a)  [of Cap.455]. For a payment to have this character, it has, for instance, to be a recompense or return or remuneration or incentive for or in connection with doing or having done something. In the context of section 2(6)(a)  [of Cap.455], that "something" is the commission of the predicate offence. It follows that the payment must derive from or be generated by, or be received on account of, commission of the offence.

33. ..."Clean money" which is not paid or received in the nature of a reward in connection with commission of the predicate offence does not qualify as the proceeds of such an offence for the purposes of section 25(1)  [of Cap.455] [3].

28.In R v Gabriel [2007] 2 Cr. App. R. 11 (p.139), the English Court of Appeal held that profits made from trading in legitimate goods, without declaring the profits to the Inland Revenue or the Department for Work and Pensions, could not in any circumstances convert the profits in to "criminal property" for the purpose of the Proceeds of Crime Act 2002[4].

29.Applying the above legal principles, I find if the nature of Young Fast/Sol Young's revenue was legitimate, it would not have become proceeds of crime even if it was transferred out of Nigeria by illegal means. 

30.As a juror, I am unable to think of any reason for Young Fast/Sol Young to engage in a scam to deceive UNPs worldwide when it was already earning legitimate revenue in Nigeria.  If the prosecution's case theory is true, the Naira earned by Young Fast/Sol Young is perhaps still in Nigeria.  But it simply makes no sense for a company to turn its legitimate revenue into proceeds of a worldwide fraud.

31.Furthermore, by asking the UNPs to transfer their money to Found Talent and Rich Intensify, the fraudster (assuming that there was fraud)  should logically be expected to have ways to get the money out of those 2 bank accounts; or otherwise, his/her effort would be futile.  In order to do so, D1 and D2 had to be part of the scam since they were the signatories of the bank accounts.  Yet, the undeniable fact remains that almost all of the funds in those 2 bank accounts went to Young Fast/Sol Young.  At present, there is not the slightest hint of evidence that Young Fast/Sol Young had engaged in any illegal activities or had anything to do with the UNPs.  Hence, it is highly unlikely that D1 and D2 had any knowledge of any scam.

32.One plausible explanation for what actually happened, in my view, was someone had orchestrated the Nigerian remittance agents used by Young Fast/Sol Young in such a way that they, instead of actually remitting the Naira to Hong Kong, falsely claimed to have done so by informing D1 and D2 about the payments sent to Found Talent and Rich Intensify by the UNPs.  In doing so, the ultimate fraudster used Found Talent and Rich Intensify as his/her scapegoats whilst the Nigerian remittance agents retained the legitimate Naira of Young Fast/Sol Young.  In other words, the ultimate fraudster used the Naira of Young Fast/Sol Young to launder his/her proceeds of fraud.  Of course, D1 and D2 might well have been part of this well-orchestrated global scam, but I do not find that the prosecution has proved so beyond reasonable doubt.

33.Based on the reasons stated above, I am not satisfied that the prosecution has proved its case against D1 and D2 to the required standard.  Accordingly, I find D1 and D2 not guilty of Charge 1.