HKSAR v. Cheung Kam Sing

DCCC 209/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 209 OF 2010

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Reasons for Sentence

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Charge

1.The Defendant is convicted after trial of a charge of money laundering.  The Particulars of Offence averred that he, between 14July 2003 and 20 November 2007 in Hong Kong, knowing or having reasonable grounds to believe that property, namely the sum of €6,117,783.81 Euro currency, in whole or in part directly or indirectly represented any person’s proceeds of an indictable offence, dealt with the said property.  A sum of €755.65 was not proved.  The net sum was therefore €6,117,028.16 (“Sum”). 

Crux of findings

2.The Defendant was a certified public accountant (“CPA”).  As part of his professional service, he provided clients with a trust account.  Pursuant to the instructions of 2 Dutchmen, his trust account was engaged to deal with monies allegedly related to their business.

3.The Sum involved displayed various features.  There were deposits and withdrawals between companies which had their own bank accounts in Hong Kong.  There were pairs of deposits and withdrawals even within the same day.   There were cash deposits and withdrawals in huge amounts.  There was little documentation which could verify the legality of the monies.  The conviction is based on his being aware of grounds that a common sense, right-thinking person would consider were sufficient to lead a person to believe that the monies in the Trust Account were linked to an indictable offence.

More detailed facts

4.In 1990s, he was the employee of a Dutch company.  Mathijs Geradus Bloemers (“Bloemers”) established the company. Bloemers identified himself as a Dutch lawyer.  In 1993, the Defendant left the company.  In 2001, he was qualified and started to practice as a CPA.  He set up his own CPA firm Cheung Kam Sing and Company (“CKS & Co”).  He resumed contact with Bloemers, who introduced him to a Dutchman, Wilfred Aalders (“Aalders”) who claimed to be the deputy chairman of an investment fund in the Netherlands.  Soon the Defendant assisted Bloemers and Aalders in setting up companies in Hong Kong.    They used his trust account provided as part of his professional service to move monies in and out. 

5.At all material times, Bloemers had a controlling interest in Acquaintance Enterprises Ltd (“Acquaintance”) whereas Aalders had a controlling interest in Grade A Ltd (“Grade A”).  Each company was said to be the vehicle for each of them to receive their professional fees. 

6.During the offending period, the Defendant had acquired a company, Active Horse Ltd (“Active Horse”) for Aalders. 

7.At all material times, the Defendant operated a clients’ account as a trust account for Bloemers and Aalders (“Trust Account”), which comprised 4 currencies (Swiss Franc, Euro, US Dollars and Hong Kong Dollars respectively) [P26 para. 9].  The 4 schedules referred to in Ref-3 is a handy reference.  The last 2 vertical columns (which relate to the source and purposes of the monies as alleged by the defence at trial) are not relevant to sentencing.

8.Bloemers and Aalders were arrested and charged by the Dutch authorities and would be tried by a District Court of the Netherlands.  They were suspected of a large number of offences including fraud, money laundering, forgery and participation in a criminal organization. Some of those offences were committed in Hong Kong.  According to the Additional Information put forward by the prosecution agreed by the defence, there were more than 10 victims interviewed by the Dutch police. 

9.On 20 November 2007, the Hong Kong police arrested the Defendant as a result of the mutual legal assistance requests from the Netherlands.  The police searched his office and seized a number of correspondences and banking documents. 

10.He had kept all the records relating to the transactions of the Trust Account in a box file, which was seized by the police on 20 November 2007.  This included the bank books covering the whole period, copies of customer advice in respect of each remittance, instructions from clients, and correspondences with clients.  He had not kept individual ledgers for each project undertaken. 

11.Since July 2003, he had established companies to be held by Bloemers and Aalders in Hong Kong.  They also used his Trust Account to handle deposits and withdrawals relating to their business.  During the offending period, Bloemers and Aalders had undertaken a number of projects.  His conviction related to 9 investment projects which saw monies passing through the Trust Account. 

12.As shown in a table compiled by defence counsel, monies had been moved in and out of a list of countries which included Netherlands, Germany, Luxembourg, Belgium, PRC and Hong Kong.  

Personal background and mitigation

13.He is 45 years of age.  He was brought up in a poor family.  His father committed suicide in his fifties in around 1980.  There were 6 siblings raised by his mother.  She has suffered hypertension and depression for long.  He remains a filial son and takes good care of her.  He worked his way up in the accounting field to become a CPA in 2001.    He lives with his mother and his 14-year-old son, now a F. 2 student, from his first marriage.  He is regarded as a responsible and committed person by his second wife and elder brother, who is a senior medical officer in the government hospital.  His client finds him an efficient and reliable professional accountant.  His employee praises him as a pleasant and understanding employer.        

14.The defence asks for a discount based on the assistance the Defendant rendered to the Dutch authority in the form of depositions taken by an examining magistrate who came to Hong Kong from the Netherlands to take such depositions.  The defence has also admitted into evidence all document exhibits put forward by the prosecution and, in some parts where the movement of the funds cannot be traced, even volunteered to supply the particulars.  There is delay in pursuing the prosecution as the Defendant had been arrested 2 years and 2 months before he was first brought up in court through no fault of his own.  At no stage had he done or said anything to mislead the police in their investigation or the prosecution in its preparation of the case. 

Sentencing principles

No sentencing guidelines

15.In HKSAR v Leong Wai Keong CACC 476/2007, McMahon J observed:

“28. The circumstances to be taken into account in cases of money laundering will often vary widely and, given that the setting of sentencing guidelines is, at least at present, thought undesirable (see Javid Kamran (supra) and Chen Zhen Chu CACC 433/2006), the sentence appropriate to each offence must be determined with reference to the particular facts of the case.

29. The amount of money involved in a laundering operation is one cogent factor to take into account and indeed may be, in the circumstances of a particular case, the primary factor, though plainly a mathematical progression in sentence based on the sums involved is inappropriate.

30. Other factors will often be of considerable importance. In Javid Kamran CACC 400/2004 (at para. 35), this court said:

“Other factors include the nature of the offence that generated the laundered money, the extent to which the offence assisted the crime or hindered its detection, the degree of sophistication of the offence and perhaps the defendant’s participation, including the length of time the offence lasted and the benefit he derived from the offence.”

31. It should be borne in mind that the nature of the underlying offence will usually only be relevant as an aggravating factor… in the event that it can be shown the defendant was aware that the funds came from very serious crimes : see HKSAR v. Xu Xia Li, CACC395/2003 and HKSAR v. Chow Ying Ki, CACC378/2004.”

Sentencing examples

16.In R v Lo Chak-man and OthersCACC 744 of 1995, a starting point of 9 years’ imprisonment was adopted. The case was described as the “worst case situation”.  One of the applicants was the brother of a drug trafficker of huge international scale.  He assisted his brother and laundered over US$5 million. The other applicant laundered HK$15 million.

17.In Shing Siu Ming CACC 415/1998, the two applicants, one of them an accountant and the other had received benefit, took active steps to launder HK$3 million and AUD$ 1.5 million.  They knew those were the proceeds of a drug trafficking syndicate which imported drugs into Australia.  The trafficking activities were undertaken on a very substantial scale over a lengthy period of time.   A sentence of 7 years’ imprisonment was affirmed on appeal. 

18.In Wong Ping Shui Adam & AnorCACC 251/2000, the applicants laundered proceeds of,what he had been told as, smuggling activities in Russia although the truth was that those were proceeds from extortion and prostitution. The monies involved, being just monies for the trial runs, were US$50,000 and US$20,000 respectively. The applicant’s abandonment at the last minute of the appeal against a sentence of 5 years’ imprisonment was considered a very wise course for a sentence “not a day too long”. 

19.In HKSAR vMak ShingCACC 322/2001, the applicant agreed with a Mr. Tsang to use the accounts of his wife and a friend to launder what he was told were the proceeds of smuggling cigarettes. Actually they were the proceeds of a major theft which had occurred in China.  The applicant was charged with the laundering of $1.5 million he had received from Mr. Tsang for handling.  The Court of Appeal revised the starting point from 5 years to 4 years. 

20.In HKSAR v Chen Zhen Chu [2007] 5 HKC 505, the applicant was convicted of money laundering.  He operated by himself or through others over 27 bank accounts to deal with HK$ 73 million from 700 individuals in a period of 13 months across Hong Kong, Australia and China.  The average was $5 million in a month.  Although the nature of the underlying offence could not be identified, the Court of Appeal regarded it a very bad case of its type.   It was a trans-national organised crime designed to subvert the legitimate attempts to restrict unchecked flow of fund from Australia to Mainland China, and in so doing offended the regulations of both Australia and Mainland China.  The applicant was the leader in the scam.  The aggravating factors also included the large amount, the carefully planned and well-structured scheme (with the recruitment of large number of individuals both in Australia and in Hong Kong and the opening of large number of bank accounts), and the fact that the applicant was working together with an accomplice (his brother). The sentence was revised from 9 years to 7 ½ years, though. 

21.In HKSAR v Choi Sui Hey CACC 277/2007, the offence yielding the proceeds was identified to be the trafficking of the dangerous drug, “ice”.  The applicant transmitted $1.1 million to Fiji on six occasions over a 6-month period.  He had in his possession $750,000 to be remitted in due course.  The Court of Appeal regarded 3 years as the proper starting point.

22.In HKSAR v Javid Kamran CACC 400/2004, the applicant trafficked in drugs and then laundered the proceeds.  In the money laundering charge, around $1,200,000 was involved for a period of 1 ½ years.  The Court of Appeal revised the starting point from 4 years to 3 years.

23.In SJ v Jerome Yuval Arnold Herzberg CAAR 8/2008, the respondent dealt with proceeds of $650 million odd, a part of which were the proceeds of fraud and all of which were emanated from share trading in the United Kingdom in breach of United Kingdom laws because none of the company selling those shares were registered with the Financial Services Authority to market or sell such shares.  The Court of Appeal regarded a starting point of 5 ½ years as too low and revised it to 7 years.

24.In HKSAR v Lin Meng Chang CACC 146/2009, the applicant had in his possession various false travel documents for opening bank accounts to launder money.  He pleaded guilty to the possession charge and 4 money laundering charges each relating to a bank account.  There was a strong international and planning element.  The offence lasted 2 years and 7 months.  The total sum laundered exceeded $20 million.  He received considerable financial benefit.  The Court of Appeal regarded 3 years as too low a starting point for each of the money laundering charges but the overall sentence of 5 years as imposed was approved. 

Sentences imposed where the underlying offence was illegal bookmaking or gambling

25.In mitigation defence counsel has cited several cases where the underlying offence was illegal bookmaking or gambling.  The sentences have been consistently lower than those where the underlying offence was of a more serious nature.   

26.In HKSAR v Kam Susanto CACC 542/2003, the applicant applied for leave to appeal conviction but not his sentence of 4 ½ years’ imprisonment.  He was an illegal bookmaker cum money launderer of over $ 470 million in 5 ½ years with 7 bank accounts.  The Court of Appeal commented that the case should not have been brought in the High Court as in no circumstances was it likely that a sentence of 7 years or more would have been imposed on the applicant in the event of conviction following a trial or a plea.   

27.In HKSAR vOei Hengky WiryoCACC 109/2005, the applicant was a bookmaking partner of the aforesaid Kam Susanto.  The starting point was 3 ½ years for the bookmaking charge.  He was also convicted on two counts of money laundering involving $236 million over 4 years and 5 months and near $11.5 million over 5 months respectively.  The large sums of money represented the turnover in an illegal bookmaking offence.  The starting points adopted were 4 years and 18 months respectively.  The total sentence was 5 ½ years. One of the grounds of appeal was that his sentence was too much heavier than the 4 ½ years that Kam Susanto had received.  The Court of Appeal found him central to the funding of the bookmaking activities which depend heavily upon access to funds.   His role was not less than Kam Susanto.  His sentence was affirmed.  

How to reconcile sentences bearing different underlying offences

28.It is sometimes difficult to place cases of money laundering whose underlying offence was illegal bookmaking or gambling involving sums reaching hundreds of million in the spectrum of sentences imposed for those other cases of money laundering bearing other underlying offences.   The former have seen sentences significantly lower than the latter.

29.Yeung JA in HKSAR v Chen Zhen Chu CACC 433/2006 regarded:

“47. In those cases involving large sums of money, such as Oei Hengky Wiryo, Kam Susantoand Cheng Sui Wa, the underlying offences were illegal bookmaking or letter of credit frauds, and the amounts involved were the turnovers in the bookmaking activities or the amounts of the letters of credit. Those amounts did not represent the profit to the defendants or the loss to the victims.

…

63. In money laundering cases where the underlying offences are drug trafficking, human smuggling and other serious trans-national crime, sentences of 10 years’ imprisonment or above may well be justified if a defendant knowingly engages in them.”

30.One can of course appreciate that at one end there may be a victim being conned into paying for something worthless hence suffering a total loss, through the middle point where the victim has purchased shares of reduced value, and the other end where a gambler places bets through an illegal bookmaker and suffers no loss or even gets his winnings. The situation is further complicated by instances where the underlying offence is not even known.  The quantum per se, which is often a weighty factor to consider, can be elusive as a pointer of sentence. 

31.The problem is not easily solved. Even a comparison between cases does not offer a clear answer.  In HKSAR v Leong Wai Keong CACC 476/2007, McMahon J highlighted the limited assistance derived from comparison:

“34. To return to the present case, Mr Fung was able to point to a number of other cases involving larger sums which attracted lower sentences. Mr Tam for the respondent, on the other hand was, able to point to various cases involving smaller sums than the present case where proportionally heavier sentences were imposed. Such comparisons are of limited assistance, and on the present state of the authorities all that can really be said is that what is required of a sentencing court is an appreciation of the relevant sentencing factors in the case before it and the application of a level of sentence appropriate to those factors.”

32.Wright J in HKSAR v AU Hau-ching CACC 146/2008 was keen to note:

“40. … One trend which is discernable from previous sentences passed is that, for whatever reason, where the predicate offence is established as being illegal bookmaking sentences regularly fall at the lower end of the spectrum.”

33.The rationale appears to be that the seriousness of the underlying offence always overrides a huge quantum of proceeds generated from less serious or less sophisticated crimes such as illegal bookmaking.  On that note, I think the sentences seen of illegal bookmaking as the underlying offence are not applicable to the Defendant in the present case.

Features relevant to sentence in the present case

34.Bloemers and Aalders were charged as the leaders of a criminal organization with several members for scam, perjury, money laundering, bankruptcy fraud and forgery.   Whilst it is known that these crimes have caused loss to at least 10 victims who had come forward to give statements, their actual loss is, however, not revealed to this court.

35.This is by any standard a very well-planned and well-orchestrated scam.  The offending period spanned over 4 years and 4 months.  There was a strong international element.  There were over 100 transactions.  The total sum was over HK$ 60 million.  There were multiple or, at times, layers of depositors and recipients in both personal and corporate entities.  The monies were stowed under the trust account of a CPA, a professional who is usually most respected and the least to be suspected.  It would be difficult for the police to detect such money laundering activities. The Defendant had taken an active role in taking instructions from Bloemers and Aalders on how to handle the monies in each transaction.  He had adopted a most accommodating attitude of never querying their sources.  He had received highly flexible fees for his service.  I take 6 ½ years as the starting point. 

36.The Dutch authority is unable to give a definite answer as to the usefulness of his evidence against Bloemers and others in the Dutch court.  I understand from the defence that his evidence as contained in the Depositions is inculpatory in nature.  He is said to be under no risk of personal safety.  The defence asks for some discount, though recognizing that it is not going to be substantial.  In this regard, I am prepared to give a discount of 3 months.  There was no reason for the delay in prosecution but it was not of the most serious type.  It can be redressed by a discount of 2 months.  The admission of the prosecution case and the supply of voluntary particulars have contributed to an efficient trial.  I give a discount of 1 month for that.

37.The final sentence is 6 years.

Applications for leave to appeal against sentence and convcition was dismissed. See CACC380/2010 dated 9 December 2011