HKSAR v. Tabagua Valerian also known as Tabagua Valeryan

DCCC 130/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 130 OF 2014

----------------------

---------------------

Reasons for Verdict

---------------------

1.The defendant pleaded not guilty to one charge of attempting to deal with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 and section 159G of the Crimes Ordinance, Cap 200.

2.The particulars are that the defendant between 8 August 2013 and 16 August 2013 attempted to deal with 349,966.40 Euros, which represented in whole or in part directly or indirectly proceeds of an indictable offence, knowing or having reasonable grounds to believe that that was the case. 

The background

3.A financial controller of a Dutch company, Satfa BV, was deceived over the telephone to transfer €350,000 to a Hong Kong bank account.  He thought he was doing this per instructions of the CEO of a group of companies; Satfa being a subsidiary of this group.  It was a telephone fraud or deception.  The money, ill-gotten money, not clean money, was transferred as directed to an HSBC bank account, an account of M N Technology Limited.

4.M N Technology had one director and one shareholder, the defendant.  It had one account at HSBC and the defendant was the sole authorized signatory in control of this account. 

5.Prior to this transfer of €350,000, the bank account had been inactive for over 15 months and the defendant had not been in Hong Kong for 16 months. The money was transferred from a Dutch bank, Rabo Bank, on 8 August, and the defendant arrived in Hong Kong on 14 August 2013 late afternoon.  By that date, HSBC, Rabo Bank, the Dutch Police and Hong Kong Police were informed of the telephone fraud. 

6.The defendant and another male entered HSBC on the morning of the 15th August 2013 and arranged a telegraphic transfer of the amount, minus about 5 per cent, to a bank account in Estonia belonging to an Octans Industry Limited.  HSBC did not act upon those instructions and the defendant returned on the 16th August to enquire why the money had not yet been transferred.  He was arrested when the police were called by HSBC bank staff.

Issues

7.The defence do not challenge the defendant attempted to deal with the proceeds in his company account by way of a telegraphic transfer to an Estonian bank account.  The defence do challenge the prosecution case that there were reasonable grounds for the defendant to believe the property, the money, represented proceeds of an indictable offence. 

8.The defence in a manner suggest the parties who owned the money or transferred the money may have been or should have been involved in the deception.  But I rejected that and will deal with that in more detail.

9.The fact that Satfa BV transferred €350,000 into M N Technology’s bank account in Hong Kong was not challenged.  The defence seek to suggest or prove the defendant dealt with the money on the basis it was a legitimate payment according to a contract for consideration of a sale of a particular product. 

Directions

10.I bear in mind the prosecution, to secure a conviction of this charge, must prove every element of the offence beyond reasonable doubt.  The defence is not required to prove anything.

11.The defendant elected not to give but did call two defence witnesses.  They are not required to raise a reasonable doubt in respect of this charge.  I will consider their evidence to determine factual issues.

12.If there is a conflict between the prosecution evidence and the defence evidence I find as true or may be true, then I will reject the prosecution’s evidence.  I cannot find it able to prove the charge to the appropriate standard. 

13.I have also taken into account if any inference of fact is to be drawn, the facts upon which the inference is to be drawn must be facts proved beyond reasonable doubt.  If any inference is drawn, then it must be the only reasonable and irresistible inference that can be drawn from proven facts.

14.I have warned myself that the defendant has a clear record in Hong Kong. 

The law

15.The actus reus of this offence is namely dealing with the property.  Dealing is defined in section 2 of the ordinance.  The defence admit the defendant dealt with it by his attempt to withdraw it from his company bank account and have it transferred to another account in Estonia of a different beneficiary.

16.The prosecution do not in Hong Kong have to prove the predicate offence.  It does not need to prove the commission of the original indictable offence that gave rise to the proceeds.  It does not have to prove if all and if not how much of the proceeds in a bank account came from an indictable offence.  That is, so long as there are reasonable grounds to believe that part of the monies did come from such origins.

17.In this case the prosecution can prove the predicate offence and can provide evidence of the indictable offence, a fraud and deception that resulted in a loss of a determinable amount €350,000.

18.Mens rea of this offence has two parts, either the defendant knew the proceeds represented proceeds of an indictable offence, or, in the alternative, the defendant had reasonable grounds to believe the property was such.

19.This second part, having reasonable grounds to believe, contains subjective and objective elements.  The prosecution must prove there are grounds that a common-sense,  right-thinking member of the community would consider sufficient to lead a person to believe that the property in question constituted the proceeds of an indictable offence.  This is the objective element.  It must also be proved that those grounds were known to the defendant.  This is the subjective element.

20.The recent authority, HKSAR v Pang Hung Fai [2013] 4 HKC 366, sets out the approach to this issue by first asking what were the facts known to the defendant that related to the dealing with the property.  Then the second step would be to - I quote - “process these facts through the mind of the common-sense, right-thinking member of the community and determine whether this person, possessed of these facts, objectively would consider them sufficient to lead a person to believe that the property in question constitutes the proceeds of an indictable offence”, from paragraph 112 of that authority.

21.I quote further:

“When this reasonable person considers these facts objectively, it means he does so uninfluenced by the personal beliefs, perceptions or prejudices of the defendant.”

22.To be clear, the belief necessary is “something more than suspicion and, implicit in what is said, something less than knowledge”, see paragraph 133 of that authority.

23.The test or two-step approach is concerned with whether there are reasonable grounds to believe proven.  It is not the case that the defendant can only be convicted if all reasonable persons furnished with the defendant’s knowledge and the understanding of the facts would believe that the property was the proceeds of an indictable offence.

24.I quote again from the authority at paragraph 126:

“Just as the test is not concerned with whether the defendant has the requisite belief in respect of the property, it is likewise not concerned with whether the reasonable man has it or would have it. Rather it is concerned with whether he would regard the facts as sufficient to ground the section 25(1) belief.”

25.The grounds proved have to be such that a common-sense, right-thinking member of the community would consider sufficient and not would lead a person to believe; there is a difference.  To determine what were the facts known to the defendant that relate to the dealing with the property, that is the subject of the charge, I will first examine the evidence presented during the course of the trial and agreed in Admitted Facts, Exhibit P37.

The prosecution case

26.PW1, a Mr Pierre Jean Beylier, known as PJ, is the chief executive officer of SpeedCast Limited, a company registered in Hong Kong.  He gave evidence that his company had many subsidiaries including a recently acquired Dutch company, Satfa BV. 

27.PW2 was a Mr Mengel Cornelis Van Der Stel, known as Marcel, and was the recently hired financial controller of Satfa BV.  Satfa BV is based in Holland. 

28.PW3, a Mark Ellison, is the chief financial officer of SpeedCast and, like PW1, based here in Hong Kong.  He hired PW2 a matter of weeks before the offence.

29.Before the offence PW1 and PW2 had not met and nor did PW2 directly report to PW1.  But he knew that PW1 was the group CEO, a Frenchman, and referred to as PJ.  Their company dealt with satellite technology. 

30.On the 8th August 2013 at about 10 am PW2 received a call from the receptionist telling him PW1, the CEO, wished to talk to him.  Never having met PW1, he assumed the male on the telephone was PW1; he had a French accent and claimed to be PJ.  He told PW2 he was in England in a lawyer’s offence and was close to concluding a deal.  He needed PW2 to help but had to keep their business confidential so as not to tip off any competitors. He asked PW2 to check the bank balance of Satfa BV as the first instalment for this acquisition had to come from Holland.  He said the company for sale was in the UK but it had a holding company in Hong Kong. 

31.The impostor on the telephone told PW2 he had no access to his email so would communicate through his lawyer’s email address [email protected].  The impostor asked PW2 for his email address and PW2 received an email not long after.  PW2 then emailed the bank balance to this Eric Berg email address after checking the account at Rabo Bank, the company bank account.  As a response to this, PW2 received an email and an attachment, P29 and P30.

32.PW1, or rather the impostor, called and told PW2 a transfer had to be done as soon as possible according to the document P30, an invoice issued by M N Technology Limited Hong Kong for €696,000 with bank account details.  PW2 told the impostor the account had insufficient funds for the full payment of €696,000.  He was told to transfer €350,000 and the balance would be paid later. 

33.PW2 called Rabo Bank who instructed him he could make two transfers of €200,000 and €150,000.  PW2 called the impostor who told him to make both transfers immediately whilst he stayed on the phone.  PW2 arranged both transfers online to the HSBC Hong Kong account of M N Technology Limited whilst the impostor stayed on the line.  This is a common practice of telephone fraudsters to stay on the phone so the victim does not have time to think or suspect anything may be amiss until it is too late. 

34.After the transfer was done electronically, the impostor told PW2 he had to go to a meeting and would be in touch about the balance of the amount required.  He even thanked PW2 for his quick response and help.  PW2 was convinced he had talked to and assisted the CEO of the group. He heard a man speak English with a French accent and that man made references to acquisitions being made by SpeedCast which were true.  He believed the caller was PJ, PW1. 

35.PW2 produced proof of the two transfers made on 8 August to M N Technology Limited.  Exhibit P25 is the bank statement of Satfa BV at Rabo Bank. 

36.After the transfer was complete and the impostor hung up, PW2 realized he was going on a holiday for two weeks the following day. He was worried about the transfer of the balance of monies still owing according to P30.  The invoice, he believed, was genuine.  He then sent an email to PW1, PJ, at his work email address.  This email is the last email of three of Exhibit P33.  He asked PW1 how to handle the next transfer as he would be on holiday with limited access to the internet.  Of course PW1 had no idea what the email referred to, so he replied by asking PW2 to discuss this with PW3, Mr Mark Ellison, the CFO (see the second email of three of P33).

37.In response, PW2 forwarded their correspondence to PW3 and asked for his thoughts (see the first email of three of P33).  PW2 said he was surprised to receive PJ’s response, but as asked he contacted PW3.  On the same day, the 8th August, PW3 then telephoned PW2 upon receipt of PW2’s email as he had no idea to what transfers he was referring.  PW2 told PW3 about PJ calling him from London and asking him to do a transfer to an HSBC Hong Kong bank account discreetly and on his behalf.  PW3 told PW2 the company had made no acquisition and there must be a deception or fraud.  He told PW2 to contact Rabo Bank and try to stop the transfer of funds.  Exhibit P31 is a request to cancel the transfer. 

38.PW2 also made a police report that same day on the 8th August.  P32 is the Dutch police report.  PW2 received a verbal warning over this incident by his employers.  PW3 dealt with the HSBC Bank in Hong Kong to ensure that money was not stolen from the M N Technology Limited account.  Rabo Bank were unable to stop the two transfers so the money was deposited into the HSBC Hong Kong account of M N Technology. 

39.PW2, as the only direct employee of Satfa BV, was shown Exhibit D1, a contract between Satfa BV and M N Technology Limited represented by the defendant.  This contract contradicts itself and describes both parties as both the buyer and the seller.  The contract is for the sale and purchase of plastic capping devices worth €696,000, the same as stated in the invoice, Exhibit P30.

40.PW2 had never seen this contract nor heard of Pieter Frans Van Kerckhoven who signed on behalf of Satfa BV.  He is not a director as stated.  Satfa deals with satellite communications, not plastic cappings.  The chop for Satfa BV with a windmill depicted is a fake chop.  The company neither buys nor sells plastic caps. 

41.PW3 gave evidence, Mr Ellison gave evidence of receiving PW2’s email on the 8th August 2013 about a transfer he knew nothing about.  It led to him calling PW2 immediately.  He quickly worked out that PW2 had been duped and deceived into transferring out €350,000 from Satfa BV’s bank account.  He said PW2 sent him a copy of P30.  PW3 instructed a staff member, PW4, to go to the Hong Kong police and immediately filed a police report.  PW3 then dealt with a member of staff at HSBC to try and recover the money.

42.P39 is a series of emails PW3 confirmed he sent that are self-explanatory.  Exhibit P38 are emails between PW3 and Rabo Bank to try and get the bank to stop the transfers.  That was not successful.

43.SpeedCast did eventually recover the money sent to HSBC and did not ultimately suffer any loss.  PW1 to PW3 agreed PW2 should have ensured he had two authorized signatures before transferring such a large sum of money.  There was at that time no mandate for Rabo Bank to ensure two signatures were required for transfers of money over a certain amount.  The company had only recently been purchased and banking safeguards had yet to be put in place.  PW2 agreed he made a mistake, hence his warning from his superior.  PW2 should have queried Exhibit P30 when it was mailed to him but did not.  This was because he did not suspect the caller was anything but genuine.

44.Witnesses, PW4 to PW10, were tendered for cross-examination.  PW4, a SpeedCast employee, the group financial controller, made a report to the Hong Kong Police on 8 August 2013 of the telephone fraud.

45.PW5 and PW6 were HSBC staff members who gave evidence of the defendant and a Mandarin speaking male, Chinese male, coming into their Wan Chai branch and arranging a telegraphic transfer.  Neither witness communicated with the defendant assuming he did not speak English.  The Chinese male, DW2, translated on his behalf.

46.PW7, Mr Li Man-wai, was the defendant’s company secretary for M N Technology Limited.  He arranged the change of ownership in 2009 of the company to the defendant.  The defendant was the sole director and shareholder.  PW8, Miss Wu Tan-na, a company secretary who arranged and filed for annual returns for M N Technology Limited from 2009 to 2012. 

47.PW9 was DPC 52474 who arrested the defendant at the bank and arrested him for money laundering.  Due to a language barrier, the defendant was not cautioned by this officer.

48.Exhibit P37 is the Admitted Facts agreed by all parties.  The defendant does not challenge the fact he applied for a telegraphic transfer of €332,432 from the account of M N Technology to a bank account of an Octans Industry Ltd in Estonia.  The form is exhibited as P11 and dated 15 August 2013.

49.It is not challenged the defendant was with DW2, Mr Yang Shue-wei, at HSBC and they both returned the next day to ask why the amount had not yet been transferred out of M N Technology’s account.  The bank reported the matter to the police and both men were taken from the bank to a police station. 

50.It is not challenged the defendant had on him documents pertaining to M N Technology Limited, two company chops of M N Technology Limited and some remittance application forms.  He also had on him some handwritten notes that contained the figures €200,000, €150,000 and €332,432.8.  Those are exhibited as Exhibit P20. 

51.Other agreed facts include the defendant’s clear record in Hong Kong and the fact he arrived last in Hong Kong on 14 August 2013.  Before that, he had last landed in Hong Kong on 25 April 2012, some 16 months prior.  His travel movements are recorded in Exhibit P36.  His company is M N Technology Limited and he is the only director and shareholder and the only signatory to its HSBC bank account.  The company is run through a Hong Kong company secretarial service where PW8 works. 

52.The prosecution case was not challenged in reality.  There was a suggestion perhaps PW2 was involved in the fraud and not a victim.  But, in reality, but for his email to PW1, Exhibit P33, telling him he was going on holiday, the money may have not been recovered.  He alerted SpeedCast to the fraud on the same day he was deceived, leading to swift action by his superiors. 

The defence case

53.The defendant elected not to give evidence which is his right.

54.The defence called two witnesses.  The second witness, Mr Yang Shue-wei, gave evidence of how he came to accompany the defendant to an HSBC Wan Chai branch to help him arrange a telegraphic transfer of the defendant’s company’s funds.  He said he was helping the defendant with some problems in his factory in Dalian, China.  The defendant needed an interpreter as he did not speak Putonghua. 

55.This witness met the defendant in Moscow at the recommendation of a mutual friend.  He agreed to help the defendant and the defendant agreed to hire him.  They arranged to fly from Moscow to Dalian and had return tickets.  He gave evidence that the details entered on the transfer or remittance form were provided by the defendant himself.  He only helped the defendant translate.  He gave no evidence pertaining to the origin of the funds or the defendant’s knowledge of the funds.  He himself had no direct knowledge of the funds in M N Technology’s HSCB account.  His evidence was neither here nor there. 

56.The first defence witness, Mr Ivan Palienko, claimed to be the corporate lawyer for the defendant’s group of companies and had been since August 2011.  He described the defendant’s business empire having a total turnover of several hundred million US dollars per year.  His businesses are diverse; they include plastic bottle cappings.  He had a factory in Dalian, Dalian Best Plastic Company Limited for which M N Technology Limited was used as a financial operator.  He said that means materials are bought through M N Technology and all sales would go through M N Technology.  It handles all disbursements and income of the factory.  M N Technology had the one HSBC bank account in Hong Kong.  The history and transactions of this account can be seen in the banker’s affirmation, Exhibit P40.

57.He said this Dalian factory was set up, fully operational and in business at the end of 2012 and apparently still in business in August 2013.  At the end of 2012 the company employed agents to sell the capping products in Europe and elsewhere.  DW1 drafted a marketing service agreement.  It is an agreement M N Technology entered into with each agent or contractor as described.  Exhibit D3 is such an agreement with an Igor Kolupaev, a friend of the defendant’s.  It is dated 10 December 2012.

58.A further agreement was signed by Igor on 29 April 2013 called a service order No 1, Exhibit D4.  It sets out the terms of the agent’s agreement between Igor and M N Technology.  These subsequently became relevant when Igor came to DW1 on 8 August with the sales contract signed between Satfa BV and M N Technology, signed on 7 August 2013.  DW1 says Satfa BV was Igor’s first customer or client he brought to M N Technology.  The contract is Exhibit D1.

59.DW1 gave evidence that Igor came to his office in Moscow distraught.  He had Exhibit D1 with him and said to DW1 that M N Technology had misled him and they could not fulfil the contract terms of D1. Exhibit D1 is a contract allegedly signed between the defendant and a director of Satfa BV on 7 August, a day before Igor appeared in Moscow.  On page 1, it describes Satfa BV buying plastic capping devices from the seller M N Technology Limited for €696,000. On page 2, at paragraph 8, it describes the seller as Satfa BV and the buyer as M N Technology Limited.  In appendix 1 of D1, the parties are confused again in paragraphs 2, 3 and 7. 

60.Exhibit D1 is a copy, not an original document. DW1 had no knowledge of D1, nor was any evidence called from anyone with personal knowledge of D1.  DW1 said he was shocked when he read Exhibit D1 as he had never seen it before.  Normally, he drafted all contracts.  He saw the defendant’s signature and the company chop and assumed the defendant had signed it.  He said it was odd because they never dealt in Euros, only US dollars, and their maximum production was one million caps a month.  The contract was for seven million caps in four months.  The factory would not have been able to fulfil this contract. 

61.DW1 asked his secretary to call the defendant who was not in Russia.  He spoke to the defendant.  The defendant seemed to be aware of this contract he allegedly signed, yet he did not answer any questions DW1 asked him about it.  The defendant just told him to sort it out and ensure that M N Technology had no liability, Satfa BV would have the contract fulfilled and Igor would get his commission.  Igor suggested to DW1 that they assigned this contract to another and produced a draft agreement.  It referred to a company Octans Industries Ltd. 

62.The defendant over the phone suggested an assignment agreement where Octans would provide the caps and M N Technology would transfer money it received from Satfa BV to Octans.  Igor as the agent of Satfa BV, Octans and M N Technology had authority to sign such an agreement. Exhibit D7 was drafted within hours of Igor arriving in DW1’s office.  It was signed by DW1 and Igor.  It is entitled “Mutual Rescission and Release Agreement” and it is in Russian and English.  It is dated 8 August 2013. 

63.Exhibit D7 in paragraph 1 makes the contract, Exhibit D1, null and void, without any party who signed Exhibit D1 acknowledging this rescission.  DW1 said he signed on behalf of M N Technology and Igor signed on behalf of Satfa BV.  DW1 took his word that Igor was the agent, their agent, as well as the agent for Octans Industries Ltd.  There are no other documents or evidence relating to either Exhibit D1 or D7, both made within a day of each other. 

64.On the following day, 9 August, the defendant called DW1 and asked him if an agreement had been prepared and signed.  He said Igor had called him to tell him Satfa BV had transferred some money to M N Technology’s HSBC bank account in Hong Kong.  It was a term of Exhibit D7, the rescission agreement, that a financial penalty would be imposed if money was not transferred from M N Technology to Octans Industries Ltd within eight days.  It was an oral term agreed apparently, but the amount of the penalty was stated as €3,500 a day. 

65.On 12 August 2013 DW1 saw Eleanor at work.  She is the company’s chief financial officer.  DW1 said Eleanor was with the defendant in China but had returned alone to Moscow on 11 August.  She gave DW1 some documents purportedly given to her by the defendant.  The documents included copies of bank documents of Rabo Bank and the two transfers of €150,000 and €200,000 made to M N Technology on 8 August 2013.  The documents are in Dutch, but the transfers are clear.

66.There was also a contract entitled “0/13” dated 8 August 2013 which is almost identical to Exhibit D1, but the buyer is M N Technology and the seller is Octans Industries Ltd.  The contract amount was for €332,432.8.  Appendix 1 of this document was exactly the same as appendix 1 of Exhibit D1, except for the contract price.  The number of caps remained the same, but the unit price was slightly lower.  The amount was wrongly calculated.  The total contract price should have been €643,800, not €332,432.8.

67.DW1 suspected it was a fake contract.  DW1 said Igor had shown him this contract on 8 August 2013 as a solution and to replace Exhibit D1.  DW1 rejected it as it was a sales contract, not a rescission or a re-assignment.  DW1 told the defendant about this over the telephone, but the defendant had made no comment on it.  Lastly, the document Eleanor said the defendant had given her also included Exhibit P30, the invoice PW2 had received from the impostor.  This same document was used to deceive PW2 and is fake. This very incriminating document was produced by the defence with the other documents I have just referred to as Exhibit D8. 

68.DW1 then said Eleanor tried to transfer money online from M N Technology’s HSBC bank account but was unsuccessful.  DW1 called the HSBC Bank in Hong Kong but could not access its account as the defendant was the sole signatory.  His evidence was he told Eleanor to tell the defendant that someone had to personally go to Hong Kong to transfer money, or else M N Technology would soon be subject to financial penalties for not transferring the money to Octans Industries Ltd, they would have to pay €3,500 each day if the money was not transferred to Octans Industries Ltd within eight days from 8 August. 

69.DW1 also produced Exhibits D5 and D6, draft terms and conditions of a contract.  He referred to as pro forma documents.  He re-drafted and amended Exhibit D5 to produce D6.  The documents do not name parties.  Apparently they were for reference only. 

70.To conclude, the defence set out to show through DW1 there existed a contract that involved Satfa BV, the defendant’s company, and a sale of plastic capping devices.  Also they thought there was apparently money sent to M N Technology Limited as a direct result of this contract.  The money was sent from Satfa pursuant to this contract, or perhaps the assignment contract, D7.  However, that would have been unlikely if these documents were true because the money was transferred hours before Exhibit D7 was drafted by DW1. 

71.Apparently, the defendant was told of the money transferred to the HSBC Hong Kong bank account and told it had to be transferred to Octans Industries urgently to avoid financial penalties.  The defendant came to Hong Kong to do this in person on his way back to Moscow.  The above was all according to Mr Palienko, DW1. 

72.Much of what DW1 said was hearsay evidence.  He repeated what Igor said to him, what the defendant said to him and what Eleanor said to him.  Igor, the defendant and Eleanor did not give evidence.

73.An oral or written assertion, express or implied, other than one made by a person giving oral evidence in court proceedings is inadmissible as evidence of any fact or opinion so asserted.  It is hearsay.

74.As for the exhibits produced, if relevant, only one has any connection to the defendant and that is Exhibit D1.  It is purportedly signed by him.  However, there is no direct evidence relating to the origins of this contract, or produced by anyone connected to it with any personal knowledge.  Yet it is a vital document to the defence because the money transferred into M N Technology’s account was a direct result of this contract.  Hence, the defendant dealing with it as he attempted to do.  No party to any contract or document, be it the defendant, Satfa BV, Igor, Octans Industries Ltd, gave evidence as to the document produced or the origin of the money received. 

The evidence

75.I repeat again that, first, I am well aware and remind myself the prosecution must prove the offence beyond reasonable doubt.  The defence have nothing to prove.  Secondly, I remind myself the defendant has a clear record in Hong Kong and have warned myself accordingly.

76.I will address the question as to what were the facts known to the defendant that related to the dealing with the money in his company’s bank account.  As Miss Mohamed for the prosecution submits “What were the defendant’s reasonable grounds to believe that the property represented the proceeds of an indictable offence, ie 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, the subjective test?” 

77.The following facts I find were known to the defendant and proved beyond reasonable doubt:

(1) On 8 August 2013, there were two transfers to the defendant’s company’s HSBC bank account of €200,000 and €150,000 from Rabo Bank Holland;

(2) For this M N Technology bank account, the defendant is the sole signatory. The defendant is the sole director and shareholder of this company at all material times;

(3) On 14 August 2009, the material bank account had a balance of over US$446,000 and when the defendant became sole signatory, this account was not particularly active or used much on a monthly basis. From April 2012, the account was practically dormant with no activity until 8 August 2013. Until this date, all sums deposited and withdrawn were in US dollars. Exhibit P40 is the relevant banker’s affirmation and account history;

(4) The defendant arrived in Hong Kong on 14 August 2013 and went to HSBC Bank branch to attempt to transfer out the Euros on 15 August 2013. Prior to this date, the defendant had last landed in Hong Kong some 16 months before in April 2012. This is about the same time the bank account became dormant;

(5) On 15 August 2013, the defendant filled out Exhibit P11 and requested the bank transfer almost all of the Euros received to a bank account in Estonia. About 5 per cent was to be left in the account. The beneficiary was Octans Industries Ltd;

(6) On 16 August 2013 the defendant returned to the bank to enquire why the Euros had not yet been transferred or deducted from M N Technology’s account;

(7) The defendant had handwritten notes in his possession, Exhibit P20, with many numbers and figures. On four sheets of paper the figures of €200,000 and €150,000 appear.

78.Where the prosecution case is concerned, as I said earlier, nothing material is in dispute.  It is not challenged Satfa BV transferred €350,000 to M N Technology’s bank account.

79.PW1 to PW4 were called to give evidence of the predicate offence, the fraud and deception that led to the transfer of Euros. I accepted their evidence entirely.  I am sure PW2 was duped by an impostor on the telephone who convinced him of the need to transfer Euros on an urgent basis.  PW2 had no time to question the instructions and acted as instructed. I am sure the proceeds transferred to M N Technology’s bank account were the proceeds of an indictable offence.  If this fraud had taken place in Hong Kong, it would amount to an indictable offence.

80.The defence do not challenge the fact it is established the defendant attempted to deal with the money in the company bank account.  Mr Palienko was called to put forward the defence case.  However, what he says the defendant said to him is hearsay.  It cannot be relied upon by the defence.  He cannot give evidence on the defendant’s knowledge.  The same principle applies to what Igor and Eleanor told him.  What he did say by way of explanation along with the documents he produced, with respect, I treat with some scepticism.  It seemed fanciful and tailor-made to explain away a transfer from a Satfa BV to M N Technology Limited, and then an attempt to send almost all of it to a bank in Estonia to an Octans Industries Ltd.

81.The documents produced explain this, but the circumstances surrounding these documents give rise to many unanswered questions.  The documents have been produced but not to prove their contents. I place little weight on them, especially Exhibit D1, the original and first contract.  No parties to this contract gave evidence.

82.The other documents, D3, 4, 5 and 6, did not relate to Exhibit D1 directly, nor were the signatories to D3 and D4 called to give evidence.  There is no evidence before the court as to the defendant’s knowledge of any of the documentary exhibits.  Exhibit D7 was drafted by and signed by DW1, but what he says the defendant knew about it is hearsay.

83.I do not intend to go into the terms of the documents or contracts, nor the legalities and principles of contract law.  It is not necessary for the purposes of this trial.  In fact, defence counsel agreed with Miss Mohamed’s submission at paragraph 44 of Exhibit 41, her final submissions, that there was no evidence as to the knowledge of the defendant regarding how Exhibit D1 came about and whether in fact the defendant had any knowledge of this document or terms of the contract at the material time.  In effect, there is no explanation why he came to Hong Kong on 14 August 2013 after a long absence to deal with the Euros deposited in his company’s account.    

84.Despite evidence from the defence, there are too many unanswered questions because of the nature of their evidence.  Much of it being hearsay or not admitted as proof of the truth of the content.  The prosecution has been unable to cross-examine the maker of the statements attributed to the defendant, Igor or Eleanor by Mr Palienko, DW1.  Therefore, his or her truthfulness and powers of memory and recall cannot be tested nor can credibility.  Of course there are situations where an out-of-court statement by another person is not hearsay, but I do not see those arising here. 

85.The second question to pose, according to the authority of Pang Hung Fai, is the objective test.  After processing the above facts, those known to the defendant, through the mind of the common-sense, right-thinking member of the community, I ask myself: Would this person possessed of those facts objectively consider them sufficient to lead a person to believe that the property in question constitutes the proceeds of an indictable offence?  I quote from Pang Hung Fai, paragraph 113. 

“The question that would be posed to a jury would run as follows: ‘On those facts and in those circumstances, did the defendant have reasonable grounds to believe that the property was the proceeds of an indictable offence? The question is not whether the defendant believed the property to be the proceeds of an indictable offence, still less whether the property was in fact the proceeds of an indictable offence. The question is whether he had on all those facts and circumstances known to him reasonable grounds so to believe.”

86.The potential issue of an honest but mistaken belief on the part of the defendant does not arise in this case.  It is what the Court of Appeal in Pang Hung Fai described as the halfway house defence.  I do not find it necessary to consider in this case.  More specifically, the evidence relied upon or produced by the defence does not or cannot raise this issue. 

87.I have carefully considered all the evidence and the submissions made by both the prosecution and the defence.  As I have said, I accept the prosecution witnesses’ evidence as credible and reliable.  As for the defence evidence, I have placed little or no weight on DW1’s evidence as it is, where pursuant to the charge and Euros deposited in M N Technology’s account, hearsay.

88.There is no requirement for the defendant to explain his wealth or assets.  And it is certainly not an offence if he fails to explain the income’s origins satisfactorily unless it is proved beyond reasonable doubt that he had reasonable grounds to believe that the property dealt with represented the proceeds of an indictable offence. 

89.I have set out the facts I believe proved were known to the defendant above.  I am sure when the objective test is applied, that objective person would find the facts proved to be sufficient to lead a person to believe that the property in question constitutes the proceeds of an indictable offence.

90.M N Technology’s HSBC bank account was dormant since April 2012.  There are no deposits that would suggest any business transactions or activities through this account in that period.  To coincide with this fact is the fact the defendant had not been in Hong Kong during the same period.  Within one week of €350,000 being deposited into this account, the defendant arrived to transfer it out, almost all, leaving 5 per cent or thereabouts in the account.  This bears the hallmarks of money laundering activity.  The currency deposited was in Euros when this account has never had Euros deposited in it from the day the account was opened in 2008. 

91.Upon a closer examination at the bank account statements and the activity within it from the time the defendant became the sole director and shareholder of this company, they do not resemble a statement of an ongoing business with trade income, outgoings or disbursements.  At most, there are one or a couple of deposits in US dollars on a monthly basis with withdrawals immediately after or soon after.  These came to a halt in April 2012 where thereafter there is no activity in the account at all.  That is until the €350,000 were deposited on 8 August 2013. 

92.This account is in the sole control of the defendant, and any activity involving this account would have had to have been known to the defendant.  After all, he was the only one with access to this account.  He came personally to Hong Kong to deal with it by transferring it out within one week of its deposit.  These facts would alert an objective, common-sense, right-thinking member of the community to ask questions and, I am sure, conclude the defendant had reasonable grounds to believe the Euros were proceeds of an indictable offence.  The answer to the objective test would be in the affirmative.  Nothing from the defence witnesses persuade me otherwise.

93.Having carefully considered all of the evidence from DW1 and DW2, I attach no weight to the explanations supplied as it pertains to the origins of the Euros or the knowledge and belief of the defendant.  In effect, there is no explanation as to the knowledge of the defendant where the money is concerned.  Nothing that would cast doubt on my finding that the objective test answer is in the affirmative. 

94.I am satisfied there are no material discrepancies, improbabilities or omissions in the evidence which cause me to doubt the findings I have made.  I am satisfied that the prosecution can prove beyond reasonable doubt the defendant had reasonable grounds to believe the property he attempted to deal with in his company bank account represented the proceeds of an indictable offence.  Accordingly, the defendant is convicted as charged.