HKSAR v. Khan Saeed

DCCC 915/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 915 OF 2013

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Reasons for Verdict

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1.The defendant faces one charge of dealing with property known or reasonably believed to represent the proceeds of an indictable offence, contrary to section 25(1) and (3) of Cap 455.

2.The charge covers a total of US$67,597.48 deposited into a Standard Chartered Bank account between 24 and 26 October 2011.  The bank account was held in the name of a company owned by the former 1st defendant in this case, a Mr Kumar.  The bulk of the moneys were paid out by Mr Kumar to the present defendant, who is the original 2nd defendant.

3.The prosecution case was that the first prosecution witness was the owner of a trading company and traded with a mainlander called Mr Xiao.  They had traded in seafood with a company in Pakistan called Arsala.

4.On 23 October 2011, PW1, Xiao, arranged another deal by purchasing a batch of seafood from Arsala.  On 24 October 2011, PW1 received an email from Arsala detailing an account with Standard Chartered Bank into which the moneys for the transaction were to be paid.  Later on, PW1 learned through other sources that the bank account was not that of Arsala.  A total of $51,711.05 US currency was paid into the account.  From that account, the money was transferred into another account with the Standard Chartered Bank, and that account was the account of JSL, which was a company controlled by the former 1st defendant, Mr Kumar.  The former 1st defendant, Mr Kumar, was the sole signatory on that account.

5.The defendant, and I refer to him as “the defendant” because he is the remaining defendant, was arrested on 2 November 2011 at his office.  The defendant has proved to be forthcoming in what he has said about this matter.  In a number of interviews and records of interview he has put forward his explanation.

6.He said he was arrested on 2 November 2011 at his office.  In his initial interview he told the police that he conducted a business selling AV, audio visual, equipment.  He had sold DVDs and speakers to an African man called Okey for about US$51,350, the goods to be delivered after payment was received.  Originally Okey had wanted to pay by telegraphic transfer.  The defendant explained that he had never received telegraphic transfer before and did not have a company account, so he gave the account of his friend, Mr Kumar.  The defendant later received Okey’s payment through Kumar in sums of HK$300,000 and HK$97,697.20.

7.In a later interview the defendant was able to identify the invoices relating to the transaction with Okey and a third party. The invoices were No 1488, 1490, 1495 and can be seen in the invoice book.  He said they related to the order from Okey and are found in the invoice book along with many other invoices relating to that period.

8.The actual payment relating to the US$51,711.05 was invoice 1488.  A further US$361 invoice was 1489 from a customer named M.2.M LTHISHAN - L T Hishan - and a further invoice No 1490 related to a deposit of a further US$15,866.44 in the name of FX Master Limited, an order said to be placed by Okey’s friend, who came to the office with Okey.

9.In a later interview the defendant amended the amounts received from Kumar to HK$310,447 and HK$85,483.33.

The Defence Case

10.The defendant did not give evidence himself.  Of course, he is entitled to do so.  He is of clear record.  No adverse inference can be drawn from the failure to give evidence.  He is a man of clear record, and that will be relevant to consideration of his evidence. 

11.He called a witness to give some details as to the fact that he actually conducted a genuine business involving the sale of audio visual equipment, including the use of a warehouse in the New Territories.

12.The defence relied upon a number of sources of evidence:  the Admitted Facts produced; the evidence of prosecution witnesses, the first and second prosecution witnesses; the evidence of his own witness, DW1; and particularly the contents of the records of interview that he has given to the police during the course of the somewhat lengthy investigation of these matters.

13.In summary, as I have said, this evidence showed the defendant was a man of clear record who set up AK Trading Company in 2009. He was an import/export trader employing the first defence witness to transport his goods, maintaining a warehouse in the New Territories and an office in Sham Shui Po.  He has produced his business and tax records to cover the relevant period, primarily to show that he operates a genuine business and was doing so at the time.

14.He knew Mr Kumar well, and acknowledged that the funds which are the subject of the charge were paid into the JSL account operated by Mr Kumar at the defendant’s request, and also that the bulk of those moneys in cash were withdrawn by Mr Kumar and given to him in Hong Kong dollars, although there still remains some US$15,000‑odd in the account.

15.He has said that he had the customer called Okey who bought goods from him from time to time, so there was a course of business between them.  Before the relevant transactions, Okey had told him he wished to order some goods as an agent, and the purchaser wished to pay to a company account instead of a personal account.  The defendant set off to try and open a company account and was told by the bank that it would take two weeks to open such an account, so he decided to ask his friend called Anil, which is Mr Kumar, for the use of his company account.  Mr Kumar agreed.

16.Funds arrived on 24 October 2011.  The defendant immediately said that he thought this was the money sent by Okey. Okey produced a document, which is D4, which is a document from a Hawaiian bank for the transfer of funds in the sum of US$51,000.  This document has been produced at an early stage to the police.  My understanding from the evidence is they did not check or verify it, the officer in charge stating there was no reason to doubt its authenticity, so I must accept that as a genuine document that was produced.  The document’s provenance was not questioned.  The defendant then transferred the goods ordered by Okey to him, after being put in funds by him.

17.On 26 October 2011, further funds of $15,886.44 arrived. The defendant said that he expected there to be further funds from Okey or his principal.  These funds remain in the account.

18.The defendant at the time of the investigation supplied to the police Okey’s mobile phone number, which they were able to investigate, but nothing concrete arose out of that.

19.As far as the evidence is concerned, the evidence at trial was largely admitted by agreement and uncontested.  The defendant’s records of interview were produced by agreement, as were all the financial records pertaining to the transfer of PW1’s money into Kumar’s account, and the withdrawal of the money from the JSL account is admitted, and the defendant’s receipt of that money was all admitted.

20.The prosecution called the first and second prosecution witnesses.  The cross-examination by the defence was not to contradict their evidence, but to establish facts favourable to the defendant. Similarly, the defence witness was called by the defence.  His evidence was again uncontested.  The flow of the moneys is not disputed.  It is established by agreement that the US$51,713‑odd was transferred to Kumar’s JSL account on 24 October 2011, but Kumar withdrew the money from the account; that a further US$15,897 was transferred to Kumar’s account on 26 October 2011; that sums of HK$85,000 and US$310,000 were withdrawn from Kumar’s account, the defendant being the eventual recipient of those moneys; that the US$15,897 remains in Kumar’s JSL account; and the defendant, as I said, does not dispute in any way the receipt of the moneys of Mr Kumar for him in the sum of US$85,000 and $310,000 after their withdrawal from the account.

21.I deal with the law.  The approach is quite clear.  There is no need for the prosecution to prove the nature of any indictable offence from which the moneys may have derived, although it does appear in this case there is evidence of such an indictable offence.  The concept of dealing is broadly stated and certainly includes the defendant’s actions in regard to the moneys in question.

22.The offence requires the prosecution to establish that the facts and circumstances of the defendant’s dealing with the moneys would provide reasonable grounds to believe that the property - the money, in this case - in whole or in part represented the proceeds of an indictable offence.  The correct or current approach is as follows.

23.First, the court is to ask the question 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 at which he dealt with the property which is the subject of the charge, and it is for the prosecution to establish the facts and circumstances relied upon.  The second question then is this:  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?

24.The defendant’s case is clearly he considered the payments into the JSL-Mr Kumar’s account to be payment for goods to be supplied in the course of trade and business.  He says it was a normal business transaction with funds, as far as he was concerned, originating from a bank, established by documentation.  He said there was no objective basis for him on which to question the transaction, and certainly no basis for a belief to be formed that the moneys, wholly or in part, represented the proceeds of an indictable offence; that there were no what I would describe as indicia of these moneys being the proceeds of an indictable offence.

25.Given the basis of the defence case, it was of course necessary to consider whether the transactions with Okey did in fact exist.  In respect of this, one had the explanation offered by the defendant, the bank documents produced, and the invoice book.  Also, one could bear in mind the defendant produced the mobile phone details of the man he said was Okey in order for him to be located.  The defendant is saying that in the course of the investigation he made what is a full disclosure.

26.I consider it is fair to say the defendant has certainly raised an evidential burden in respect of these matters, and there is nothing in the evidence to refute the defendant’s assertions that Okey in fact existed and the business he conducted with him took place.  It is simply a matter of evidence.

27.The case has, in any event, proceeded on that basis, and the issues are determined on that basis.  The prosecution is saying that the defendant’s dealing with Okey would in fact have given rise to suspicion or the belief in a reasonable person that Okey’s payments represented in whole or in part the proceeds of an indictable offence.

28.I will deal with some analysis now.  The prosecution say the evidence should give rise to an objective belief on the part of the defendant that the moneys paid into Kumar’s JSL account, with which the defendant admits he dealt directly or indirectly, represented the proceeds of an indictable offence.  They say the defendant’s business was a small one, and they rely on the low profits paid by the defendant in profits tax.

29.The size of a business really depends on its turnover rather than the amount of tax it manages to pay - one could think that some very large businesses pay very little in tax - and also the rate of profit on turnover should be considered.  I have no evidence about any of that.

30.The defendant’s pattern of business, the prosecution say, was to receive cash deposits, use this to buy the goods to sell on to his customer, and then to cash any profit in to his personal account.  The business of the defendant one sees was largely conducted in cash and in Hong Kong dollars and with gentlemen from the African continent, the orders being recorded in the invoice book; whereas the prosecution say the Okey transaction was large by the defendant’s standards, conducted with payments in US dollars; involved the use of a company account, which was unique for the defendant; no deposit was required, the position in this case being the money being paid before the goods were supplied; the order being purchased without the deposit of funds from Okey but being supplied after payment.

31.The defence argues that in respect of this transaction there is nothing to raise in the mind of a reasonable person a belief as to the illegitimacy, I will put it, or the illegality of the moneys paid into the JSL account.  The belief has to be that the proceeds directly or indirectly represent the proceeds of an indictable offence.  There must be some indicia of such an offence in relation to the moneys themselves.

32.He says the transaction was a normal trading transaction, with legitimate documentation; that in essence, the defendant himself is the victim of a form of long-term fraud, although it has not actually occurred over a long period.  The defendant is in a way saying that he is the victim of a bad cheque.

33.They rely to a certain extent on a response by the second prosecution witness, who had investigated the matter on behalf of the police.  He was asked:  “Isn’t the defendant also a victim in respect of this?”  And the response to that was:  “We’re not sure.”  They also point to the fact that it was conceded that nothing in the investigation had contradicted in essence what the defendant had said to the police in his records of interview.

34.In assessing the objective factual circumstances known to the defendant and the objective factual circumstances in which he found himself or was aware of when he dealt in the property, I bear in mind the Admitted Facts, the uncontested evidence of the first and second prosecution witnesses and the defence witness, and the evidence of fund transfer and the contents of the records of interview made by the defendant.

35.In respect of this matter, the most important element to consider is the account given by the defendant in his records of interview.  In the records of interview the defendant has raised an explanation for his receipt of the moneys from Mr Kumar, the defendant maintaining a legitimate reason to accept and deal in the money, a reason that would not give rise to any belief as to the illegitimacy of those funds.

36.In approaching this question, I must also bear in mind and do bear in mind the burden of standard of proof - that it lies on the prosecution to prove the case beyond reasonable doubt.

37.The defendant has certainly raised and, as I said, discharged an evidential burden in respect of his explanation as to a case to meet.  It also has been conceded that there was nothing in the investigation that could directly contradict the explanation given by the defendant for his dealing in the moneys in the JSL account.  Thus in dealing with the objective factual circumstances, I must consider them on the assumption that Okey exists, that the transaction with him existed, and the defendant was accepting payment from Okey for the dealing of goods to him.

38.In these circumstances, is it actually possible for the objective observer, the reasonable man, to have a reasonable belief that a payment made in these circumstances would be the proceeds of an indictable offence directly or indirectly?  In this case, one observes the fact that the defendant’s own account was not used.  The defendant does not appear to have questioned this in any detail as to why a company account would be used. It would appear, however, that the payee would require the appearance of a payment into another business.

39.However, I have no evidence as to the significance of that; whether it is something that is of great significance or not.  The defendant’s explanation is simply that that is the way the payment would have to be made, and I take it from his explanation that that afforded him some comfort.  It is not the same as accepting money in cash.

40.I also observed that in this case, the case for the defendant differs from many cases of this kind where there are large payments of unexplained cash deposits into bank accounts where the objective observer, from the absence of any explanation, can easily form the belief as to the origins of the money resulting from the proceeds of an indictable offence.

41.As I have already observed, the objective facts in this case include course of business between the parties, a set of documents including invoices evidencing the transaction, documentary evidence presented by the defendant about the origins of the funds from the bank in Hawaii where one could assume the bank dealing with the transaction would themselves have had to be satisfied as to the origins of the money.

42.Against this is set the prosecution’s submission that the transaction is unusually large; that the payment in a particular way and into a particular kind of account is unusual; that the normal procedure of the defendant as to taking a deposit first is not followed.  All the factors, they say, should arouse suspicion as to this transaction.

43.As I have observed, the prosecution must prove this beyond reasonable doubt that there is an objective reasonable belief the moneys received by Kumar were the proceeds of crime in whole or in part.  That must be proved beyond reasonable doubt.  There must be grounds on which one could be led to believe that the moneys were the proceeds of crime.

44.It appears to me that on the objective facts as proved there is no clear determinative evidence that would lead a reasonable person to have grounds to believe that this payment through the Hawaiian bank and the other payment of US$15,000 was the proceeds of a crime directly or indirectly as opposed to a payment for the provision of goods to be supplied by this man Okey; or, put another way, there is insufficient evidence in this case in respect of this transaction for the court to reach the conclusion that the Okey transaction was not genuine from the defendant’s point of view, and the transaction was of such an unusual nature as to give rise to such indicia as would persuade or for a reasonable person to reach the conclusion or belief that the payment represented the proceeds of an indictable offence.

45.Given this conclusion, the defendant will be acquitted.  I find a finding of not guilty.