HKSAR v. Fan Yanhua

DCCC 362/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 362 OF 2014

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Reasons for Sentence

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1.The defendant pleaded guilty to two charges of dealing 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.

Summary of Facts

2.A Chilean company “IML” had been doing business with a company registered in Hong Kong “AE” for some 30 years. IML would import toys and general merchandise from suppliers in China through AE’s arrangement. Communication between the two companies was by way of email. PW1 was the director of IML while his cousin Parwani was the main contact person with AE.

3.PW1 received an email in the beginning of October 2013 that was purportedly from Parwani, requesting money to be transferred to two bank accounts in Hong Kong in relation to certain business deals between the two companies. The 2 bank accounts were not the usual bank accounts that AE had used in previous transactions. Nevertheless, PW1 believed the email to be genuine and proceeded to make remittances.

4.A total of USD$168,853.98 and USD$97,623.83 were transferred into the bank accounts in charge 1 and 2 respectively, by way of transfers on 3^rd, 7^th and 8^th October.

5.Parwani returned from his business trip on 11^th October, whereupon PW1 discovered that the said email was not sent by Parwani. AE’s representative reported the case to the Hong Kong Police on 13^th October.

6.Police investigation revealed the defendant as holder of the said 2 bank accounts, which were opened by the defendant in August 2013. The defendant, a mainlander, was arrested on 15^th October when she tried to withdraw money from one of the bank accounts.

7.In the subsequent video recorded interview, the defendant told the following story.

8.The defendant and her boyfriend were from Guangxi, China. They started a company called Hong Da Technology Company in June 2013 and registered the company in Hong Kong. The boyfriend gave $7,000 to the defendant and told her to open 4 bank accounts in Hong Kong for their company. The defendant came to Hong Kong to open the 2 personal bank accounts particularized in the two charges around 20^th August 2013. The defendant also opened accounts with HSBC and Hang Seng Bank.

9.The defendant provided the details of the bank accounts to her boyfriend who was responsible for the business’ operation. The defendant did not know whether there were any transactions conducted through those bank accounts.

10.A friend of the boyfriend was informed via online banking facilities that money was remitted from Chile into 2 of the accounts. The defendant was told that the money was from a friend of her boyfriend, “M”.

11.The defendant came to Hong Kong on 14^th October 2013. It was M who booked the air ticket for the defendant and M also gave RMB5,000 to the defendant as travel and accommodation expenses. M told the defendant to withdraw USD$168,000 from the charge 1 account. USD$100,000 of that was to be deposited into a Bank of China account and the remainder into an Agricultural Bank of China account. M also told the defendant to withdraw USD$97,000 from the charge 2 account and to await further instructions.

12.The defendant claimed that she acted upon the request or instruction of her boyfriend and M only. The defendant did not provide any details of her boyfriend or M.

13.Movement records of the defendant show that between August and October 2013 the defendant came to Hong Kong twice. The first time she came was on 18^th August and she left 3 days later on 21^st August 2013. The defendant next entered Hong Kong on 14^th October, the day before her arrest.

14.Since the opening of the 2 bank accounts in charge 1 and 2, there had been no transactions other than the remittances from IML. Checks with HSBC and Hang Seng Bank revealed no record of the other 2 accounts the defendant said she had also opened in Hong Kong.

Previous Convictions

15.The defendant is of previously clear record.

Mitigation

16.The defendant is a 27 years old mainlander who lives in mainland China. A letter written by the defendant was submitted and the defendant expressed her remorse through her legal representative. According to the defendant’s letter, everything that happened was because her boyfriend had exploited her trust.

17.Ms. Chan pointed out that the defendant has been in custody since the day of her arrest and has learnt her lesson. The defendant wishes to return to China to get back to her family as soon as possible.

Sentencing Authorities

18.There are no sentencing guidelines in money laundering cases. However, the Court of Appeal in the case of HKSAR v a male known as Boma Amaso, CACC 335/2010 identified some significant features for the sentencing court to consider:

“40. Less helpful though this may be than we had hoped, the best we can therefore do is to identify some of the significant features for which the court should look and take into account, though it is not possible to produce an exhaustive list: we can do no better than echo obvious factors that have been referred to by the cases:

(1) The nature of the predicate offence, if known, and the penalty available for the predicate offence: see R v Karen Monfries [2004] 2 Cr App R (S) 9....; although it is suggested that there must be a difference between the offender who knows what the predicate offence is and the offender who does not : R v Gonzalez [2003] 2 Cr App R (S) 35 at [13].

(2) This brings us to the question of the state of knowledge of the offender. This divides itself in two – knowledge of the nature of the predicate offence, where the predicate offence is known to the court; and knowledge of the fact that the funds are the proceeds of an indictable offence:

(a) Where the predicate offence is known to the court, the question of knowledge of the offender as to the nature of the predicate offence is relevant in that the person who knows the nature of the predicate offence is more culpable than the person who does not : see Gonzales above at [13] and Monfries above at [11]. But this is a question to be approached with considerable caution, since many offenders will assert ignorance of the origin of the proceeds in question, particularly where the offender has deliberately turned a blind eye thereby choosing not to know. In such a case it must be recognised that he is nonetheless “assisting in the original crime, whether with knowledge or blind eye knowledge of it”: R v Basra above at [472]. The scheme and purpose of the legislation is to ensure care and honesty in the handling of other people’s money and those who are prepared to handle money on other people’s behalf and turn a blind eye to the source of that money do so at their own risk: see Attorney General’s Reference No. 48 of 2006 [2007] 1 Cr App R (S) 558 at [24]. So the person who is aware of the fact that he is dealing with proceeds of an indictable offence but deliberately chooses not to ask questions is barely less culpable than the person who asks or who is told.

(b) As to the second question, there seems to me to be unassailable logic in the scheme of the Australian legislation which draws a distinction in culpability between the person who intentionally deals with the proceeds of crime, meaning the person who knows or believes that the funds in question are the proceeds of crime; the person who is reckless as to that question; and the person who is negligent about it. The legislation makes it a criminal offence to deal with proceeds of an indictable offence where there are grounds to believe that that is the origin of the funds and the offender knows of the grounds, even where the offender does not positively know that the funds originate from the commission of such an offence, so care must be taken in the last category not thereby to dilute sentencing so as to defeat the object of the legislation; but the person who is reckless is more culpable and the person who knows or believes is more culpable still.

(3) An international dimension will always be a significant aggravating feature; and by international dimension we include money laundered from, or for those operating in, the Mainland.

(4) The sophistication of the offence is always relevant. This will include the degree of planning and whether deceit is practised to achieve the objective.

(5) Where the offence is committed by or on behalf of an organized criminal syndicate, that is an aggravating fact.

(6) It is relevant to take into account whether there is one transaction or many and the length of time over which the offence was committed.

(7) As in the case of Herzberg, it will be an aggravating feature where the offender continues to launder funds after he has discovered as a fact that the funds are the proceeds of an offence or after he has discovered the nature of an offence which is serious.

(8) The sentencing court should have regard to the role of the offender and the acts performed by him. In this regard, the director of a laundering operation or scheme should attract a greater sentence than a person engaged by him although sentences should be sufficient to deter those who might be prevailed upon by directing minds. In the case of a person down the chain, the court will wish to have regard to whether a benefit has been received and if so the nature and size of the benefit. But within the category of persons down the chain there will gradations of culpability. So for example the drug addict or petty crook who is paid a small sum to open an account and hand over its operation to another with no more participation and no more knowledge than that it is going to be used for some sort of crime is much less culpable than an offender of a different sort not “used” in that way.”

19.I was referred to the case of HKSAR v Hsu Yu Yi (許有益), CACC 159/2009 by Ms. Chan and it is her submission that applying the principles in that case, an appropriate starting point should be 3 years’ imprisonment. Ms. Tam for the prosecution did not see the need to make any submission in reply.

Sentence

20.The maximum sentence under s.25(3)(a) on conviction upon indictment is a fine of $5,000,000 and imprisonment for 14 years.

21.In relation to the factors identified in HKSAR v Boma Amaso, I make the following findings based on the version of fact put forward by the defendant in her video recorded interview.

22.There is no evidence to suggest that the defendant knew the nature of the predicate offence. There is no evidence to suggest that the defendant was ‘turning a blind eye’ to the source of the money being transferred into the 2 bank accounts.

23.There is an international dimension in the present case in that the scam was perpetrated on a Chilean company and the money was remitted from Chile into Hong Kong and then the defendant, a mainlander, came to Hong Kong to deal with the money.

24.The commission of the 2 offences cannot be said to be sophisticated. The defendant used her own name to open the 2 bank accounts making them easily traceable against her and the method of withdrawal and dealing with the money so withdrawn by depositing into another bank account was basic.

25.There is no evidence to suggest that the offence was committed by or on behalf of an organized criminal syndicate.

26.There were only 3 deposits into the 2 bank accounts and the defendant was arrested while she was trying to make a withdrawal from the Charge 1 bank account. There would seem to be no other withdrawals made. The period between the first remittance and the attempted withdrawal was just around 12 days and the laundering cannot be said to be over any length of time.

27.There is no evidence to suggest that the defendant had continued to launder after she had found out as a fact that the money was proceeds of a scam.

28.It would appear from the defendant’s version of fact that she was not the director of the email scam or the money laundering operation. She was the final person down the chain. Again, based on the defendant’s video recorded interview, the only benefit that she had received for her role in the operation was the RMB5,000 travel and accommodation expenses and the free flight into Hong Kong.

29.The amount of money laundered in charge 1 and 2 in Hong Kong dollar equivalent is around $1,317,000 and $761,465 respectively, making a total of $2,078,465.

30.I find the defendant at the lower end of the spectrum of culpability given her role in the money laundering operation. I find however that there is a need to incorporate an element of deterrence in sentencing money laundering cases, given the need to protect Hong Kong’s status as an international financial hub.

31.Although there are 2 charges, I will adopt a global approach when sentencing. That is to say, the starting point to be adopted will be based on the total amount of money laundered in both charges.

32.Having heard from Ms. Chan the defendant’s mitigation and read the letter written by the defendant herself, I find that there are no mitigating factors in the present case other than the defendant’s plea of guilty.

33.For the amount of $2,078,465, the presence of an international dimension, the lack of sophistication and the relatively minor role of the defendant, but bearing in mind the need for deterrence, I will adopt a starting point of 3 years for both charges, discount them by one third in recognition of the defendant’s guilty plea and order the sentences to be served concurrently. The defendant is therefore sentenced to a total of 2 years’ imprisonment.

34.A date will be fixed to hear the prosecution’s application for confiscation.