HKSAR v. Tsoi Suet Ching and Another

DCCC 1240/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1240 OF 2010

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REASONS FOR SENTENCE

1.D2 and D3 pleaded guilty to charges of dealing with property known or reasonably believed to represent proceeds of an indictable offence contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance Cap 455. D2 pleaded guilty to three charges (Charges 2, 6 and 7). D3 pleaded guilty to two charges (Charges 3 and 6).

Background of the defendants and the companies

2.D2 and D3 are two of five defendants who were charged with related offences. The 5 defendants are related either by marriage or by birth.

3.D2 is the sister of D1 and is married to D3. D2 and D3 resided at Flat E 15^th Floor Block 3 Bamboo Mansion Whampoa Garden Hung Hom together with D4 Ngai Lan Fa who is the mother of D1 and D2. D5 is the wife of D1.

4.Hong Kong Anshun Fuel Co Ltd (Anshun) was a limited company incorporated on the 17^th 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 for the financial year 2008/09 with a reported profit of $855,229.00

5.Yantex International (Asia) Company Ltd (Yantex) was incorporated on the 29^th September 2006 with an issued share capital of 10,000 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 was the secretary of the company. The company filed a tax return for the financial year 2007/08 with a reported loss of $1,984,887.00.

6.D1 had made use of the 28 bank accounts held in the names of defendants or the companies, Anshun and Yantex. D3 had also received monies from D1and other persons and had together with D2 used the accounts of Anshun to transact funds through the accounts. D3 had also stored cash received from D1 at his home and given some of it to D2 who then put it in bag and hung it on the door of the bedroom occupied by D4.

7.In respect of all bank accounts there were large cash transactions and large deposits which were subsequently withdrawn showing that such accounts were used as temporary repositories of the funds. There were large amounts flowing between the various accounts of the various defendants and the companies which created complex layers of financial transactions. Substantial deposits were received from and amounts transferred to third parties who could not be identified.

8.Large amounts were transferred in or out of the various accounts using Remittance Agents which made it difficult to trace the origin of the funds or their destination.

9.Substantial sums of money were transferred from the bank accounts and used for subscription of IPO’s 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.

10.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.

11.There were also unusual transaction patterns in all the relevant bank accounts which showed layering and integration of funds received into the accounts.

12.The sums handled by the various defendants were out of all proportion to their reported income for Inland Revenue purposes.

Charge 2 against D2

13.The amounts referred to in charge (HKD114,971,718.32, USD857,488.24 and RMB93,800) refer to the sums laundered by D2 through five bank accounts held in D2’s sole name during the material period and cash recovered by the police. Three accounts were with the Bank of China ( BOC) and two with the Hang Seng Bank (HSB)

Charge 3 against D3

14.The amounts referred to in the charge ( HKD288,434,485.23, RMB93,800) represent sums of money going through six bank accounts in D3’s sole name held during the material period which have been analysed and sums of cash recovered by the police. Five of the accounts were with the BOC and one with the National China Bank ( NCB).

Charge 6 against D2 and D3

15.The amounts referred to in this charge ( HKD261,697,266.00 and RMB20,000) relate to funds in 2 Bank of China accounts in the name of Anshun. D2 and D3 were signatories to the accounts. It also relates to a sum of cash RMB20,000.00 seized in the office of Anshun.

16.Anshun filed a tax return for 2008/2009 and attached were audited financial statements for the year ending 31^st March 2009. The monthly average deposits appeared higher than the monthly average turnover as reflected in the accounts.

17.Lai Man Yee an accounting clerk employed at Anshun said that she followed the instructions of D2 as to the keeping of the books of account for Anshun and Yantex and prepared monthly statements. The actual pecuniary transactions were dealt with by D2 and Ms Lai never handled the cash. D2 would inform her of the amount of money received and she would compile the records in accordance with instructions. The banking transactions were handled by D2 personally although at times D2 also used internet banking to pay for some purchases. Ms Lai was told to compile the accounts in Hong Kong $ taking no regard of the currency in which the transactions were supposedly conducted. D2 told her that an adjustment would be made at the end of the year. In connection with Yantex the cost of manufacturing goods in the mainland was not supplied since D2 told Ms Lai this would be handled by an accountant on the mainland. This created a problem in keeping the books and despite Ms Lai raising the issue with D2, no solution was provided.

Charge 7 against D1 and D2

18.The amounts referred to in this charge ( HKD17,121,961.56 and USD196,373.68) relate to funds in 2 DBS bank accounts in the name of Yantex for which D1 and D2 were the account signatories.

19.Yantex filed a tax return for 2007/2008 and attached were audited financial statements for the year ending 31^st March 2008. According to the financial statements Yantex had a turnover of $1,690,802.00 and a net loss of $1,906,089.00 for the period 29^th September 2006 to 31^st March 2008.

20.The deposits into the bank accounts were approximately 3 times the turnover (on an adjusted basis).

The arrest of the 2^nd and 3^rd defendants

21.At approximately 0700hrs on 22^nd November 2008 police officers went to Flat E 15^th Floor Block 3 Bamboo Mansion Whampoa Garden Kowloon being the residence of D2 and D3. D4 also lived with D2 and D3 occupied one of the bedrooms at the premises.

22.Following her arrest and caution D2 said “I just helped my younger brother Tsoi Chit Tsang (D1) in the operations of the company. My husband was responsible for the financial matters¨.

23.The police, in possession of a search warrant, went with D2 to the offices of Anshun at Room 1113, Tower A, Hung Hom Commercial Centre, 39 Ma Tau Wai Road, Kowloon.

24.The following items were seized as exhibits:

1. Cash RMB20,000

2. Three bank passbooks in the name of D1.

3. Three bank passbooks in the name of D2.

25.D2 was subsequently interviewed under caution.

26.During the interviews D2 said inter alia she worked for Anshun and Yantex since November 2006 and earned a monthly salary of HK20,000.00. She had no idea about the source of the cash found in her residence. She knew that some of the RMB was income from the sale of oil by Anshun and had given the cash (RMB93,800.00) to D3 for safekeeping. The HK$500,000.00 cash found in a plastic bag hanging on the door of D4’s bedroom was given to her by D3 who had asked her to keep it separately. When she walked past the bedroom of D4 she found the green plastic bag and she placed the cash inside the bag before hanging it on the door. When D3 handed her the cash he told her it was a “share for me¨. D3 had not previously given her such a large sum of cash. She knew the money in the safe came from D1.

27.D2 estimated the profit of Yantex to be about $800,000.00 - $900,000.00 per annum and for Anshun it should be about $1 million.

28.D2 had asked D1 about the source of the money since she was worried the money could be proceeds of crime having seen TV public information broadcasts warning the public about money laundering (black money) and the consequences. D2 had told D1 not to commit any offence. D1 simply explained the money was “for his business ..and it was rent or whatever collected by him”.

29.D2 said D1 deposited funds into her accounts and she followed the instructions of D1 in making withdrawals and transfers. When asked by D1 for “a certain amount¨ D2 gave it to him. In respect of 90 deposit and withdrawal transactions shown in BOC accounts ranging from $100,000.00 to $5million D2 said these were made upon the instructions of D1. On the 11^th July 2006 when $1.93 million was transferred into her account (A/C10) this had caused D2 to ask D1 about it since she was aware that it seemed “not right”.

30.Although D2 had internet banking service no one other D2 was aware of the password and all withdrawals/transfers out of the accounts in her sole name could only be carried out by D2 herself.

31.At approximately 0755hrs D3 was arrested and cautioned for money laundering . D3 said in respect of the money it was D1 who asked him to keep an eye on the money. If he asked him to make a deposit a deposit would be made and if he asked him to make a withdrawal a withdrawal would be made.

32.During a search the following items were seized:

1). Inside a safe in the master bedroom normally occupied by D2 and D3 cash totaling HK$1,379,880.00.

2). Inside the same safe was cash totalling RMB83,800.00.

3). In a bag also in the master bedroom cash totalling HK$250,000.00.

4). In the same bag a further sum of cash totalling RMB10,000.00.

5). In a drawer under the bed in the master bedroom cash totalling HK$1 million.

6). In a green bag hanging on the door of a bedroom normally occupied by D4 cash totalling HK$500,000.00.

7). On the top of a cabinet inside the master bedroom one money counting machine.

33.At Police Headquarters the police opened a safe seized from the residence of D1 and D5 in the presence of D3. In order to open the safe both the key and a password were necessary. D3 had supplied the password.

34.Inside the safe, apart from some items of jewellery and notebooks, there was a Deed Poll dated 2^nd February 2005 whereby D1 changed his name from Tsoi Wai Ngai to Tsoi Chit Tsang.

35.D3 was interviewed under caution.

36.During those interviews under caution D3 said inter alia he had worked as a casual worker Anshun and Yantex. His monthly salary was approximately $10,000.00. He handled bank transactions as per D1’s instructions but did not know the source and destination of the monies. If Anshun was short of money he would turn to D1 or friends to obtain funds. Anshun was engaged in the oil trade whereas Yantex was engaged in trading in swimming goggles. Further D1 had delivered cash of between $3.5 million to $4 million which he had collected from a man in a parked car. Having received the money he kept it in the larger safe at his home. D1 had instructed him to keep the money for a while and then deposit smaller amounts of $100,000.00 into the Anshun’s company bank account at the Bank of China. He had given $400,000.00 to D2 to deposit and had deposited $200,000.00 into his personal account which he would transfer into Anshun’s account upon instructions from D1.

37.In respect of the cash found at his premises (including the $500,000.00 found in the green bag on the back of the door of D4’s bedroom) this was part of the money given to him by D1. Although he did not ask D1 about the source of the money he was doubtful as to its origin. He doubted how D1 was able to get so much money and why so much of the money he was asked to handle was in cash. Further concerning the money found at the premises he doubted why it had not been deposited into the bank directly.

38.D3 said he knew D1 had been detained by the authorities on the mainland and taken out some cash from the larger safe ($250,000.00 plus RMB10,000.00) and put it into a bag ready to take to Beijing.

39.He could not recall the details of the transactions in his bank accounts but all the transactions were arranged under the instruction of D1.

40.D2 and D3 admit they knew or had reasonable grounds to believe all the property the subject of the charges they face in whole or in part directly or indirectly represented proceeds of an indictable offence.

Mitigation

41.D2 is aged 46 and has a clear record. She was born on the mainland and educated there to senior secondary level. She has previously worked as a garment worker and clerk. Between 1996 and 2006 she worked in a garment factory as a shipping clerk and afterwards ran companies with her younger brother D1.

42.D2 is married to D3, they were married in 1998. They have two children aged 23 and 21. Her father passed away in 1984 and she had a very hard upbringing when she was only 17 and she had to give up her education to support herself and her mother. Her mother, D4, is aged 69.

43.D3 is aged 45. On his record he has a dissimilar matter recorded which is now spent. He was born on the mainland and educated there to primary level. He came to Hong Kong when he was 12. He previously worked in his father’ s factory and took over the business from his father when he retired. The factory closed down in 1995. He has 5 siblings.

44.A large number of letters of support from friends, relatives and colleagues were submitted to the court.

Sentencing Considerations

45.Yeung JA in HKSAR v Javid Kamran CACC400/2004 observed:

“30. Money laundering is a very serious offence as it is an attempt to legitimize proceeds from criminal activities.

31. Serious criminal offences are very often motivated by financial gains and those who assist criminals in laundering money, indirectly encourage them in their criminal activities…..

32. Successful deterrents against money laundering could be effective measures against crime.

33. The maximum sentence for a money laundering conviction on indictment is a fine of $5 million and 14 years’ imprisonment, which is perhaps a reflection of how such an offence is viewed.”

46.No tariff exists for money laundering offences, but such offences are invariably treated seriously and substantial sentences of imprisonment are regularly imposed. The amount of money laundered will inevitably be relevant to sentence.

47.I was referred, inter alia, to the case of HKSAR v. Leung Wai Wah and Anr CACC 201/2011. The Court of Appeal in that case were referred to a number of authorities. The court stated that :

“From various cases cited to this court [HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, Secretary for Justice v Herzberg [2010] 1 HKLRD 502, HKSAR v Javid Kamran (supra)], it appears that the following factors are relevant to sentence in “money laundering” cases:

1.  The amount of money laundered, which was described as the major consideration.

2.  The nature of the offence that generated the “laundered money”.

3.  The extent to which the offence assisted the underlying crime or hindered its detection.

4.  The degree of sophistication of the offence.

5.  The defendant’s participation, both in the underlying offence and in the “money laundering” activities.

6.  The length of time that the offence lasted.

7.  The benefit that the defendant had derived from the offence.

8.  Whether there was an international element in the commission of the offence.”

48.I have also been referred to a large number of cases dealing with a number of different scenarios. These cases make it clear that there are no tariffs for these offences and each case depends upon its own peculiar facts.

49.The total amount involved in the charges to which D2 entered guilty pleas is HKD402,155,594.85 allowing for a USD exchange rate of 7.8 and a RMB exchange rate of 1.27.

50.The total amount involved in the charges to which D3 pleaded guilty is HKD550,276,277.23. Over HKD2.6 million was seised by the police from the home of D2 and D3.

51.D2 was the sole director and shareholder of Anshun and D3 was the company secretary. D2 was a 49% shareholder in Yantex. D2 and D3 were bank signatories to the accounts of Anshun and D2 was a bank signatory for the accounts of Yantex. The monies referred to in charge 2 referred inter alia to funds laundered through 5 personal bank accounts. The monies referred to in charge 3 inter alia to funds laundered through 6 personal bank accounts.

52.D2 instructed Lai Man Yee, the company accounting clerk, as to the keeping of books of account for Anshun and Yantex and prepared monthly statements. The pecuniary transactions were handled by D2. The banking transactions were handled by D2 personally or through internet.

53.The amount of money involved in this case is very substantial. This is the major consideration. The nature of the underlying offence is not known. The defendants played significant roles in the money laundering activities which involved laundering money through a large number of accounts many of which they controlled. The offences covered a period of three years.

54.I was satisfied that D2 and D3 were not the masterminds behind the offences or the underlying crimes. There was no international element to the offences and they were not the major beneficiaries.

55.Taking into account all the circumstances I take the view that concurrent sentences of 8 years imprisonment are appropriated in respect of charges 2, 3 and 6. In respect of charge 7, I take a starting point of 4 years imprisonment, the sentence to run concurrently with the other sentences.

56.I reduce that by one third to reflect the guilty pleas entered by both defendants. Both defendants will serve a sentence of 5 years and four months.

57.D2, on charges 2 and 6 she will go to prison for 5 years and 4 months and in respect of charge 7 she will serve a sentence of 32 months, all sentences to be served concurrently.

58.D3 will serve a sentence of imprisonment of 5 years and 4 months in respect of charges 3 and 6.