HKSAR v. Li on Yiu

DCCC 1081/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1081 OF 2012

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Reasons for Verdict

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1.The defendant pleaded not guilty to three charges of dealing with property known or reasonably believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap.455, offences colloquially known as money-laundering. 

2.The defendant did not challenge the prosecution’s case and no prosecution witnesses were required to give evidence.

3.Exhibits P1 and P1A were the admitted facts agreed by both parties.

4.There is a fourth charge against a 2nd defendant who absconded and failed to answer his bail terms.  A warrant of arrest was issued to apprehend the 2nd defendant.  The trial proceeded in his absence.

5.The prosecution say the defendant for trial controlled and used three bank accounts belonging to his sisters.  The prosecution covers the period between 1 January 2006 and 3 January 2008.

Charge 1

6.The first account was opened by a Miss Li Kwai-ping on 30 January 1988 at Hang Seng Bank, account number 276-3-56088.  On 1 January 2006 the balance of this account was $207,736.  The prosecution show that between 1 January 2006 and 8 September 2006 a total of $5,319,570 was deposited into this account and a total of $5,531,609.44 was withdrawn from the same account.  This is according to the account breakdown of Exhibit P8.  On 8 September 2006, the balance of $482,249.44 was transferred to another account, the number of which is 286-8-213246, opened on that day by another sister, Li Kwai-lin.  It is this first account that is the subject of Charge 1.

7.Exhibit P8 is an analysis of the movement of moneys in the three accounts of the three charges.  It is not challenged by the defence.  It refers to this first account of Charge 1 as Account E.  It sets out all cash, cheque and transfer deposits as well as all cash or transfer withdrawals.  It sets out what amount and what percentage is deposited and withdrawn on a Monday through to a Saturday.  It shows 43.06 per cent of the total amount deposited during that period of time was on a Monday and 32.02 per cent was on a Thursday.  The lion’s share came in on those two specific days. It also shows 36.7 per cent of the total amount withdrawn during that period of time was on a Monday and 34.22 per cent was on a Thursday.  The lion’s share went out on those two specific days.

8.The prosecution allege the pattern of deposits suggests that these moneys may have been the proceeds of illegal bookmaking activity.

Charge 2

9.The subject bank account of Charge 2 was the account referred to earlier, 286-8-213246, in the name of Li Kwai-lin.  It was opened on 8 September 2006 and $482,249.44 from Li Kwai-ping’s account was used as the initial deposit.  Exhibit P8 refers to this second account of Charge 2 as Account A. 

10.Between September 2006 and January 2008, $5,186,758.14 was deposited into this account.  The whole amount was withdrawn from it. 

11.Exhibit P8 shows 33.7 per cent of the total amount deposited during that period of time was on a Monday and 30.40 per cent was on a Thursday.  It also shows 34.41 per cent of the total amount withdrawn was on a Monday and 44.06 per cent was on a Thursday.  The lion’s share went in and out of this account on those two specific days.

Charge 3

12.The subject bank account of Charge 3 was the account 286‑540091-888, also in the name of Li Kwai-lin.  This account was also opened on 8 September 2006 and the initial deposit of $90,162 came from another account belonging to Li Kwai-ping.  Exhibit P8 refers to this account as Account B.

13.Between September 2006 and January 2008, $9,432,765.71 was deposited into this account and/or withdrawn.  The pattern of deposits and withdrawals were much the same as that of the accounts of Charge 1 and 2. 

14.Exhibit P8 shows 36.39 per cent of the total amount deposited during that period of time was on a Monday, 28.62 per cent was on a Thursday.  It also shows 42.58 per cent of the total amount withdrawn was on a Monday, 36.27 per cent was on a Thursday.  The lion’s share went in and out of this account on those two specific days.

15.The defendant’s two sisters were not implicated in these charges as the defendant agrees he used and controlled these accounts as his own.  His sisters are now retired and living in public housing in Hong Kong.  According to Exhibit P1, the admitted facts, the defendant had no real property or assets in Hong Kong or elsewhere.  The defendant did not or does not operate a registered business or company in Hong Kong.  The defendant has not filed a tax return in Hong Kong for the financial years 2004 to 2011.

16.He did have an active personal bank account and did have it during the material time at the Bank of China.

17.When the defendant was arrested on 27 October 2010, under caution he said, “Ah Sir, I did not get involved in money laundering.  I borrowed the accounts of my elder sisters to do business.  I did not do anything illegal.”  His sisters were also arrested but released without charge.

18.There are three video record of interviews conducted on 27 October 2010, 3 November 2010 and 24 March 2011 respectively. They are not challenged and admitted into evidence as P2 abc, P3 abc and P4 abc.  In these interviews the defendant told the police he worked as a second-hand car salesman in China and had for about six years.  He said he earned about HK$10,000 per month.  He used his sisters’ accounts because he could not open bank accounts.  All the moneys in these accounts belonged to him, not his sisters.  They did not know about any of the deposits and withdrawals.

19.He first borrowed the first account from Li Kwai-ping but she needed to apply for public housing and could no longer lend him this account to use.  In late 2006, he stopped using this account.  He then borrowed two accounts from another sister, the accounts of Charges 2 and 3.

20.These two accounts were closed by Hang Seng Bank on 3 January 2008.  It is noteworthy the defendant did not question the bank’s action or challenge it.

21.As I have said, the prosecution’s evidence was not challenged and all relevant exhibits, such as the video records of interviews, the bankers’ affirmations relating to these three accounts and the defendant’s travel records produced by the Immigration Department were submitted. The three video records of interviews were played in open court.  No witnesses were called or required.  The defence agreed the prosecution case in its entirety.

22.The defendant elected to give evidence.  He gave evidence of the source of moneys in these three accounts over the material period of time.  He gave evidence over three days.

23.In short, he explained that the transactions were a long time ago and he was relying on his memory.  He had no documentary exhibits to assist his memory.  As far as he could recall the funds in these accounts came from sales of vehicles, gambling personally, loans to and from friends, chit funds, and some small business transactions, such as trading in tea leaves.

24.The defendant is 57 years old and now unemployed.  He is educated to a Primary 5 standard.  He was taken to Exhibit P8 almost as soon as he began to give evidence-in-chief.  P8 also lists and sets out every deposit and withdrawal, on which day of the week the transaction took place, the date, the amount and the balance of that account.  The exercise is done for all three bank accounts.  The defendant was taken to this chart by defence counsel and attempted to explain the source of each deposit, each transaction.

25.He attempted to explain every deposit of or over HK$50,000.  He said it was used for business purposes only.  He did this without relying on any documentary evidence.  He pinpointed loans, chit fund activity, business deals, car sales, without any documentary assistance.  He did it from memory for hundreds of transactions.  He said he could not locate any documents relating to any deposit or withdrawal, nor any of his friends or members involved in chit funds, personal loans or personal gambling.

26.I do not propose to repeat all of his evidence, suffice to say I have taken it into account.

27.In cross-examination he said he sold at best 10 to 20 vehicles per month and at least 8 to 10, with an average profit margin of 20 to 30 per cent on each vehicle.  He sold vehicles worth between $30,000 to $100,000.  In his record of interview he told the police he made about HK$10,000 per month. 

28.He was asked in cross-examination to look at all three accounts and point out any transaction relating to a car sale specifically.  He looked for a very long time and it was put to him there were in fact none that related to car sales.  It was suggested there was no pattern of income withdrawn to buy vehicles followed by a deposit of the sale price plus a profit.  He disagreed.  He says the fact there is a pattern which shows most of the deposits and withdrawals took place on a Monday or Thursday is a coincident, and nothing more.  He does not agree it is indicative of gambling revenue.  For example, there is horse racing and football on the weekends followed by a win or loss money transaction being dealt with on a Monday, and the same applied for a Thursday which follows Wednesday night horse racing.

29.The defendant does indicate that the chit fund activity did dominate the source of moneys in these accounts and he says he did mention it to the police in his video record of interview, but not in great detail because the police did not ask him about it.

30.The defendant agrees that the turnover in Account A was approximately $5.1 million and the turnover in Account B was approximately $9.4 million, but $3.6 million of that amount had been transferred into Account B from Account A, so the turnover of Account B was approximately $5.8 million.  He agrees that when one considers these two amounts it is double the turnover that went through Account E.  He explained it may be because there was more chit fund activity by him and the many  members of several funds.

31.The defendant agrees that when Account A and B were opened he added to Account B five names with a designated bank account each and he could transfer money to these five designated person from Account B by telephone.

32.Exhibit P7, the bankers’ affirmation, at Exhibit LKLB-1, page 3, evidences these five persons and their details.

33.He was vague when identifying these five persons and their significance.  He told the police they were either friends or business acquaintances and he set up this phone banking facility for the sake of convenience.  The amount to be transferred was up $500,000 but he did not make use of this facility.

34.The defendant reiterated on a number of occasions that the moneys were all legitimate transactions and accounted for. He did not, as he told the police after his arrest and under caution, get involved in any money laundering activity.  He said he borrowed the accounts of his elder sisters to do business.

The Law

35.The prosecution has the burden of proof to prove these charges beyond reasonable doubt.

36.The prosecution must prove to the appropriate standard of proof that the defendant dealt with the property, the moneys in all three accounts, and at the time of doing so, he either knew or had reasonable grounds to believe that the moneys in whole or in part, directly or indirectly, represented any person’s proceeds of an indictable offence.

37.“Dealing” is defined by the ordinance but in this case it is agreed and it not in doubt the defendant dealt with all the moneys in all three accounts.  This is the actus reus of the offence.

38.Did he have knowledge or have reasonable grounds to believe in the nature of those moneys?  To prove reasonable grounds to believe the prosecution is required to prove both the objective and subjective factors.  Firstly, to prove this the prosecution is required to prove beyond reasonable doubt that he knew of sufficient grounds, which if they were known by any common sense, right-thinking member of the community, would lead that person to believe the property was the proceeds of an indictable offence; this is the objective test.

39.Secondly, with the subjective test, the question is, are those grounds known to the defendant?

40.The prosecution does not need to prove the defendant in fact believed the property to be proceeds of an indictable offence - actual belief.  The prosecution only needs to show there are reasonable grounds for such a belief and that the defendant knew of those grounds.

41.The crux of the matter is this, the mens rea of the charges.

42.I referred myself to the authority of HKSAR v Lai Kam Yee Teresa [2010] 4 HKLRD 165 at 170, paragraphs 18 and 19.  It reiterates what was said at page 295 of HKSAR v Ma Zhujiang [2007] 4 HKLRD 2851.

43.In addition, the prosecution does not need to prove the origin of the moneys.  Not need to prove it is, as a fact, the product of an indictable offence by proving an indictable offence occurred.  It is the state of the mind of the defendant that is in issue, not the status of the property.

44.That is the law in Hong Kong and I referred myself to Oei Hengky Wiryo v HKSAR (No 2) [2007] 1 HKLRD 568 at paragraphs 96 to 109.

45.The prosecution here is quite sure the moneys, the proceeds, stemmed from illegal bookmaking and were prepared to submit he knew, the defendant knew, the proceeds were from illegal bookmaking based on the pattern of the deposits and withdrawals.  The prosecution contends in any event if he did not know he had reasonable grounds to believe the moneys were proceeds of an indictable offence and he was money laundering.

46.The defence actually contend the moneys were not proceeds of an indictable offence and he personally dealt with each transaction. Each deposit and withdrawal could be accounted for and was legal.  The defence challenge the allegations the proceeds were subject to money laundering.

47.The credibility of the defendant is in issue.

My Findings

48.Defence counsel submits the defendant was a reliable and credible witness.  He was not evasive even if sometimes he seemed vague.  This can be explained by the passage of time since the accounts were in use and now.

49.It was submitted that even if I rejected the defendant’s evidence, the prosecution must still prove the elements of the offence beyond reasonable doubt.

50.It was submitted that the prosecution’s case shows the defendant’s actions were suspicious only and that is not enough to convict the defendant.

51.The prosecution submits the defendant’s explanation as to the source of these millions of dollars was weak, incredible, unsubstantiated, and not independently verified.  I agree.

52.The defendant was the only person to control and use these three accounts and ought to have been able to demonstrate these funds were legitimate if they were indeed legitimate.  He claimed these were accounts used for the sole purpose of his businesses and chit fund activity.  He claimed his day-to-day expenditure did not go through these accounts.  If there were business transactions, then it should have been made obvious from business records or at least a discernible pattern of money movement in these accounts. To not be able to produce one piece of paper or a witness to verify any legitimate business dealings is incredulous and indicative of bare assertions.

53.The only discernible pattern was that what was deposited was soon withdrawn.  Where Accounts A and B were concerned, Account A transferred a lot of money to Account B, ($3.6 million), whereas it was never vice versa.  This did not make sense if these were business accounts.

54.Where money is deposited to be withdrawn, this is indicative of highly suspicious activity.

55.I have considered carefully the defendant’s evidence and I reject it in its entirety.  He was a poor witness who was clearly telling untruths in the witness box.  His evidence of his unaided recollection of money transactions years ago was far-fetched.  I was not convinced by the defendant’s attempt to show the deposits and withdrawals were legitimate.

56.Even though I reject the defendant’s evidence, I still have to consider whether the prosecution’s evidence is sufficient to prove he knew or had reasonable grounds to believe the moneys were proceeds of an indictable offence.

57.I took into account the very large sums of moneys that moved through these three accounts mainly on a Monday and a Thursday.  I believe they are indicative of moneys related to gambling and illegal bookmaking. 

58.I find the defendant dealt with these moneys personally and I am convinced he knew they were proceeds of an indictable offence.

59.Even if I am wrong and he did not have actual knowledge he was money laundering, having regard to the evidence as a whole, which was not challenged, I am sure the common sense right-thinking member of the community would believe the property was the proceeds of an indictable offence.  The sums of moneys are vast and unaccounted for by the defendant. There is no legitimacy in these transactions or genuine business dealings on the face of it.  There is more than ample reasonable grounds to believe that. I accepted the prosecution’s evidence in its entirety.

60.The objective test succeeds as far as the prosecution is concerned beyond reasonable doubt.

61.I turn to the subjective test.  The defendant’s attempt to show the proceeds were legitimate failed.  He has fabricated evidence in the witness box in a desperate attempt to exonerate himself.

62.There is an absence of a credible explanation and the only reasonable inference I can draw is that the defendant had reasonable grounds to believe that the millions of dollars that went through these three accounts were proceeds of an indictable offence.  He was money laundering.

63.I am sure the prosecution can prove all of the elements of each offence beyond reasonable doubt.

64.Accordingly, I convict the defendant of Charges 1, 2 and 3 after trial.