HKSAR v. Tsoi Chit Tsang
Read the full judgment text of DCCC 1240/2010 on BabelCite. This District Court judgment was delivered on 31 October 2013.
1. The defendant (D1) pleaded not guilty to 2 charges of money laundering (Charges 1 and 7). After the commencement of the trial D1 voluntarily absconded and, for reasons I will set out below, I continued the trial in his absence. I acceded to his counsel’s application to withdraw from the case.
Cited by 3 cases · Cites 1 case
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DCCC 1240/2010 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CRIMINAL CASE NO 1240 OF 2010 ____________ BETWEEN
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_______________ REASONS FOR VERDICT _______________ 1.The defendant (D1) pleaded not guilty to 2 charges of money laundering (Charges 1 and 7). After the commencement of the trial D1 voluntarily absconded and, for reasons I will set out below, I continued the trial in his absence. I acceded to his counsel’s application to withdraw from the case. 2.D1 was one of five defendants who were charged with a total of seven related money laundering offences. D2 and D3 entered pleas of guilty to the charges they faced (Charges 2, 3, 6 and 7). I granted the application by the prosecution that the charges facing D4 and D5 (Charges 4 and 5) should remain on the court file not to be proceeded with without leave of the court. 3.The five defendants are related either by marriage or by birth. D5 is married to D1. D2 is the sister of D1 and is married to D3. D4 is the mother of D1 and D2, and lived with D2 and D3. 4.The charges against the defendants related to funds passing through 28 bank accounts held either in the names of the defendants or companies under their control and for which they were the authorised bank signatories. 5.I was told by the prosecutor that D1 has a clear record. 6.The prosecution produced, for reference, copies of documents produced in evidence in a Core Bundle (CB)(Exhibit P147 – CB Exhibit List 147A). Where appropriate I will refer to the relevant page number of this bundle . Charge 1 7.The amounts referred to in the charge (HKD192,273,353.14 and USD3,874,314.80) relate to funds passing through nine bank accounts held in D1’s sole name during the material period, 1 February 2005 to 7 January 2009. Charge 7 8.The amounts referred to in the charge (HKD17,121,961.56, USD196,373.68) relate to funds in 2 DBS bank accounts held in the name of Yantex International (Asia) Company Ltd (Yantex) for which D1 and D2 were the account signatories. The companies involved 9.The prosecution case in respect of D1 was that he was laundering money through a number of personal bank accounts held in his name and in the names of his co-accused and also through two companies controlled by them, namely, Yantex and Hong Kong Anshun Fuel Co Ltd (Anshun). 10.Yantex was incorporated on the 28 September 2006 with an issued share capital of 10,000 and shares of $1.00 each. D1 held 5,100 shares and D2 held 4,900 shares. It traded in swimming goggles. D1 was the sole director, D2 the company secretary. The company filed a tax return, signed by D1 ( CB 9585), for the financial year 2007/08. This showed that for the period from 29 September 2006 (the date of incorporation) the turnover was HKD1,690,802 and the reported loss before taxation HKD1,906,089. The loss to be carried forward was reported as $1,984,887.00 ( Exhibit P71A CB pages 9384 – 9407 at 9389/90). 11.Anshun was a limited company incorporated on the 17 July 2007 with an issued share capital of 10,000 shares of $1.00 each. It engaged in the oil trade. D2 was the sole director and shareholder. D3 was the secretary of the company. The company filed a tax return ( Exhibit 70A – CB 9353- 9375) for the financial year 2008/09 with a reported profit of $855,229.00. The loss brought forward from the previous tax year was HKD2,016,509 ( CB p.9373). Other companies 12.During the relevant period D1 was involved with a number of other companies. 13.Fine Smart International Investment Limited ( Fine Smart) was incorporated on the 21st January 2005 with a nominal share capital of 10,000 shares of $1.00 each and an issued share capital of 9,000 shares. 3,000 shares were held by D1. D1 was also director of the company. D1 sold his shares in this company on the 7th November 2007 to Lo Fai Wong ( Lo) (Exhibit 47). 14.Pretty Universal Limited (Pretty Universal) was incorporated on the 28th November 2005. D1 was a minority shareholder. Lo was also a shareholder – see exhibit P91 and P91 A - C. D1 sold his shares (minus one) to Lo on 22nd September 2008. D1 remained a director until 8th May 2009. 15.Wealthway Industrial Limited (Wealthway) was incorporated on 11th May 1993 with a nominal share capital of 10,000 shares of $1.00 each and an issued share capital of 5,000 shares all held by D1 who was also the sole director of the company (from 2006). D2 was the company secretary ( Exhibit 48). 16.Cheer Surplus Investment Limited (Cheer Surplus) was incorporated on the 11th August 2006 with a nominal share capital of 10,000 shares of $1.00 each and an issued share capital of 180 shares. D1 held 120 shares and Wong Yat King held 60 shares. D1 was one of the directors of the company ( Exhibit 46). 17.GarimanLimited (Gariman) was incorporated on the 5th December 2001. D1 became a director of the company on 23rd November 2007 and resigned on the 4th February 2010– see exhibit P93 & P93A – E. 18.Friendly Express Company Limited (Friendly Express) was incorporated on the 13th March 2008. It was deregistered on the 9th January 2009 by application of D1 as director – see exhibit P92 and P92A. The prosecution case 19.The prosecution alleged that in respect of the 9 personal bank accounts held by D1 ( Charge 1) and the two corporate accounts held in the name of Yantex ( Charge 7) there were a substantial number of large cash transactions and large deposits which were subsequently withdrawn showing that such accounts were used as temporary repositories for funds. There were large amounts flowing between the accounts of the defendants and the companies which created complex layers of financial transactions. Substantial deposits were received from and amounts were transferred to third parties who could not be identified. 20.Large amounts were transferred in or out of the various accounts using remittance agents making it difficult to trace the origin of the funds or their destination. 21.Substantial sums of money were transferred from the bank accounts and used for subscription of IPOs and as consideration for other securities and, later, refunds of similar sums were received back into the accounts of the defendants or the companies they controlled. 22.Analysis of the deposits of cash into the respective accounts show multiple deposits were made on the same day into different bank branches or multiple deposits at different times of day on the same day at the same branch. 23.There were also unusual transaction patterns in all the relevant bank accounts which showed layering and integration of funds received into the accounts. 24.The forensic expert accountant called by the prosecution, PW2, said that layering involved separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity. 25.PW2 said that integration involved the provision of apparent legitimacy to criminally derived wealth. If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing to be normal business funds. 26.The sums handled by the defendant were out of all proportion to his reported income for Inland Revenue purposes. 27.As mentioned above, Yantex filed a tax return for 2007/2008 and attached were audited financial statements for the year ending 31st March 2008 showing it was trading at a loss. The deposits into its bank accounts were approximately three times the turnover (on an adjusted basis). 28.The prosecution maintained that the evidence established beyond reasonable doubt that D1 was involved in money laundering as alleged. Prosecution Evidence 29.D1 failed to attend court on the fourth day of the trial. The prosecution had been in the process of reading out several pages of admitted facts which had been signed by counsel on behalf of each defendant. When the trial later resumed against D1 in his absence, the prosecution no longer sought to rely on those admitted facts as the defendants had not been invited to confirm such facts. 30.It was therefore necessary for the prosecution to call witnesses and produce documentation to prove many of the facts which had been included in the admitted facts. 31.The prosecution called 19 witnesses. In addition a large number of documentary exhibits were admitted into evidence pursuant to various ordinances. Bankers Affirmations Exhibits P24 -43 32.Twenty bankers’ affirmations were produced pursuant to the provisions of s.20 of the Evidence Ordinance. These affirmations dealt with the 28 accounts controlled by D1 to D5 and the two companies Yantex and Anshun. I noted that charges 1 and 7 concerned only the 9 accounts controlled by D1 (Charge 1) and the two accounts held by Yantex ( Charge 7). However the accounts held in the names of other defendants and Anshun were relevant to show the movement of funds between these accounts and the accounts controlled by D1. 33.The accounts were as follows:
34.The branch codes which appear on some of the bank statements exhibited to the affirmations were explained by reference to lists produced by Lau Kwun Shung ( PW4) who was the maker of the Banker’s Affirmation on behalf of BOC ( Exhibits 35 A and 35 B) and Lai Yat Lung (PW5) who was the maker of the Banker’s Affirmations made on behalf NCB (Exhibits 37A and 37B). Corporate Documents – Exhibits 44 -48, 91-93 35.The prosecution produced the relevant corporate documents relating to Yantex, Anshun, Cheer Surplus, Wealthway, Fine Smart, Friendly Express, Gariman and Pretty Universal pursuant to the provisions of the Companies Ordinance Cap 32. The documents confirm the matters set out above in relation to these companies. Land Registry Documents – Exhibits P87-90,95 36.Land registry documents were produced in relation to certain properties registered in the name of D1, D4 and Cheer Surplus. There were mortgages on all the properties. 37.D1 purchased three properties during the relevant period. 38.Flat B, 12th Floor, Tower 25, Ocean Vista, Laguna Verde, Hung Hom (Ocean Vista) was purchased by D1 on the 7th June 2005 for HKD11 million. 39.Flat C, 6th Floor, Tower 15, Costa Del Sol, Laguna Verde, Hung Hom (Costa Del Sol) was purchased by D1 on the 10th August 2005 for HKD9 million. The property was sold on the 12th March 2007 for HKD9.85 million. 40.Flat A, 23rd Floor, Tower 2, One Silversea, No.18, Hoi Fai Road, Kowloon (Silversea) was purchased by D1 and another person on the 7th October 2005 for HKD14.05 million. The property was sold on 18th February 2008 for HKD16.55 million. 41.Block 1-6, Regent Garden, 26A, Hang Tau, Sheung Shui (Regent Garden) was purchased by Cheer Surplus on 14 September 2006 for HKD13 million. 42.D4 purchased Flat E, 15/F, Block 3, Bamboo Mansion, Whampoa Garden, Hung Hom (Bamboo Mansion) on 10 October 2006 for HKD4.668 million. This property was sold on 26 April 2011. Inland Revenue Records 43.Records kept by the Inland Revenue were obtained by Production Orders and produced to the court pursuant to the provisions of s.20 Drug Recovery Proceeds Ordinance Cap 128. 44.The authorised officers who collected the records were called as witnesses together with the Assessor of the Inland Revenue Department, Mr Lam Chuen Kee (PW19), who had certified the copies. 45.PC 51668 Au Kwok Hung (PW13) applied for Production Orders under DCMP 1263 of 2007 on 7 May 2007 (exhibit P141), 18 September 2007 (exhibit P142) and 21 January 2008 (exhibit P143) and served them on the Inland Revenue Department. 46.WPC 55204 Ning Yan Yan Judy (PW14) collected the documents from the Inland Revenue Department pursuant to exhibit P141 on 1 August 2007. 47.The documents are exhibits: P66, P67, P67A, P67B, P67D, P67E, P67F, P67G, P67I, P67J, P67K, P67L, P67M, P67N, P67O, P68, P68A,P68B,P68D,P68F,P68G & P141B 48.PC155 Lee Sung Kit (PW9) collected the documents from the Inland Revenue Department pursuant to exhibit P142 on the 13 November 2007. 49.The documents are exhibits: P69, P69A, P71, P74, P74A, P74D, P74E, P74F, P74G ,P74H & P142B. 50.Sergeant 2694 Ngai Tak Wa (PW16) collected the documents from the Inland Revenue Department pursuant to exhibit P143 on the 19 March 2008, Ex P143B 51.Station Sergeant Ho Tung Suen (PW15) applied for a Production Order under DCMP 1263 of 2007 on the 3 December 2008 (exhibit P144) and served it on the Inland Revenue Department. 52.PW16 collected the documents from the Inland Revenue Department pursuant to exhibit P144 on the 3 March 2009. 53.The documents are exhibits: P67C, P67P, P67Q, P68C, P68H, P68i, P70, P71A, P72B, P72C, P72D, P73, P73A, P73B, P74B, P74C, P74i, P74J, P74K, P74L, P138, P138A, P138B, P138C, P139, P140 & P144B 54.PC 4056 Fung Tsan Hang (PW17) applied for Production Orders under DCMP 1263 of 2007 on the 5 October 2010 (exhibit P132) and 22 December 2010 (exhibit P133) and served them on the Inland Revenue Department. PW17 also collected the documents pursuant to exhibit P132. 55.The documents are exhibits: P66A, P66B, P66C, P66D, P66E, P66F, P66H, P67R, P67S, P67T, P67U, P67V, P68J, P68K, P68L, P68M, P68O, P69B, P70A & P70B & P132B. 56.PC 2006 Kwok Wai Wah (PW18) collected the documents pursuant to exhibit P133. 57.The documents are exhibits: P72, P72A, P73C, P73D, P73E & P133B. 58.PW17 later returned all the documents earlier collected from the Inland Revenue Department for certification by PW19. Each of the documents produced as exhibits (save and except the memos) bears the chop and signature of PW19 certifying they are true copies. 59.Other documents and exhibits were seized during searches conducted by the police. I will refer to these later. PW1 Ms Lai Man Yee- Accounts Clerk of Anshun 60.PW1 started working for Anshun on 5 November 2007 having been interviewed by Tsoi Suet Ching (D2). The Anshun office was located in Hung Hom Commercial Centre, Ma Tau Wai Road, Hung Hom. She said that the company traded in oil. 61.As part of PW1’s duties she had to deal with the business of Yantex, which had the same registered office as Anshun. The business of Yantex was trading in swimming goggles. PW1 said that her understanding was that these goods were manufactured in a factory in Wai Chou on the Mainland. PW1 believed that the main proprietors of Yantex were D2 and D1. 62.PW1 confirmed seeing D1 at the office, although she said that he did not come very often. She estimated that in a year of working at Anshun she only saw him about 7 – 8 times. She said that he would stay the best part of the day and usually leave before 1600 hours. 63.PW1 said she received all her instructions from D2. She stated that she did not have any dealings with the factory on the Mainland. The accounts in relation to the Mainland business were dealt with there by a female accounts clerk. She said that she did not receive any details or documents relating to the Mainland accounts. She said that she raised this issue with D2 who told her that she would follow up on the matter. There were occasions where D2 would make telephone calls to the Mainland in her presence but the conversations were in a dialect which she could not understand. 64.PW1 said that she created documents such as profit and loss accounts relating to business conducted in Hong Kong. 65.PW1 said she was aware that Yantex had two bank accounts in Hong Kong with DBS, a savings account and a current account. 66.PW1 was shown Exhibit P26 (CB pages 2138-2286), the DBS banker’s affirmation which included the Savings Account (No. 4706491790) which had a HKD account and a USD account, and the Current Account (No. 4721608180) . PW1 said she never made any deposits into or withdrawals from these accounts and that D2 would deal with any such transactions. 67.PW1 was shown Exhibit P83 (CB pages 10037 – 10043), a profit and loss account for the year ended 30 April 2008. She confirmed that this was the type of document that she dealt with. 68.PW1 said that accountants, Andes Glacier and Co., Certified Public Accountants, were appointed to prepare accounts for the Inland Revenue Department (IRD). 69.PW1 was shown P81 (CB page 10011), which is the Directors’ Report and Financial Statements for the period September 2006 to 31 March 2008. She confirmed that the Yantex profit and loss account, page 10011, shows a loss of HKD1,906,089 and was based upon documents she had prepared and subsequently sent to Andes Glacier. This showed that Yantex was trading at a loss. 70.PW1 said that she was told by D2 that D2 paid HKD5.6 million, D1 HKD950,000 and Anshun HKD630,000 on behalf of Yantex. PW1 said that D2 asked her to enter these amounts in the company accounts. PW2 said that sometimes she was given deposit slips but no underlying documentation to explain the source of the funds. These deposit slips would only show that money was being deposited into Yantex accounts. PW1 said she left Anshun in late November 2008 and no documents relating to Anshun’s business on the Mainland were shown to her during the course of her employment. PW1 said that Yantex only had 2 staff members in Hong Kong who were D2 and Mr Choy Kan Tin, a driver. PW2 Mr Hung Ying Hong, Herbert, Treasury Accountant 71.PW2 told the court that he is a member of the Hong Kong Institution of Certified Auditors (HKICA). He has been a Treasury Accountant in the Police since October 2010. Prior to joining the police he worked as an auditor for Anderson and Co and PricewaterhouseCoopers. He was a senior accountant in Karcel International Holding Co Limited, which is listed on the HK stock exchange and is involved in the manufacturing of products on the Mainland. He worked for Tianjin Development Holdings Limited as a senior accountant. He said that this company is listed on the stock exchange and is an asset owned mainland enterprise with its main business based on the Mainland. 72.PW2 said he attended training courses conducted for expert forensic accountants. He said that he had previously prepared expert forensic accountancy reports for two cases which were for trial in the Court of First Instance. In both cases the defendant entered pleas of guilty. One of those cases involved charges of money laundering. 73.PW2 said that he had qualified as a certified public accountant in 2004 and has never been investigated by his professional body for any impropriety. 74.I was satisfied that the subject matter of the opinion falls within a class of subjects upon which expert testimony is permissible, that the court required the assistance of an expert and that PW2 was such an expert. I bore in mind that whether or not the prosecution had established to the required standard that D1 was engaged in money laundering was a matter for the court and not the expert. PW2 had been invited by the prosecution to review and prepare analyses of all 28 bank statements and banking records produced in this case for the period from 23 February 2004 to 31 December 2008. PW2 also reviewed the tax records produced. PW2 had been invited to give his opinion as to whether the accounts operated by D1 had the characteristics of the process of money laundering. 75.PW2 prepared a number of reports in connection with this case. He produced and adopted a report dated 16 May 2011 which consists of two volumes, Exhibit P94. There was a third volume, Annexe A, which comprised a complete list of the 6515 transactions analysed. Each transaction listed was given a transaction reference number. PW2 confirmed that he understood the obligations of an expert witness as set out in the Code of Practice for Expert Witnesses Engaged by the Prosecuting Authority and that he followed the code in the preparation of his report. 76.On page 4 of P94, PW2 sets out the scope of his work. He was asked to examine 28 bank accounts and Inland Revenue Department documents as set out in Appendix 1 of the Report (page 114). The report lists the 28 bank accounts at paragraph 5. At the relevant times, these accounts were held by the five defendants or by companies under their control. I have listed the relevant accounts above as A/C1 to A/C28. 77.PW2 reviewed all the bank statements and banking records provided to him by the police in relation to the 28 accounts. These statements and records were produced to the court as exhibits. 78.PW2 analysed the sources and applications of funds received in the 28 accounts for the relevant periods. He considered whether such transactions had the characteristics of the process of money laundering. PW2 gave evidence over a period of 7 days. 79.PW2 also reviewed the records of the subject parties ( D1 to D5 and related companies) submitted to the IRD and considered whether the amount of deposits received into the bank accounts of the subject parties were commensurate with their reported personal or business activities. 80.PW2 stated that he approached his task on the basis that it would be improper to make any findings unless they were based upon materials tending logically to show the existence of facts consistent with and supporting such findings. 81.PW2, inter alia, conducted tracing exercises between the various accounts. In his analyses he refers to amounts going to and from “Subject Parties” (D1 to D5, Anshun and Yantex), “Other Parties” (parties that are not subject parties) and “Unknown Parties”. 82.In his analyses PW2 refers to a significant number of transactions involving remittance agents. A list of registered and unregistered remittance agents maintained by the Joint Financial Intelligence Unit ( the section of the Police Force which prior to April 2012 was under a duty to maintain the lists pursuant to the Organised and Serious Crimes Ordinance Cap 455) was produced by Hiu Yue Mun, Christine ( PW7) – Exhibits P85, 85A and 85B. 83.During the course of his evidence PW2 referred to a second report dated 17 September 2012. This was prepared by PW2 after the prosecution had received an expert report prepared on behalf of D1. As D1 was neither present nor represented this report was not produced to the court. PW2 stated that, having considered the contents of the report prepared by the defence expert, he stood by his findings as set out in in Exhibit P94. 84.PW2 found in his final analysis that there were significant cash deposits, accounts being used as temporary repositories for funds, fund flows creating complex layers of financial transactions and deposits not commensurate with turnover. PW2 said that these are hallmarks of money laundering. PW2 said that he would have come to the same conclusion even without considering the IRD records. Brief Summary of Findings of PW2 85.PW2 summarised his findings at paragraph 179 of his report. 86.He noted that there were large amounts of cash transactions which are generally by nature not traceable as to origin and ownership. He said that it also followed that where a cash withdrawal is made it can only be made with the authority of the account signatory but its ultimate destination/purpose is generally not traceable. 87.There were instances in these accounts where cash was paid into one account and then transferred to another account or to a third party. This process could be traced by reference to the balance in the account immediately prior to the deposit of the cash and the subsequent transfer, which could not have been made without the deposit of cash since there would have been insufficient funds in the account to have made the transfer without the cash deposit having been made. 88.This pattern of receiving funds into the accounts which were then utilised almost immediately was also evident in respect of funds received from subject parties and/or other parties. This was often to make investments but often followed by the sale of the investment with a return of the funds (in whole or in part) to source which demonstrated a circulation of funds through the accounts. 89.There were large deposits and withdrawals. All the accounts analysed showed large deposits made during the specified period which were for the most part later withdrawn leading PW2 to conclude (as mentioned above) that the accounts were only temporary repositories for the funds. 90.PW2 also commented that it was “unusual if an account is used to receive and disburse large sums of money with no obvious purpose”. 91.PW2 pointed out in the accounts large amounts being transferred between the accounts of the subject parties. He said that this created “complex layers of financial transactions” making it “difficult to trace the origin” of the funds. 92.PW2 said that within this concept of layering also came the associated concept of integration whereby a veneer of legitimacy was given to funds from criminal activities by placing them into the economy in “such a way that they re-enter the financial system appearing to be normal business funds”. 93.A highlighted example found in these accounts was the IPO subscriptions which were made at a time when IPOs were a much favoured form of legitimate investment but invariably, because they were vastly over – subscribed, resulted in the refund of a large proportion of the investment applied for. 94.PW2 referred to the use of remittance agents. He said that money received from remittance agents was often difficult to trace as to its true origin. Likewise the use of remittance agents to remit money made it more difficult to trace the eventual destination of the money. Whilst remittance agents were required to be registered by the JFIU they fell outside the traditional banking system. Many remittance agents were found to have been involved in the transactions appearing in these accounts and the use of many (as opposed to perhaps one or two selected agents) would appear to have been deliberate. 95.The deposits into the accounts were not commensurate with the income declared by the account holder to the Inland Revenue Department or, in the case of Yantex, not commensurate with turnover for the period analysed – this indicates a source of funds other than legitimately earned income from salaries earned and profits made in Hong Kong. 96.PW2 noted that D1 had interests in other companies but it was apparent that these companies were not a source of income. Findings made by PW2 97.PW2 drew the attention of the court to certain findings made by him from his analysis of the bank accounts with reference to his report and its annexures. I do not intend to deal with each of his findings but I will highlight some of them. 98.He noted that many of the bank accounts were opened by the subject parties during the period 2005 – 2007 but particularly in the years 2006 and 2007. PW2 said that, whilst it is apparent that some of the bank accounts were opened for the purpose of making investments or paying for mortgages and others opened in part to carry on the business of Anshun and Yantex, the sheer number of bank accounts suggested fund dispersal and layering. Charge 1 A/C 1 – BOC Savings account – Exhibit 27 99.The opening mandate (CB page 3341 – 3351 [the page where D1’s HKID card number is shown is 3344]) shows D1 opened A/C1 on 31 August 2006 and was the sole signatory to the account. 100.PW2 said that A/C 1 was one of those accounts where the opening balance and closing balance demonstrated that the account, despite being a savings account, was only used as a temporary repository of funds. During a period of just over 2 years over HKD82 million passed through this account. 101.The category of deposits is set out in the table appearing on page 8 of PW2’s report. Nearly 25% ($20,260,000.00) of the total amount deposited into the account was in cash. 102.Significant amounts were also moved between other accounts in D1’s name as shown in the table on page 9 which indicates that over $11 million was transferred into A/C 1 from other accounts and over $38 million transferred out into A/Cs 2 – 9 103.$4.68 million was received from D3 and $6 million paid to D3. As the records from the Inland Revenue Department show, D3 was a man with limited declared income and, if this is correct, he was in no position to give D1 $4.68 million. He also had 6 personal bank accounts. 104.Paragraph 13.3 refers to IPOs and securities with over $27 million being paid out to subscribe for IPOs or purchase other securities and over $24 million being received by way of refunds from over - subscribed IPOs and the sale of other securities. 105.The analysis of transactions with other parties is set out in appendix 2A(ii) (page 121). I will highlight two of those referred to by PW2. These are listed in the appendix at number 3, Fine Smart, and number 11, Tung Koon-ming Fine Smart 106.Fine Smart was incorporated on the 21st January 2005. D1 held a third of the shares in this company and was also a director. According to the accounts submitted to IRD, Fine Smart was trading at a loss – exhibits P74A, P74B, P74C. 107.Amongst the list of transactions appearing in Appendix 2A (page 115) the first deposit into the account was a deposit of cash on the 1st September 2006 (2573) followed by a deposit of $3,399,990.00 from Fine Smart on the 11th September (2574). 108.An application for an IPO was funded from these two deposits (2575) followed, about a week later, by an IPO refund (2576). A purchase of securities was made on the 4th October (2578) and a sale on the 10th October of what appears to have been that portion of the IPO subscription which had been successful (2579). 109.A further IPO subscription was made on the 19th October (2582) followed by a refund on the 27th October (2584). 110.There appears to be no refund paid to Fine Smart suggesting that A/C 1 was being used by Fine Smart to make (at least in part) these investments. 111.Unexplained receipts of large sums from other parties are clearly shown in Appendix 3.1(ii) (page 398). This appendix is an analysis of transactions with other parties for all 9 of D1’s personal accounts ( A/C 1 to A/C9). 112.Fine Smart appears at No. 40 where, over the period analysed within the 9 accounts in D1’s name, $18,564,361.00 was received from Fine Smart and only $1,314,125.00 was paid to Fine Smart. 113.The summary appendix 3.2(ii) (page 404) shows the transactions between D2’s accounts and other parties. D2, who has no interest in Fine Smart, paid over $5 million to this company. 114.D3, who likewise had no interest in this company, had significant transactions with Fine Smart with over $8.8 million received and $6.8 million paid out (see appendix 3.3(ii) at page 409). 115.The other subject parties also had some minor dealings with Fine Smart. 116.Whilst the focus of the evidence is in relation to D1, PW2 said that the pattern of dispersal of funds between the various accounts by Fine Smart demonstrated layering. Tung Koon Ming 117.On 24 November 2006 Tung deposited HKD2 million into A/C1 (transaction number 2597) but there was no corresponding payment out. 118.Tung also appears at No. 91 in appendix 3.1(ii) (page 400). During the period in question $2.2 million was received by D1 from Tung and only $100,000.00 paid to Tung. 119.Tung also features in D3’s accounts as shown in the summary Appendix 3.3(ii) (page 408) where D3 is shown to have received over $11 million from Tung (see page 410 entry No. 107). 120.D4 also received money from Tung, albeit a much smaller sum of $45,000.00 (see appendix 3.4(ii) at page 415). 121.Anshun received $2,423,393.62 from Tung (see appendix 3.6(ii) at page 420) and Yantex $2.5 million (see appendix 3.7(ii) at page 426). 122.PW2 opined that the dispersal of funds by Tung through these various accounts defied reasonable explanation and also demonstrated layering. Other Parties 123.I do not intend to go through all the other parties transactions in detail since they are clearly set out in appendix 3.1(ii) for D1’s accounts and the other supporting appendices for the other subject parties but I will highlight a number of other names which appear in this appendix and which are shown to have made significant deposits into the accounts or received significant funds from the accounts: · No. 18 Cai Yibin received HKD852,417 from D1’s accounts. He also appears in D2’s accounts summary ( receives over HKD1.97 million- page 404), D3’s accounts ( receives over $10.1 million – page 408), Anshun’s accounts ( receives over HKD2.73 million- page 418) and Yantex accounts ( over HKD1 million- page 424). · No. 23 Chan Hung Kit Wilson also appears in D3’s accounts ( deposits HKD200,000 and received HKD500,000 - page 408) and D4’s accounts ( deposits HKD135,500 - page 414). · No. 25 Chau Tuk Shun and Leung Yim Fun Amy also appear in Anshun’s accounts ( receives HKD1 million - page 418). · No. 30 Choy Kam Tin also appears in D2’s accounts (receives HKD65,766.50 – page 404), Anshun’s accounts (deposits HKD1.7 million and receives over HKD2.675 million - page 418) and Yantex accounts ( receives over HKD1 million - page 424). · No. 31 Chu Kam Ying also appears in D2’s accounts (deposited HKD2 million - page 404), D3’s accounts ( deposits over HKD6.5 million - page 408) and Anshun’s accounts ( deposits over HKD5.74 million and together with Ho Wai Yu deposits over HKD1 million - page 418). · No. 55 Ieong Tong Seng also appears in D3’s accounts (received HKD 2 million - page 409). · There were numerous transactions involving remittance agents . 124.At Appendix 2A on page 115, a list of the transactions relating to A/C 1, there are instances where cash was deposited into the account followed almost immediately by transfers or withdrawals . 125.I was referred to an example of this at transaction entry 2580 where $3 million was deposited in cash and, on the same day (16th October 2006), $3 million was transferred to A/C 2. At 2594 $2 million was deposited and on the following day (24th November) $10,000 was transferred to A/C2. At 2605 $2 million was deposited and on the same day 6th December a like sum was transferred to A/C2. At 2621 $3 million was deposited in and on the following day (22nd December) $50,000.00 was withdrawn in cash. 126.PW2 identified a number of significant large payments of cash into A/C1. They are referred to by transaction number: 2573 1st September 2006 $3 million 2580 16th October 2006 $3 million 2594 23rd November 2006 $2 million 2605 6th December 2006 $2 million 2621 21st December 2006 $3 million 2641 8th February 2007 $90,000.00 2642 12th February 2007 $70,000.00 2675 22nd May 2007 $1.5 million 2676 23rd May 2007 $1.5 million 2692 27th July 2007 $4 million 2704 23rd November 2007 $100,000.00. A/C 2 – BOC Current account- Exhibit P27 127.The opening mandate (CB pages 3341 – 3351 [the page where D1’s HKID card number is shown is 3344]) shows D1 opened the account on the 31st August 2006 and was the sole signatory to the account. 128.PW2 said that whilst it was not uncommon for a current account to be used as a temporary repository for funds the amount passing through this account for the period of just over two years analysed was significant – approximately $47 million. 129.PW2 said that there were large deposits received from the subject parties (D2 $1 million, D3 $2.021 million, D4 $5.05 million and Anshun $1.54 million). $15 million was paid from this account to D3. 130.PW2 said that the account summary appendix 2B (page 122) showed examples where funds are transferred into this account from one of the other accounts in D1’s name and thence into D3’s accounts with no apparent reason why funds could not have been transferred direct. 2365 3rd October 2006 $1 million from A/C3 2366 3rd October 2006 $1 million to D3’s A/C17 2384 6th December 2006 $2 million from A/C1 2385 6th December 2006 $2 million to D3’s A/C17 2386 14th December 2006 $1million from A/C1 2387 14th December 2006 $1million to D3’s A/C17 2390 10th January 2007 $1.5million from A/C1 2391 10th January 2007 $1.5million to D3’s A/C 17 2396 23rd February 2007 $9.5 million from A/C1 2397 24th February 2007 $9.5 million to D3 (cash out) 131.PW2 said that D4 seemed to have made use of this account to make a payment to Chen Wei Ping of $5 million with no apparent reason why D4 could not have made the payment direct (entries 2405 and 2406 dated 30th April 2007). Note D4 had her own current account with BOC – A/C 23. 132.A payment of $1 million by D3 to Lo Man Fai was directed through A/C 2 on the 8th May 2007 (see entries 2411, 2412 and 2413). Likewise the payment made to Friends Provident International Limited of $600,000.00 (entries 2424 and 2425) and to Cheung Siu Ping for $40,200.00 on 26th April 2007 (entries 2403 and 2404). I noted that D3 had two current accounts with BOC A/Cs 16 and 19. 133.PW2 said that a full list of the other parties’ transactions appear in appendix 2B(ii) (page 129) and, with the exception of minor bank payments, the majority of the withdrawals from this account in favour of other parties were for significant sums and far in excess of any known legitimate source of income. A/C 3 – BOC Savings account - Exhibit P 30. 134.The opening mandate (CB pages 3838 – 3842 [the page where D1’s HKID card number is shown is 3842]) shows D1 opened the account on the 27th August 2005 and was the sole signatory to the account. 135.The chart appearing at page 12 of PW2’s report again shows this account was a temporary repository of funds. 136.PW2 said that this was another very active account operated by D1 although in the latter part of the period under review the account seems to have been used to make mortgage repayments. It is significant that for a period in 2006/ 2007 the monthly loan repayments exceeded $75,000.00. He said that there was a pattern whereby these loans, which were to purchase property in D1’s name,were in fact being funded to a large part by deposits from subject parties/other parties or cash. 137.PW2 said that this account demonstrated the concept of integration whereby funds are received from subject parties/other parties and put towards the purchase of properties through these loans. 138.PW2 referred to some examples: 2779 12th October 2005 $100,000.00 from D3/s A/C15 2780 21st October 2006 Loan repayment $38,121.09 2820 17th January 2006 $100,000.00 cash deposit 2822 21st January 2006 Loan repayment $41,419.79 2845 16th March 2006 $150,000.00 cash deposit 2846 21st March 2006 Loan repayment $42,258.86 2853/4 4th April 2006 $1 million from Fine Smart [PW2 said that this sum went towards the loan repayments on the 21st April 2006 (2863) and 3rd May (2873).] 2888 17th May 2006 $144,788.00 from Cai Daiyang 2890 22nd May 2006 Loan repayment $43,101.09 2902 1st June 2006 $60,000.00 from D3’s A/C15 2904 2nd June 2006 Loan repayment $35,922.36 139.PW2 said that the pattern was repeated thereafter with significant sums coming from D3’s account(s). Deposits of $250,000.00 (2971), $200,000.00 (3016) and $200,000.00 (3023) came from Chan Hung Kit Wilson. 140.PW2 referred to the amount of $200,000.00 which came from Artwin Limited (3047), $40,000.00 from D2(3061) with a like amount at 3112. 141.PW2 said that Fine Smart made a significant deposit on the 22nd September 2006 which financed, in part, a partial repayment of a loan on the same date (2964 and 2965). I noted also entry 2963 where $1 million was deposited from D1’s A/C 7 on the 22nd September 2006 and on 3rd October $1 million was transferred to A/C2. 142.PW2 said that Chu Kam Ying deposited over $300,000.00 into the account on the 4th November 2005 which was withdrawn in cash on the following day (2783 and 2784) and for some reason D1 transferred $3.1 million from his savings A/C1 with BOC to savings A/C 3 with BOC and then paid Chau Tuk Shun and Leung Yim Fun Amy $3 million on the same day ( 3044 and 3045). 143.PW2 said that during the period 11September 2007 to 27 September 2007 the pattern of deposits and withdrawals on this account was: 3039 11th September 2007 $3.8 million from “others” 3040 12th September 2007 $100,000.00 to A/C2 3041 12th September 2007 $100,000.00 to A/C1 3042 12th September 2007 $3.2 million to A/C1 3043 12th September 2007 $300,000.00 withdrawn in cash 3044 12th September 2007 $3.1 million from A/C 1 3045 12th September 2007 $3 million to Chau and Leung 3046 18th September 2007 $100,000.00 withdrawn in cash 3047 18th September 2007 $200,000.00 deposit from Artwin 3048 19th September 2007 $55,000.00 to A/C2 3049 21st September 2007 $41,692.95 loan repayment 3050 27th September 2007 $109,000.00 withdrawn in cash 3051 27th September 2007 $8,100.00 cash deposit A/C 4 – BOC Savings account- Exhibit P31. 144.The opening mandate (CB page 4061 – 4072 [the page where D1’s HKID card number is shown is 4072]) shows D1 opened the account on the 26th January 2005 and was the sole signatory to the account. 145.PW2 said that, as is shown on the chart appearing on page 15 of PW2’s report, a significant proportion of the funds credited to this account was withdrawn in cash (85.30%). PW2 said that this account appears to have been used as a funnel to receive funds from subject parties/other parties and then to withdraw the funds in cash. 146.PW2 commented at paragraph 22.1 that the ultimate recipients of these cash withdrawals could not be traced, although the account seems to have been linked to a betting account and the majority of the cash transactions are relatively small. 147.PW2 pointed out that the opening transactions in this account (2268, 2274 and 2277) showed credits to the account were from Lau Fai Yeung and a remittance agent and two weeks later a significant transfer ($80,000.00) into the account was made by D2 (2280 from A/C 10) and 20 days later a further $245,000.00 was received from D2’s A/C 10 (2298). A/C 5 – BOC Foreign currency account (US$)- Exhibit P27 148.The opening mandate (CB pages 3341 – 3351[the page where D1’s HKID card number is shown is 3344]) shows D1 opened the account on the 31st August 2006 and was the sole signatory to the account. 149.PW2 said that this account appears to have been used to make investments although there was a significant credit from D3’s A/C 17 of US$200,000.00 just after the account was opened (2740) (I noted D2, the wife of D3, has a foreign currency account) and PW2 said that there are three significant payments to Anshun (2754 – US$400,000.00; 2759 – US$30,000.00 and 2763 – US$30,000.00). A/C 6 – Nanyang Commercial Bank Savings account- Exhibit 37 150.The opening mandate (CB pages 6543 – 6549 [the page where D1’s HKID card number is shown is 6548]) shows D1 opened the account on the 23rd May 2005 and was the sole signatory to the account. 151.PW2 said that the account was operated for a short period only and was closed on the 2nd June 2005 when the funds were transferred to A/C7. 152.PW2 said that during that period funds were received from two remittance agents and there were two deposits of cash. A/C 7 – Nanyang Commercial Bank Savings account- Exhibit 37 153.The opening mandate (CB pages 6557 – 6562 [the page where D1’s HKID card number is shown is 6558) shows D1 opened the account on the 2nd June 2005 and was the sole signatory to the account. 154.As mentioned above the account was opened when A/C 6 was closed. PW2 said that there appears to be no obvious reason for this since both accounts were opened at the same branch in North Point ( the account number gives the same branch code, namely 496). 155.PW2 said that this account was later used in connection with property transactions but again the primary deposits at the outset came from a remittance agent – the same agent (Hong Yan yan) who had made deposits into A/C6. 156.PW2 said that a significant amount of over $1.7 million was channelled through this account from another remittance agent and Wang Lirong to Fine Smart (entries 3249,3250 and 3251) and funds which were destined for Ellen Au & Co Solicitors to purchase a property came from Ieong Tong Seng and Tan Anthony Lawrence Junior (entries 3253, 3255, 3256, 3265, 3266). 157.PW2 said that Ieong and another unknown person also contributed towards another property purchase through Tsang Chan & Wong (3286,3287 and 3288). Chan Hung Kit Wilson made a deposit of $143,400.00 which was followed by a number of cash withdrawals ( 3302). 158.PW2 said that Artune Limited made a significant deposit of $500,000.00 (3277) on the 18th July 2005 and Wang Lirong made a further deposit of $500,000.00 on the 29th September 2005 (3310). 159.PW2 said that this appears to have been an account used to conduct large transactions on behalf of third parties with no apparent reason why the said Wang could not pay Fine Smart direct or Ieong and Tan pay the solicitors direct. A/C 8 – Standard Chartered Bank Savings account- Exhibit P33 160.The opening mandate (CB pages 4293 - 4299 [the page where D1’s HKID card number is shown is 4299]) shows D1 opened the account on the 2nd January 2007 and was the sole signatory to the account. 161.PW2 said that this was another short lived account since it was closed on the 4th June 2008. 162.PW2 said that, as shown in paragraph 34.1 of the report, 44.57% of the deposits into this account were in the form of cash although the total amount was relatively small compared with some of the other accounts. 163.PW2 said that the account was used to facilitate a loan repayment – the loan had been taken out in connection with the purchase of Flat A, 23rd Floor, Tower Two, One, Silver Sea Kowloon (referred to as Silver Sea during the trial) which was vested in D1’s name together with another person (Lau Po Lee). 164.PW2 said that during the first half of the period analysed the loan repayments were chiefly financed by deposits into the account made from D2’s A/C11 and one from an account in D4’s name (not analysed) but, in the latter half, the payments were financed by cash deposits. 165.PW2 said that this account read in conjunction with A/C 3 shows that D1 had loan repayment liabilities in 2007 of nearly $140,000.00 per month which was far in excess of any discernible sources of legitimate income. A/C 9 – ICBC Savings account- Exhibit P39 166.The opening mandate (CB pages 6751 – 6766 [the page where D1’s HKID card number is shown is 6762]) shows D1 opened the account on the 27th November 2006 and was the sole signatory to the account. 167.PW2 said that this was another account which proved to be a temporary repository of funds. I noted that PW2 when giving evidence was directed to page 173 of his report where, in relation to 7 transactions, under the heading “ Classification” he had stated “unknown” indicating that such transactions were with unknown third parties. PW2 was referred to the relevant bank account statements which established that all 7 transactions related either to IPO subscriptions or sales of securities ( CB 6818-20). 168.3 months after its opening it largely remained dormant. 169.PW2 said that the account was opened with a $2 million deposit from D3’s A/C 17. This money had in turn been received into D3’s account in cash on the same day it was transferred (page 250 entries 4999 and 5000). PW2 said that there is no discernible legitimate reason why the cash could not have been deposited direct into A/C 9. 170.PW2 pointed out that, on the day following its transfer into A/C 9, D1 transferred $1,921,191.18 for an IPO subscription (3197) and approximately 1 week later received $1,780,567.01 which appeared to be an IPO refund (3199). 171.PW2 said that D1 received three further credits into this account from sales of securities (3200 – 14th December 2006 $149,214.02; 3204 - 31st January 2007 $1,206,478.90; 3205 - 31st January 2007 $924,881.92) before transferring $2,168,950.00 to A/C1 also on the 31st January 2007. Thereafter, as mentioned above, the account remained dormant. 172.PW2 said that by cross reference to A/C 1 transactions (page 116) on the 1st February 2007 D1 transferred $2 million to D3’s A/C 17 ( 2640) showing a complete circulation of funds. 173.The combined summary of D1’s accounts appears in the report at pages 24 – 28. 174.PW2 pointed out that, from the chart appearing on page 25, it is apparent that all these accounts were opened within a short period of each other. PW2, from his analysis, identified not only the large sums of cash deposited into the accounts but also features of placement, layering, and integration all of which were features appearing in the Prevention of Money Laundering Guideline issued by the Monetary Authority. PW2 said that placement involves the physical disposal of cash proceeds derived from illegal activity. 175.PW2 commented that he was not aware of any explanation of such large fund flows through the accounts (except to fund the issue of cheques and the creation of time deposits) and the flow between the accounts in the names of the subject parties created complex layers of financial transactions. 176.PW2 also noted the use of remittance agents in D1’s accounts which, as mentioned before, makes it difficult to trace the true origin or destination of the funds. Tax Records - Exhibits: P66A – H. 177.According to the records D1 did not file any tax returns or make any payment for tax up to 3rd December 2008. For the year ending 31st March 2009 he reported an income of $360,000.00. 178.PW2 concluded that the total deposits amounted to 618 times D1’s reported income which, even after adjustment made for deposits from the subject parties, still amounted to 268 times reported income. PW2 said that from any perspective neither the income, nor the expenditure (eg mortgage payments), was commensurate with the reported income especially for the years 2005/06, 2006/07 and 2007/08. Charge 7 179.As mentioned above, it would appear that Yantex was engaged in some business activities (PW1 said the company engaged in the trade of swimming goggles). In his analysis of the bank accounts of Yantex, PW2 identified some features common to those applicable to D1’s accounts and which are indicators of money laundering. A/C 26 – DBS savings account (A/C 26a – HK$ account ; A/C 26b – US$ account)- Exhibit P26 180.The opening mandate (CB pages 2165 – 2169 [the page where D1’s HKID card number is shown is 2169]) shows the account was opened on the 19th October 2006. D1 and D2 were joint signatories to the account. 181.PW2 said that the opening and closing balance of A/C 26a is shown in the chart on page 97 and follows the pattern of an account used as a temporary repository of funds. 182.PW2 said that the amount of cash deposited into the account was relatively small but still accounted for over 9% of the total deposits. 183.PW2 said that the first two deposits shown on appendix 2Za (page 365) (5875 and 5876) into the account were transfers from accounts in D2’s name. The third deposit on the same day (5875 and 5876) was a transfer of $300,000.00 from A/C 27 (5877). This was not a funding from business receipts since a cross reference to appendix 2AA (page 377) showed the money came from a transfer into A/C 27 from D2’s A/C 11 on the 29th March 2007 (6113) of $3.5 million. 184.PW2 said that further cross reference showed the $3.5 million came from D2’s A/C 10 (4259 & 4260 at page 198) which in turn came from a variety of sources (3859 – 3864 at page 183) which when cross referenced with the analysis in appendix 2J(ii) on page 196 were all deposits made by remittance agents. 185.PW2 pointed out that, after the transfer of $300,000.00 from the current account A/C 27 to A/C 26a on the 4th April 2007 (5877 as above), $200,000.00 was then transferred back to A/C 27 on the 11th April 2007 (5878) and a further $50,000.00 on the 16th April (5879). $600,000.00 was then placed in a time deposit (5880) effectively depleting the account until two deposits were made into the account (5881 & 5882) totalling $2.5 million by Tung with a significant portion of that, namely $1,039,651.00, being later withdrawn in favour of Cai Yibin (5892). 186.PW2 said that thereafter the account was funded by cash deposits (5893, 5896, 5898, 5899) which were in rounded amounts of $100,000.00 per deposit. The deposits which followed by J.S.P. Pacific Group Company Limited and Zocker Toys Asia Limited (5902, 5905, 5907, 5910 & 5913), which may represent some kind of business related transactions, contrast with those cash deposits in rounded amounts. 187.PW2 said that A/C 26b is the US$ part of the account and appeared on its face to have been set up to receive US$ related business transactions. A/C 27 – DBS current account – Exhibit P26 188.The opening mandate (CB pages 2165 – 2169 [the page where D1’s HKID card number is shown is 2169] ) shows the account was opened on the 19th October 2006. D1 and D2 were joint signatories to the account. 189.The account summary is appendix 2AA at page 373. 190.PW2 pointed out that the first significant deposit into this account was by way of a transfer from D3’s A/C 16 (5965 – deposit of $150,000.00) and a deposit of cash (5966 – deposit of $100,000.00). Thereafter up until the end of 2006 the account was funded by further deposits of cash and one deposit from D1’s A/C2 (5981 - $50,000.00). 191.PW2 said that a further significant deposit of $500,000.00 was made on 19th December 2006 from D2’s A/C 11 which in turn came from A/C10 (4248 page 198) which in turn came (at least to a large part) from a deposit from Kwan Sau Ping of $500,000.00 (3769 – page 180). Kwan Sau Ping was a remittance agent (Appendix 2J (ii) page 196). 192.PW2 said that the account is further funded by what appears to have been some business related transactions (eg 6083, 6084 and 6085) before the transfer of $3.5 million referred to above and further injections of cash (generally in rounded amounts). 193.PW2 pointed out that from January 2008 there appears to have been cross funding of Yantex by Anshun to the extent of $1.66 million as reflected in the summary appearing in the appendix 2AA(i) at page 389. 194.PW2 said that appendix 2AA (ii) shows the other party transactions. Whilst many of these could be business related, entry No. 13 on the list shows $1,007,947.80 was withdrawn in favour of Choy Kam Tin, supposedly an employee of the company, a driver, according to PW1. 195.Appendix 3.7 (i) of PW2’s report (page 423) shows the movement of funds between related parties during the relevant period. Over HKD9.9 million was paid into the Yantex accounts from related parties and over HKD5.5 million was paid out from the Yantex accounts to related parties. 196.PW2 referred to the employment records of Yantex (exhibit P82 – page 10024) which lists Choy receiving a salary for the year 1st April 2007 – 31st March 2008 of $195,000.00. 197.PW2 examined the business account records for Yantex, principally the set of audited financial statements for the period ending 31st March 2008 (exhibit P 71A). These show that for the period 29th September 2006 to 31st March 2008 Yantex had a turnover of $1,609,802.00 and a net loss of $1,906,089.00. 198.PW2 said that, as reflected in paragraph 176 of the report, the total deposits into the accounts and adjusted deposits were 8.3 and 3.6 times the turnover. 199.I noted that PW1 was asked about the accounts which she had kept for the period April 2008 to October 2008 (exhibit P83) (which were not considered by PW2). However her evidence was that, despite having asked D2 for the account details in respect of the Mainland operations, these were never provided so the accounts only contain details of HK activities. Police Evidence Evidence relating to the identity of the defendants 200.DSPC 48042 Lee Sung Wah (PW8) arrested D1 on the 7th January 2009 at Lok Ma Chau Border Control Point after D1 had returned to Hong Kong from the Mainland. At the time of his arrest PW8 checked the travel document carried by D1 which was a HKSAR passport. Within that passport was D1’s Hong Kong Identity Card number which PW8 recorded on the POL 153 which he served on D1(exhibit P103). The identity card number recorded was K154501(9). 201.D1 was later interviewed under caution. The interview was video recorded. The tape recording of that interview (exhibit P105, transcript P105A and translation P105B) was played and PW8 identified D1 on the recording. D1 recited his Hong Kong Identity Card number. The number he recited was K154501(9)( counter 5 in the transcript). 202.PW8 confirmed that no force threat or inducement had been used before or during the interview. I also noted that the interview was conducted in the presence of two lawyers acting on behalf of D1. 203.A copy of D1’s Hong Kong Identity card also appears in the affirmations by the bank officers who exhibited the opening mandates and other documents relating to the accounts held in D1’s sole name (A/Cs 1 – 9 ) and the accounts held in the name of Yantex for which D1 is a co- signatory (A/Cs 26 and 27). 204.PW8 was shown the copy of the identity card appearing in exhibit P33 (CB page 4299) and confirmed the person he arrested was the person whose image and identity card number appeared on the copy. 205.PW8 was also shown a family photograph (exhibit P114) which had been seized from the residence of D2 and D3 (Bamboo Mansions purchased by D4 in 2006) and confirmed the male appearing thereon was D1. 206.In my view, the identity of the other defendants named in the other charges and their relationship to D1 were relevant to the charges against D1. PW2 in his analysis of the 28 bank accounts points out numerous examples of monies flowing between their various accounts. 207.PW8 was also the officer who arrested D5. He likewise identified the younger adult female shown in the photograph (exhibit P114) to be D5. PW8 further confirmed the female shown in the copy of the passport exhibited to the affirmation by the bank officer on behalf of the bank which held D5’s account (A/C28 - exhibit P43 CB page 8690) to be the female Shi Wenni he had arrested on the 13th January 2009. 208.PW9 arrested D2 on the 22nd November 2008. PW9 confirmed at the time of arrest he examined the Hong Kong Identity Card of D2. He copied the number onto the POL 153 served on D2 (exhibit P11). The number was K217961(A). . 209.PW9 also confirmed the person whose image and identity card number appears on a copy exhibited to the banker’s affirmation (exhibit P35 – CB page 5220) was the lady he had arrested on the 22nd November 2008. 210.Sgt 53822 Yuen Man Lai (PW10) arrested D3 on the 22nd November 2008. PW10 confirmed that at the time of arrest he examined the Hong Kong Identity Card of D3. He copied the number onto the POL 153 served on D3 (exhibit P15). The number was H397288(9). 211.PW10 also confirmed the person whose image and identity card number appears on a copy exhibited to the banker’s affirmation (exhibit P35 CB page 5220) was the man he had arrested on the 22nd November 2008 212.DSPC 45622 Tang Lap Hang (PW12) arrested D4 on the 23rd November 2008. PW12 confirmed at the time of arrest he examined the Hong Kong Identity Card of D4. He copied the number onto the POL 153 served on D4 (exhibit P22). The number was K217933(4). 213.PW12 also confirmed the person whose image and identity card number appears on a copy exhibited to the banker’s affirmation (exhibit P28, CB page 4699) was the lady he had arrested on the 23rd November 2008. Exhibits Seised by Police officers 214.SPC 50423 Au Yeung Wai Kin (PW11) conducted the search of the Bamboo Mansion premises. His evidence was that on the 22nd November 2008 a team of police officers arrived at the Bamboo Mansion premises which were bought by D4 in October 2006. A search was conducted pursuant to a search warrant (exhibit P110) and inter alia the following exhibits were seized: P3 $1,379,880.00 found in a safe in the bedroom – shown in P10 photo numbers 1 & 2 (mixed denomination notes ranging from bundles of $1000 to bundles of $20). P4 RMB83,800.00 also found in the safe – shown in P10 photo numbers 3 & 4 (bundles of RMB100 notes). P5 $250,000.00 found inside a bag in the bedroom – shown in P10 photo numbers 5 & 6 (bundles of $1000 and $500 notes). P6 RMB10,000.00 found in the same bag – shown in P10 photo numbers 7 & 8 (bundles of RMB100 notes). P7 $1,000,000.00 found in a drawer in the bedroom – shown in P10 photo numbers 9 & 10 (bundles of $1000 notes). P8 $500,000.00 found in the green bag on the back of the door of one of the bedrooms – shown in P10 photo numbers 11 & 12 (bundles of $1000 notes). P2 A money counting machine found in the bedroom – shown in P131 photo 11. Various bank passbooks and documents (exhibit numbers P50 – 57, P59, P60, P115 – P120, P125 – 130). Various documents of identity including a passport in the former name of D1 (exhibit P112) and the re – entry permits for D1 and D4 (exhibits P113). A Bank of China Life Assurance Policy Document (exhibit P121) in the name of D4 which declared D1 and D2 to be her son and daughter. A set of documents relating to the purchase of Bamboo Mansions (exhibit P122) showing the property was purchased in the name of D4. A copy of a loan agreement between D1 and Sky Finance Limited (exhibit P124) used in connection with the purchase of Flat B 12th Floor Tower 25 Ocean Vista Laguna Verde Kowloon (referred to as Ocean Vista during the trial). The family photograph referred to above (exhibit P114). 215.PW9 conducted the search of the office premises. His evidence was that, following the arrest of D2, she was escorted to the office premises which were searched pursuant to a search warrant (exhibit P108). Inter alia the following exhibits were seized: P9 RMB20,000.00 shown in P10 photo 13 and 14 (bundles of RMB100 notes) Various bank books and documents (exhibits P61A – F, P109) P134 Name Card in the name of D1 for the company Friendly Express. P135 Name Card in the name of D3 for Yantex. Various company account documents were also seized from the office or later handed over to the police by PW1. These were: P75 - financial statement of Anshun for the period 17th July 2007 to 31st March 2008. P76 - IRD employers return of remuneration and pensions relating to Anshun for the period 1st April 2007 – 31st March 2008. P80 - income statement of Wealthway for year ending 31st March 2008. P80A - financial statement of Wealthway for year ending 31st March 2007. P81- financial statement of Yantex for the period 29th September 2006 – 31st March 2008. P82 - IRD employer return relating to Yantex from 1st April 2007 – 31st March 2008. P83 referred to above. 216.Pursuant to a search warrant, P96, PW3 conducted a search of the Ocean Vista property purchased by D1 in 2005. 217.A safe which had been seized from Ocean Vista was opened at the police station in the presence of D3. From the safe a Deed Poll was seized – exhibit P1. The Deed Poll shows a change of name for D1. D1’s former name appears on the passport (exhibit P 112 referred to above) and also the bank documents exhibited to the affirmation P31 (for A/C 4). 218.During the search of the Ocean Vista premises an access card for Laguna Verde issued to D3 was also seized (exhibit P99). Directions D1 absconding during proceedings 219.The trial of all five defendants was due to commence on 9 July 2013. Counsel for D1 was unavailable on that date and the trial was put back to 15 July. The trial commenced on that day and on 17 July all counsel requested that the trial be adjourned to Monday, 22 July. D1 failed to appear on that day. The court was informed that the previous evening D1 had left Hong Kong to travel to the Mainland and had not returned. A warrant was issued for his arrest and the trial was adjourned to 26 July. On the 26 July D1 failed to appear and counsel for the other defendants sought a further adjournment for discussions with the prosecution. The trial was adjourned to 30 July. On 30 July D1 again failed to appear and I was informed by the prosecution that, according to their enquiries, D1 had not been detained by Mainland authorities. 220.On 30 July D2 and D3 entered guilty pleas to the charges they faced and, on a later date, the prosecution requested that the charges against D4 and D5 remain on the court file not to be proceeded with without the leave of the court 221.I was invited by the prosecution to continue the trial against D1 in his absence. I was referred to paragraphs 3-108 to 3-110 of Archbold Hong Kong 2013. 222.It is there stated that the general rule is that the defendant should be present through the trial. It was established in R v Browne, 70 J P 472 that a charge may be tried in the absence of the defendant, if he has previously pleaded. However, Lord Reading CJ cautioned in R v Lee Kun [1916] 1 KB 337 at p 341, 11 Cr App R 293 at 300, CCA, that “[t]here must be very exceptional circumstances to justify proceeding with the trial in the absence of the accused”. 223.The following principles were set out in R v Hayward [2001] 3 WLR 125 (Court of Appeal): A defendant generally had a right to be present at his trial and to be represented. These rights could be waived in various ways, including deliberate absence, withdrawal of instructions, and disruptive behaviour during trial. The judge had a discretion as to whether the trial should continue in the absence of the defendant and/or his representatives. The discretion must be exercised with great care. Only rarely should a trial continue in the absence of a defendant, especially if he was unrepresented. In exercising the discretion, fairness to the defendant was of prime importance but fairness to the prosecution must also be taken into account. The judge must have regard to all the circumstances, including: The nature and circumstances of the defendant’s behaviour in absenting himself from the trial or disrupting it, and in particular whether the behaviour was voluntary and so plainly waived the right to be present; Whether an adjournment would resolve the matter; The likely length of such an adjournment; Whether the defendant, though absent, wished to be represented or had waived his right to representation; Whether the defendant’s representatives were able to receive instructions from him and the extent to which they could present his defence; The extent of the disadvantage to the defendant in not being able to present his account of events; The risk of the jury reaching an improper conclusion about the absence of the defendant; The seriousness of the offence; The general public interest that a trial should take place within a reasonable time; The effect of the delay on the memories of witnesses; Where there was more than one defendant, and not all had absconded, the undesirability of having separated trials. If the judge decided that a trial must proceed in the absence of a defendant, he must ensure that it was as fair as possible. Steps must be taken to expose and draw attention to weaknesses in the prosecution case, and the jury must be warned that absence was not evidence of guilt. 224.I noted that the defendant absconded on the evening of 21 July 2013 in full knowledge that the trial was to continue the next day. The other four defendants are all related to D1 but there was no explanation for the defendant’s absence. I concluded that he had deliberately waived his right to be present. 225.D1 had made no contact with his defence counsel who applied to withdraw due to lack of instructions. I acceded to that application. 226.I bore in mind that there are obvious disadvantages to D1 not being able to present his account of events to the court. I bore in mind that the court has an obligation to make sure that the trial is as fair as possible in the circumstances. 227.The offences in this case are serious. Although the nature of the underlying offence is not known the amount of money involved is very substantial. The offences also cover a period of four years involving a large number of accounts. The defendant is also suspected of being the major beneficiary of these offences. 228.The proceedings over four years ago. The defendant was first arrested on 7 January 2009 and he was subsequently charged on 5 October 2010. The case was transferred to the District Court on 10 November 2010 and for various reasons three previous trial dates were vacated. 229.I was told that there is certain property in which D2 and D3 have interests that cannot be dealt with until after the trial of D1. 230.The prosecution conceded, that, as the witnesses it intended to call relied largely on documentary evidence, this was not a case where delay would have an undue effect on the memories of the witnesses. 231.I bore in mind that steps must be taken in order to ensure that the trial was as fair as possible to the defendant. I noted what was said by Lord Bingham in Jones, “it is of course a discretion to be exercised with great caution and with close regard to the overall fairness of proceedings”. 232.Having considered all the circumstances, I took the view that it was in the public interest that the trial should proceed. 233.I was mindful of my obligation to ensure that steps must be taken to expose and carefully consider any weaknesses in the prosecution case. 234.I reminded myself that the absence of D1 was no indication of guilt and that a defendant has no obligation to prove anything, it is for the prosecution to prove the guilt of the defendant on each charge beyond reasonable doubt. Expert Evidence 235.I was told by the prosecutor that he intended to call an expert witness and that D1’s counsel had intended to call their own expert witness, a forensic accountant. I was also told that his report was served on the prosecution who thereafter consulted their own expert witness. Subsequently, the prosecution’s expert witness provided further statements dealing with matters raised by the defence expert. 236.I reminded myself that before a court could receive expert evidence it must decide upon two questions. The first is whether the subject matter of the opinion falls within the class of subjects upon which expert testimony is permissible. This question may be divided into two parts. Does the court required the assistance of an expert and secondly does the subject matter of the opinion form part of a body of knowledge or experience which is sufficiently organised or recognised to be accepted as a reliable body of knowledge or experience, a special acquaintance with which by the witness would render his opinion of assistance to the court. 237.The second question is whether the witness has acquired by study or experience sufficient knowledge of the subject to render his opinion of value in resolving the issues before the court. 238.I also reminded myself that although an expert witness will be called on behalf of a particular party to the proceedings, an expert witness has an overriding duty to assist the court impartially and his primary duty is to the court. An expert should not omit to consider material facts which could detract from his concluded opinion. In this case there had been an exchange of experts’ reports. PW2 confirmed that he had read the report prepared by the defence expert and stood by the findings he made in his original report. I was satisfied that PW2 was quite clear as to his obligation to express honest and independent opinions. 239.I bore in mind that the court has a duty to scrutinise the expert evidence at the time it is produced and to be vigilant as to any frailties it may contain-: R .v. J-LJ (2002) 148 CCC (3d) 487, SCC, para 28. Other Directions 240.I reminded myself that D1 has a clear record which is relevant to the issue of propensity. 241.I reminded myself that, where the prosecution rely on circumstantial evidence, the court can only draw an inference from facts proved beyond reasonable doubt and any inference drawn must be the only inference that can reasonably be drawn from such facts, it must be an irresistible inference. The Law relating to s 25 (1) of the Organised and Serious Crimes Ordinance Cap 455 242.The prosecution is required to prove beyond reasonable doubt that the defendant dealt with property, knowing, or having reasonable grounds to believe, that such property, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence. 243.The actus reus of the offence is the dealing. It is not an aspect of the actus reus that the property is in fact the proceeds of an indictable offence. 244.The Court of Appeal in HKSAR v. Pang Hung Fai CACC 34/2012 held that, in order to ascertain whether the “ having reasonable grounds to believe” limb of the offence has been established to the required standard, the court should ask itself two questions. The first question is: what were the facts known to the defendant and the objective factual circumstances in which he found himself and of which he was aware at the time he dealt with the property which is the subject of the charge? The Court stated that it is for the prosecution to establish the facts and circumstances relied upon. 245.The second question is: do those facts and circumstances provide reasonable grounds to believe that the property in whole or in part represented the proceeds of an indictable offence? 246.The Court of Appeal went on to state in Pang that the first step in determining whether a defendant had reasonable grounds to believe is to identify:
Evaluation of the evidence Charge 1 247.This charge relates to monies deposited into 9 bank accounts ( A/C 1 to A/C 9) held in the name of D1. The evidence shows that during the relevant period HKD192,273,353.14 and US3,874,314 was deposited into these accounts. 248.I have set out above in considerable detail the evidence and findings of PW2. I accepted PW2 as an expert in the relevant field of expertise and I was satisfied that the court required the assistance of an expert. PW2 was taken in considerable detail through his report and the relevant supporting documentation. He gave his evidence over a period of 7 days. He was asked to explain his findings in relation to the relevant documents produced and I have set out above some of the evidence he gave. 249.He opined, inter alia, that the transfer of funds into and out of accounts in the names of other defendants or related companies, the application for IPO’s which resulted in substantial repayments, other investments including the purchase of property and the use of different accounts are all indicators of layering and integration which are hallmarks of money laundering. I accepted his findings and conclusions. He said that he would have reached the same conclusions without the evidence obtained from the IRD. 250.I noted that in addition to the 28 bank accounts analysed, there were account books and documents seised by the police which show that the subject parties had a further 15 bank accounts between them. 251.Of the 28 accounts analysed the majority were opened within the period 2005 -2007. 7 of the accounts were opened in 2005, 11 in 2006 and 5 in 2007. 252.One of the factors which PW2 highlighted during his analysis was the significant cash deposits and withdrawals. Substantial sums of cash were found during the police search of Bamboo Mansion, a property purchased by D4 and occupied by her, her daughter, D2, and her son-in-law D3, and during the search the offices shared by Anshun and Yantex in Hung Hom. 253.Virtually all the deposits paid into D1’s accounts were subsequently withdrawn such that I was sure that the accounts were used as temporary repositories of the funds. 254.There were large sums transferred to or received from the other defendants or from the accounts of companies controlled by them. 255.Over HKD14 million was received from D3, over HKD5.8 million from D4 and over HKD1.71 million from D2. Over HKD1.58 million came from Anshun. 256.Over HKD 23 million was transferred to D3 and over HKD4.9 million to Anshun. 257.Of the over HKD68 million received from third parties approximately HKD8 million was transferred through remittance agents. Approximately HKD5 million was transferred out through remittance agents. The use of remittance agents instead of the traditional banking system makes it more difficult to trace the origin of funds or their destination. 258.Over HKD4 million in deposits and a similar amount in withdrawals was received from and paid to parties who could not be identified from the bank documents and records. No supporting documentation or records were found during the police search of the homes of the defendants. Such corporate records as were found did not support this substantial movement of funds. 259.The IRD records show that D1 filed no tax returns and did not make any payment for tax up to 3 December 2008. 260.A return filed by an employer showed D1’ s income for the period 1 April 2008 to 31 March 2009 to be HKD360,000 as a director of Cheer Surplus ( CB 9101). 261.The total deposits within the period covered, which amounted to approximately HKD222 million, was far in excess of any reported income especially for the years 2005 to 2008. Further, the deposits from other defendants or accounts controlled by D1 or other defendants were far in excess of any reported income. General Observations Land Registry Records 262.The records show significant funds were used by D1 and D4, his mother, to purchase four properties worth over HKD34 million. Over 10% of the deposits were in cash. Although the properties were purchased with the assistance of mortgages, there did not appear to be any legitimate source of funds to enable such purchases or to meet the mortgage repayments. I noted that the residential premises were all very close to each other in the Hung Hom area of Hong Kong. Search of Bamboo Mansion 263.Bamboo Mansion was purchased by D4 and occupied by D2 and D3. Passbooks and other banking documents relating to D2- D4 were found at these premises. A passport in the former name of D1 and re-entry permits for D1 and D4 were recovered there. Other documentation and photographs found there show a family connection between the defendants. 264.Substantial sums of cash, a total of HKD3,129,880 and RMB93,000, and a money counting machine were recovered from various places in Bamboo Mansion. Yantex and Anshun 265.Yantex was incorporated on the 28 September 2006 with an issued share capital of 10,000 and shares of $1.00 each. D1 held 5,100 shares and D2 held 4,900 shares. It traded in swimming goggles. D1 was the sole director. D2 the company secretary. The company filed a tax return, signed by D1 ( CB 9585), for the financial year 2007/08 with a reported loss of $1,984,887.00 to be carried forward ( Exhibit P71A CB pages 9384 – 9407 at 9389). The return shows that the monthly salary bill was HKD20,000. 266.Anshun was a limited company incorporated on the 17 July 2007 with an issued share capital of 10,000 shares of $1.00 each. It engaged in the oil trade. D2 was the sole director and shareholder. D3 was the secretary of the company. The company filed a tax return, signed by D1 ( CB 9585), for the financial year 2007/08. This showed that for the period from 29 September 2006 ( the date of incorporation) the turnover was 1,690,802 and the reported loss before taxation HKD1,906,089. The loss to be carried forward was reported as $1,984,887.00 ( Exhibit P71A CB pages 9384 – 9407 at 9389/90). 267.These records show that D2 and D3 were paid about HKD15,000 per month. 268.PW1, the Anshun accounts clerk, said that she only kept records for business conducted in Hong Kong. PW1 said that she supplied documents to the accountants Andes Glacier who filed the returns with the IRD. The other companies 269.Fine Smart was incorporated on 21st January 2005. D1 was a one third equal shareholder. D1 sold his shares to Lo Fai Wong on the 7th November 2007 – see P47 and P47A-C. D1 had been one of the directors of the company. 270.Lo Fai Wong received $4 million from D2 and D3’s accounts on the 27th February 2007. Lo had earlier deposited $150,000.00 into D3’s A/C 15 on the 23rd February 2006 – see entries 5407, 3829 and 5677. 271.Financial returns and correspondence with the IRD were produced as exhibits P74 and P74A – L referred to above. They showed Fine Smart trading at a loss (subject to the charge for provisional tax as a result of deemed trading in property). 272.Cheer Surplus Investment Limited was incorporated on the 11th August 2006. D1 was the majority shareholder and one of the directors – exhibit P46 and P46 A - D. 273.One of the other shareholders was Wong Yat King. Wong paid into D3’s A/C 17 a total of $1,080,000.00 by way of two deposits made on the 24th January 2007 and 9th February 2007 (transaction entries 5041 and 5051) and received $218,400 from D1 (A/C 2) and D2 (A/C10) on the 2nd July 2008 and 19th December 2006 respectively (transaction entries 2539 and 3776). 274.Financial returns and correspondence with the IRD were produced as exhibits P73 and P73A – E referred to above. They showed Cheer Surplus trading at a loss. 275.Cheer Surplus acquired property namely Section A – F and the remaining portion of Lot 457 in DD 94 Sheung Shui which was purchased on the 14th Septmeber 2006 for $13 million. A mortgage was obtained from ICBC to part finance the purchase. That property remains unsold – exhibit P90. 276.Wealthway was incorporated on the 11th May 1993. D1 became a shareholder and director from 10 November 2006. D2 was secretary from 2008 – exhibit P48 and P48A –E. 277.Financial returns and correspondence with the IRD were produced as exhibits P72 and P72 A - D. They showed Wealthway had no trading income with accumulated losses. 278.Friendly Express Company Limited was incorporated on the 13th March 2008. It was deregistered on the 9th January 2009 by application of D1 as director – Exhibit P92 and P92A. 279.Gariman Limited was incorporated on the 5th December 2001. D1 became a director of the company on 23rd November 2007 and resigned on the 4th February 2010– Exhibit P93 & P93A - E 280.Pretty Universal Limited was incorporated on the 28th November 2005. D1 was a minority shareholder. Lo Fai Wong was also a shareholder – Exhibit P91 and P91 A - C. D1 sold his shares (minus one) to Lo on 22nd September 2008. D1 remained a director until 8th May 2009. 281.Financial returns and correspondence with the IRD were produced as exhibits P138 and P138A - C. They showed that Pretty Universal had no turnover. 282.These companies do not appear to have been an apparent source of legitimate income for D1 283.The affirmations in relation to the bank accounts held in the names of the other defendants and Anshun were produced to show the subject parties’ transfers as analysed by PW2 and to cross reference certain transactions shown in D1’s accounts. 284.The tax returns and correspondence filed by D2, D3, and D4 with the IRD were also produced (exhibits D2 - P67 and P67 A- V; D3 - P68 & P68 A – O; D4 P69 and P69A & B) and show they had limited income and do not account for the large sums passing from their accounts into D1’s accounts or the Yantex accounts. Charge 7 285.D1 was the sole director and majority shareholder in Yantex. D2 was the company secretary. D1 signed the declaration to the Inland Revenue Department Profit Tax Return for 2008 ( CB page 9385). 286.Charge 7 related to the two bank accounts operated by Yantex, A/C 26 and A/C27, for which D1 and D2 were the joint signatories. Either could sign to operate the accounts. 287.In respect of A/C 26 the bank records ( Ex P26) show that during the period 4 April 2007 to 21 November 2008 the total deposits into the account amounted to HKD4,370,522.58 and withdrawals amounted to HKD4,310,371 with a closing balance of HKD60,151.58 288.With regard to A/C 27 ( Exhibit P26) the banking documents show that between 19 October 2006 and 18 November 2008 the total deposits amounted to HKD12,751.438.98 and withdrawals amounted to HKD12,712,786.92 with a closing balance as at 18 November 2008 of HKD38,653.06. 289.As mentioned above, it would appear that Yantex was engaged in some business activities. PW1 said that they sold swimming goggles. 290.PW2 examined the business account records of Yantex, principally the set of audited financial statements for the period ending 31 March 2008 (Exhibit 71A CB pages 9348-9407). These show that for the period 29 September 2006 to 31 March 2008 Yantex had a turnover of HKD1,609,802 and a net loss of HKD1,906,089. 291.Appendix 3.7 (i) of PW2’s report ( page 423) shows the movement of funds between related parties during the relevant period. Over HKD9.9 million was paid into the Yantex accounts from related parties and over HKD5.5 million was paid out from the Yantex accounts to related parties. 292.PW2 points out at paragraph 176 of the report that the total deposits into the accounts and adjusted deposits were 8.3 times and 3.6 times the turnover. 293.I have set out in detail above the observations of PW2 in relation to these accounts. PW2 was able to identify a number of features common to those applicable to D1’s accounts which are indicators of money laundering. In relation to these accounts D2 found in his analysis significant cash deposits, accounts being used as temporary repositories for funds, fund flows creating complex layers of financial transactions and deposits not commensurate with turnover. 294.In relation to this charge, I also considered the evidence of PW1. She produced accounts she kept for Yantex for April to October 2008 (Ex P83 pages 10037-10043). This evidence was not considered by PW2. She said that despite having requested D2 for account details relating to mainland business they were never supplied. She said that D1 appeared at the Anshun offices 7-8 times during the period she worked there and on those occasions he would remain for most of the day. 295.I also considered the general observations set out above in relation to charge 1. Conclusions 296.In considering the evidence presented I bore in mind the clear record of the defendant which goes to the issue of propensity. I bore in mind that his absence was not evidence of his guilt. 297.I also bore in mind that as D1 was neither present nor represented I had to ensure that the trial was as fair as possible. I examined the evidence presented by the prosecution most carefully to assess its reliability. In this case, the main body of evidence was the banker’s affirmations. I noted that the two charges facing D1 related only to the 9 bank personal bank accounts he held and the two Yantex accounts. The accounts controlled by related parties were only relevant to show the considerable movement of funds between the various accounts. 298.I found PW2 to be a reliable and credible witness and I accepted his evidence. In considering his evidence I bore in mind that whether or not the prosecution had established that D1 was engaged in money laundering was a matter for the court and not the expert. 299.PW2’s analyses of the various accounts and his comments thereon were supported by detailed reference to the relevant bankers’ affirmations. He opined that his conclusions would have been the same even without reference to the records produced from the IRD . 300.I bore in mind that much of the evidence adduced by the prosecution was circumstantial and inferences could only be drawn from such evidence if they were irresistible. What were the facts known to D1 and the objective factual circumstances in which he found himself and of which he was aware at the time he dealt with the property the subject of the charge as established by the prosecution? Charge 1 301.During the relevant period HKD192,273,353.14 and USD3,874,314.80 passed through the 9 personal bank accounts in the sole name of D1 and in respect of which he was the sole signatory. 302.I was sure that he dealt with this property as defined by s. 2 of Cap 455. 303.There were a substantial number of large cash transactions. The amounts involved in many of these transactions were in round numbers. 304.There were numerous instances where cash was paid into one account and then transferred to another of his accounts or to a third party. This could be traced by reference to the balance shown in the account immediately prior to the deposit of cash and the subsequent transfers which could not have been made without the the deposit of cash since there were insufficient funds in the account to make the subsequent transfer(s) without the deposit of cash having been made. 305.This pattern of receiving funds into the accounts which were then utilized almost immediately was also evident in respect of funds received from subject parties and /or other parties. This was often to make investments but often this was followed by a sale of the investment with a return of funds ( in whole or in part) to source which demonstrated a circulation of funds through the accounts. 306.All the accounts analysed showed large deposits made during the specified period which were for the most part later withdrawn indicating that the accounts were only temporary repositories for the funds. No documentation was recovered to explain these fund movements. 307.There were large flows of funds among the subject parties which created complex layers of financial transactions making it difficult to trace the origin of such funds. 308.There was extensive use of many remittance agents which again made it difficult to trace the true origin or eventual destination of funds. 309.The deposits were not commensurate with income declared to IRD. This indicates the funds did not come from legitimately earned income or profits make in Hong Kong. 310.The 9 accounts were set up within a short time of each other, four in 2005, four in 2006 ( three on 31 August 2006) and the last in January 2007. 311.D1 had an interest in a number of companies but they could not have been a source of legitimate income. 312.In 2006/7 D1 had fixed outgoings in the form of mortgage repayments (nearly HKD140,000 in 2007) which far exceeded any discernible legitimate source of income. 313.The Land Registry records showed that over HKD34 million was used to purchase the four properties purchased by D1 and his mother D4. As I stated above, they were subject to mortgages, there appeared to be no legitimate source of funds to enable their purchase and mortgage repayments. Tax returns in relation to D2-D4 showed they had very limited income. D1 filed no tax returns up to December 2008; a return filed by his employer for April 2008 to 31 March 2009 reported his income as HKD360,000 as a Director of Cheer Surplus ( CB9101). 314.D1 was not only related to the other defendants, they all lived in the same area of Hung Hom and personal papers relating to each of them were recovered from Bamboo Mansion. 315.D1 signed the tax return for Yantex for the financial year 2007/8 which showed losses (CB 9585). 316.The number of transactions and the huge amounts of money transferred through and between the various accounts must have required very careful planning and monitoring. A great deal of time must have been spent in organizing and overseeing this elaborate and sophisticated movement of funds. D1 was centrally involved in this operation. I was sure that he had arranged these fund movements in an attempt to conceal that they represented the proceeds of crime. Do these facts and circumstances provide reasonable grounds to believe that the property in whole or in part represented the proceeds of an indictable offence? 317.I had no doubt whatsoever that these facts and circumstances would lead a common sense, right-thinking member of the community to believe that the property in question constituted the proceeds of an indictable offence. 318.In my view, the evidence clearly demonstrates that the defendant played a central role in this huge money laundering operation and I was sure he would have known the source of such funds and that they were the proceeds of indictable offences. Accordingly I convict D1 of Charge 1. Charge 7 What were the facts known to D1 and the objective factual circumstances in which he found himself and of which he was aware at the time he dealt with the property the subject of the charge as established by the prosecution? 319.During the relevant period, HKD17,121,961.56 and USD196,373.68 passed through the Yantex accounts, A/C’s 27 and 28. D1 and D2 were the signatories of the accounts which were opened in October 2006. D1 was the majority shareholder and sole director. 320.Most of the hallmarks of money laundering identified by PW2 in relation to the 9 personal accounts operated by D1 were also to be observed in the Yantex accounts. In his evidence and report, PW2 pointed out and explained these hallmarks. 321.Although Yantex was engaged in some business activities, PW1 said the company traded in swimming goggles, this could not account for the huge sums of money going through the Yantex accounts. The company filed a tax return, signed by D1 ( CB 9585), for the financial year 2007/08. This showed that for the period from 29 September 2006 ( the date of incorporation) the turnover was 1,690,802 and the reported loss before taxation HKD1,906,089. The loss to be carried forward was reported as $1,984,887.00 ( Exhibit P71A CB pages 9384 – 9407 at 9389/90). 322.As reflected in paragraph 176 of the PW2’s report the total deposits into the accounts and adjusted profits were 8.3 and 3.6 times the reported turnover. 323.The Yantex accounts were in operation at the same time as D1’s 9 personal bank accounts. The substantial movement of funds into and out of these accounts and between the various accounts must have required careful oversight and monitoring. 324.Appendix 3.7 (i) of PW2’s report ( page 423) shows the movement of funds between related parties during the relevant period. Over HKD9.9 million was paid into the Yantex accounts from related parties and over HKD5.5 million was paid out from the Yantex accounts to related parties. Do these facts and circumstances provide reasonable grounds to believe that the property in whole or in part represented the proceeds of an indictable offence? 325.These were the facts known to D1 and the objective factual circumstances in which he found himself and of which he was aware at the time he dealt with the money in the Yantex accounts. These facts and circumstances provide reasonable grounds to believe that the money in whole or in part represented the proceeds of an indictable offence. Indeed, in all the circumstances I was sure that the defendant was aware of the source of the money with which he dealt and that they represented the proceeds of indictable offences. 326.I was sure that the prosecution had established each and every ingredient of Charge 7 beyond reasonable doubt and I convict D1 accordingly.
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