HKSAR v. Liang Xinchao and Another

DCCC 590/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 590 OF 2014

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Reasons for Sentence

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1.D1 pleaded guilty to one charge of Conspiracy to deal with property known or believed to represent proceeds of an indictable offence (charge 4), a charge he jointly faced with D2.

2.D2 pleaded guilty to the same joint charge (charge 4) as well as one charge of Dealing with property known or believed to represent proceeds of an indictable offence (charge 3).

Facts

Charge 3 (against D2 only)

3.Victim of the charge 74 years old Mr. Hui received a phone call from an unknown male at around 11:45am on 15^th April 2014, falsely informing him that the victim’s son had an affair with the girlfriend of the man’s boss, demanding $200,000 to save the son. The amount was reduced to $30,000 after negotiation.

4.As instructed by the man, Mr. Hui brought $30,000 cash to a park near Metropark Hotel in Kowloon. A man in blue shirt and carrying a shoulder bag in red and black approached the victim and told him that the man’s boss ordered him to take the money from Mr. Hui. The victim handed over the money but later found out that his son was fine and the deception was reported to the Police.

Charge 4 (against D1 and D2)

5.Victim of charge 4 is 87 years old Madam Lam. She received a phone call at home from a man who falsely told her that her son was being held hostage because he was the guarantor of a loan for another person. The man said she had to pay $300,000 to save her son. A person pretending to be the victim’s son shouted for help over the phone. After negotiation, the victim was to pay $60,000 as the first instalment.

6.Madam Lam then left home to withdraw the money from her bank while leaving the phone connected. At around 12:30pm on the same day Madam Lam approached a social worker of a nearby community centre for help. The social worker accompanied her home and reported the matter to the Police.

7.Police officers arrived at Madam Lam’s home at around 1:30pm and took over the phone call with the man, who requested the money to be put into a plastic bag and left outside the door of the victim’s home.

8.At around 4:30pm, Madam Lam placed a plastic bag with fake money inside outside her door. At around the same time, Police officers noticed D1 and D2 chatting in a staircase near Madam Lam’s unit. D1 pointed towards the unit and D2 went to pick up the plastic bag.

9.Both the defendants were intercepted and arrested, and Madam Lam’s son was confirmed to not having been held hostage at all.

Cautioned statements

D1

Charge 4 only

10.Under caution, D1 claimed that on 13^th April 2014, a man ‘Ah Ling’ told him to come to Hong Kong to collect some money. D1 was to deduct 10% of the money as his reward and then remit the balance to a bank account in mainland China. D1 claimed that ‘Ah Ling’ was part of an organization controlled by other people. D1 never thought about the nature of the money to be collected.

11.Subsequent to the agreement, D1 arrived in Hong Kong on 14^th April 2014 and was then instructed over the phone to go with D2 to the victim’s unit in charge 4 on the following day. When there, D1 instructed D2 to pick up the plastic bag.

D2

Charge 4

12.Under caution, D2 claimed that he and D1 arrived together in Hong Kong on 14^th April to collect money for a person called ‘Ah Ling’. D2 was aware of the illegal nature of the money to be collected and that he would be involved in money laundering in collecting the money. D2 was to receive $3,000 from Ah Ling for his effort upon his return to mainland China.

13.D2 went to the residential unit in charge 4 on 15^th April together with D1 to collect the money pursuant to instructions that D1 received from Ah Ling over the phone. Someone put a black plastic bag outside the unit and D2 picked it up as instructed by D1. D2 knew the bag had money inside.

Charge 3

14.At around 12pm on 15^th April, D2 collected $28,000 from the charge 3 victim Mr. Hui near Metropark Hotel in Kowloon as instructed by Ah Ling over the phone. D2 claimed that he was not sure about the nature of the money collected. D2 then remitted the money to a mainland China bank account in the name of ‘Ng Wai Ling’ through a Hong Kong remittance agent at around 1:30pm. D2 was promised 6% of the money (about $1,000) as his reward upon his return to mainland China. The relevant remittance slip bearing D2’s name, two-way permit number and mobile phone number was found on D2. D2 admitted to filling out the slip to complete the remittance.

15.D2 intended to leave Hong Kong on the same day.

16.Movement records show that D1 and D2 entered Hong Kong from mainland China through the same check point at around 10:21am on 14^th April 2014.

Previous convictions

17.Both defendants are of previously clear record in Hong Kong.

D1’s Mitigation

18.D1 is 33 years old, married and from Jiang Men in mainland China, where he resides with his family. He is a salesman earning around RMB$2,000 per month. D1’s parents are retired while his wife stays home to look after their newborn son. D1 is the sole breadwinner of the family. Since D1’s detention in Hong Kong, his family has been living on their limited savings.

19.Mr. Sher for D1 confirmed in his written mitigation the circumstances surrounding D1’s commission of charge 4 as set out in the summary of facts.

D2’s mitigation

20.D2 was 21 years and 2 months’ old at the time of his commission of the present 2 offences. He came from Guang Zhou where his parents and elder sister are currently staying. D2 left school after he finished form 3 when he was about 15 years old. He migrated to Fo Shan and worked in a factory there. He later became an apprentice at a hair salon and spent 4 years in the industry, eventually promoted to be a barber. D2 was however unemployed when he came to Hong Kong.

21.According to Ms. Chong, D2 did not have any money when he was approached by the above mentioned ‘Ah Ling’ who asked him to come to Hong Kong. Being penniless and naïve, D2 thought he could also take the opportunity to come to Hong Kong for some sightseeing and so he agreed to the proposal.

22.D2 did not know anything about the telephone deception that caused the money to be handed over, although he did have reasonable grounds to believe that the money came from some illegal enterprise.

23.It is Ms. Chong’s submission that since the charges the defendant pleaded guilty to are money laundering and conspiracy for money laundering, the main consideration when sentencing should be the amount of money being laundered, together with other considerations such as the nature of the predicate offence and the defendant’s role in and knowledge of the offence.

24.Ms. Chong pointed out that this is not a bad case of money laundering and should be at the lower end of the spectrum of criminality. D2 did not take part in the underlying offence of telephone deception, nor did he have knowledge that the money was in fact from telephone deceptions practiced on senior citizens.

25.In relation to charge 3, the money laundered was $30,000, which is a very small amount as far as money laundering cases in the District Court go and the starting point should be no higher than 24 months’ imprisonment, even taking into consideration aggravating factors such as the cross border element.

26.In relation to charge 4, there was no actual loss of money since the defendant was apprehended right after he picked up the plastic bag of fake money. The actual agreement in the conspiracy that is disclosed in the summary of facts would be that D2 had agreed with ‘Ah Ling’ to come to Hong Kong to collect some money. It does not show whether D2 knew the amount he had agreed to collect at the time of the agreement in mainland China. That being the case, the court should only base its sentencing on $60,000, the supposed payment as the first instalment. That being the case, although it is double the amount in charge 3, it is still a relatively small amount in money laundering cases in the District Court.

Enhancement of sentence

27.The prosecution applied to enhance the sentences of D1 and D2 pursuant to s.27, in particular s.27(2)(c) and (d) of the Organized and Serious Crimes Ordinance, Cap.455 (“OSCO”).

28.It is the prosecution’s case that based on the information as set out in the statement of Detective Chief Inspector Lam Cheuk Ho (exhibit P-1), the offences of Dealing with property known or believed to represent proceeds of an indictable offence and the offence of conspiring to commit the same offence is prevalent in Hong Kong, and the nature and extent of the harm caused to the community by recent occurrences of the offences warrant an enhancement of the sentence to be imposed on the defendants.

29.The enhancement application is opposed by the defendants.

30.It is not disputed that charge 3 and charge 4 are specified offences within the meaning of s.27 of OSCO[1].

31.It is Ms. Chong’s submission that of the statistics put forward by the prosecution through DCIP Lam’s statement, the court is only entitled to take into consideration those cases where the accused were being charged with and convicted of money laundering offences, and not the figures for other reported cases of telephone deception that did not result in the prosecution of and conviction on money laundering charges. On that basis, Ms. Chong pointed out that the figures for such “Detected Cases” (as adopted in DCIP Lam’s statement at paragraph 22) are insufficient to support the prosecution’s claim of prevalence.

32.Ms. Chong referred to 3 cases.

33.In HKSAR v Mo Liuchun, DCCC 770/2011, the defendant pleaded guilty to one charge of conspiracy to launder money. There as in our present charge 3, the defendant went to collect money from the victim after the victim had been led to believe that her son was kidnapped by way of a telephone deception and had agreed to pay a ransom of $30,000. Also similar to our present defendants, the collector also came to Hong Kong for the specific purpose of collecting the money after someone had promised her RMB$8,000. There was no evidence to suggest she knew the nature of the predicate offence.

34.The prosecution sought an enhancement of sentence on the basis of prevalence and harm to society under s.27(2)(c) and (d) of OSCO.

35.In sentencing, the learned District Judge Pang (as she then was) first of all finds that the guideline sentence of 4 years’ imprisonment for telephone deception cases did not apply since the accused was not charged with any deception or fraud offences, and there was no evidence to prove that the accused was a party to the telephone deception.

36.The learned judge that referred to the case of HKSAR v Hou Shun Hsiung, CACC 472/2009 where the Court of Appeal set out some relevant factors to be considered when sentencing in money laundering cases. Having taken into consideration those relevant factors, including the $30,000 involved, the fact that the accused did not actually receive the promised reward, the fact that the accused was recruited in mainland China to come to Hong Kong to commit the offence and the fact that the accused was aware that she was acting with others when committing the offence, the learned judge adopted a starting point of 2 years’ imprisonment.

37.In relation to the prosecution’s application for enhancement of sentence, the learned judge found that the statistics produced by the prosecution did not deal with the prevalence of the specified offence of money laundering, nor did they include the percentage of telephone deception cases being prosecuted by way of money laundering offences and whether the accused in those cases were aware of or party to the deception.

38.The learned judge then proceeded to find that since the specified offence was conspiracy to launder money, the prevalence that the prosecution had to prove was the prevalence of that particular offence and not that of telephone deception. The learned judge refused the prosecution’s application to enhance as a result.

39.In another District Court case of HKSAR v Zhao Liansheng, DCCC 454/2013, the facts are again almost on all four with our present case. There the 81 year old victim received a call from a man claiming to be her son saying that he was in trouble. A demand of $30,000 was made. The victim went to the bank to withdraw the money but the bank teller sensed something was wrong and the matter was reported to the Police who were able to confirm that her son was actually safe and was not the person who made the earlier phone call seeking help. The Police then took over and arranged with the caller to hand over the money later on. The defendant was arrested when he showed up to take the money.  The learned District Judge Dufton took into account the young age and clear record of the defendant and the fact that there was no evidence to prove that the defendant was party to the telephone deception or that he knew the source of the money.

40.The learned judge observed that money laundering is a serious offence for which deterrent sentences are required, but stressed that the defendant was being sentenced for the money laundering charge and not the underlying telephone deception.

41.He then referred to the case of HKSAR v Wu Jianbing where the applicant came to Hong Kong from mainland China to collect money on four occasions over four days, with the money collected ranging between $20,000 to $200,000, resulting in four charges of money laundering. The Court of Appeal, having taken into account that there was no evidence to show that the applicant participated directly in the telephone deceptions found that the proper starting point after trial was that of 3 years’ imprisonment on each charge.

42.HH Judge Dufton then proceeded to sentence the defendant in his case, taking into account that the amount to be collected was $30,000, that the defendant’s role was limited to the collection of the money, that it was a single occasion and that he had a clear record, adopted a starting point of 2 years’ imprisonment.

43.The learned judge then dealt with the prosecution’s application for enhancement based on an earlier statement of DCIP Lam dated 14^th June 2013. The case of HKSAR v Mo Liuchun, supra, was also relied on by the defendant there in objection to the application on the ground that the prosecution failed to show prevalence of money laundering as opposed to telephone deception cases. 

44.The learned judge did not deal with Mo Liuchun but moved on to refer to the statement of DCIP Lam, whose evidence showed that there was a significant increase in ‘Drop-off’ telephone deception cases and the consequential loss in such cases. The learned judge also observed that whilst the focus of the information was on telephone deceptions, the conclusion there of DCIP Lam was clear in that the modus operandi of ‘Drop-off’ in telephone deception cases and the associated money laundering activity by culprits tasked to retrieve the money is a prevalent crime in Hong Kong with obvious concern to the community.

45.The learned judge also pointed out that ‘whilst the emphasis of sentencing is on the facts of the money laundering charge and not on the facts of the underlying offence, this does not mean the facts of the underlying offence are to be totally ignored’. An enhancement of just less than the one-third enhancement approved in HKSAR v Wu Jianbing was applied and the defendant was sentenced to 1 years and 9 months’ imprisonment.

46.Ms. Chong also referred to the case of HKSAR v Lam Wai Yip, Hugo, CACC 64 of 2005. This is not a case of telephone deception nor money laundering. The applicant was convicted of a charge of having custody or control of counterfeit currency notes. There the prosecution’s application to enhance was granted and the Court of Appeal found that the judge was correct to take into consideration the trend of the increase of volume of counterfeit notes and not just the number of prosecutions.

47.Since HKSAR v Wu Jianbing, CACC 32 of 2011 was referred to in both the District Court cases cited to me, I think it is helpful to set out the facts in that case here.

48.In Wu Jianbing, the applicant came to Hong Kong from mainland China to collect money from victims of telephone deception cases. He pleaded guilty to 2 charges of money laundering and 2 charges of conspiring to launder money. The application to enhance the sentence was not opposed in the District Court. The Court of Appeal allowed the appeal on sentence but confirmed the enhancement.

49.While it is true that there was no detailed argument on the enhancement, given that the appeal was against sentence, and an enhancement under OSCO can only proceed upon the prosecution proving its case, the fact that the Court of Appeal considered an enhancement necessary in a case with facts so similar to ours must not be disregarded lightly.

What information to consider when deciding on prevalence

50.Unlike the statement relied upon by the prosecution in the case of Mo Liuchan, DCIP Lam’s statement in our present case does contain information specifically on the percentage of telephone deception cases being prosecuted by way of money laundering offences.

51.Looking at the statistics, it is unmistakable that there is an upward trend of telephone deception cases. The question that needs to be answered is whether those statistics can be taken into account when deciding on the prevalence of the ‘specified offence’.

52.For the following reasons, it is my finding that statistics for all the reported ‘Drop-off’ cases and not just the prosecuted ones should be taken into consideration.

53.Theoretically speaking, there is nothing to prevent the prosecution from including a charge of money laundering against the money collecting person in all telephone deception cases. It is only the offence of deception or fraud that would require the prosecution to prove knowledge of the deception on the defendant’s part. If the evidence supports a prima facie case of fraud or deception against the money collecting person, the same evidence would inevitably also support a prima facie case of money laundering or conspiracy to launder money against that same person.

54.In any event, since 2011, where arrests in relation to ‘Drop-off’ cases were made, the majority of the prosecutions was by way of money laundering (see paragraph 22 of DSIP Lam’s statement) and only a handful of arrested persons were charged with either conspiracy to defraud or attempted fraud. This is no doubt due to the difficulties that the prosecution would always face in trying to prove knowledge of the telephone deception against the money collector, and the relatively easier task of proving the money collector had reasonable grounds to believe the money they were collecting represented proceeds of an indictable offence.

55.Applying HKSAR v Lam Wai Yip, Hugo referred to above, I find that I am entitled to look at the trend of the increase in reported telephone deception cases with a ‘drop-off’ modus operandi over the years and not be restricted to the amount of cases where there had been prosecution and conviction.

56.I find that when considering the prevalence of a specified offence, the court must look into the facts behind the offence. An example in support of this proposition is where sentence was enhanced for theft of Buddhist pines and ‘incense trees’. The defendants would be charged with either theft or handling stolen goods for their theft of the protected species. If Ms. Chong’s logic is correct, that is to say only money laundering statistics can be considered, then instead of producing statistics for theft of the specific kind of trees, the prosecution would be referring the court to the trend of all theft or handling cases in Hong Kong. This cannot be the right approach. As suggested by the various cases of theft of Buddhist pines and ‘incense trees’, the court required specificity when considering prevalence.

57.In the case of HKSAR v Xie Jinbin, CACC 195 of 2010 where ‘incense trees’ were stolen and the prosecution applied to enhance the sentence, the Court of Appeal found that there were no prosecution statistics to support the suggestion that the offence of theft of ‘incense tree’ was prevalent. Yet the Court did refer to the existence of numerous reports of illegal exploitation of the species, and deduced that the exploitation was difficult to police. Furthermore, the Court then referred to cases where there is evidence to prove that theft of Buddhist pines is prevalent and pointed out the similarities in the nature of the offences, that is to say, mainlanders coming illegally or on two way permits to exploit Hong Kong’s local flora as well as the relative ease that the offence could be committed and found that all these considerations apply equally to illegal exploitation of ‘incense trees’.

58.I find that in the interest of justice, the court should adopt an expansive approach when dealing with the statistics in support of an enhancement application, rather than a restrictive and narrow one.

59.Applying this approach to the information as produced by the prosecution through DCIP Lam’s statement, I find that the prosecution has prove beyond reasonable doubt that the offence of money laundering committed by someone collecting money which represented proceeds from a telephone deception is prevalent and that the nature and extent of the harm done to the society warrant an enhancement of the sentence.

Charge 4

D1 and D2

60.The maximum sentence for money laundering is that of a fine of $5 million and imprisonment for 14 years.

61.Both the defendants are of previously clear record. There is no evidence to suggest they knew about or took part in the underlying telephone deception. The conspiracy to launder money was just for that particular occasion. The money conspired to be laundered was $60,000.

62.The defendants however committed the offence for a monetary reward. They came to Hong Kong as a Chinese citizen from mainland China just the day before they committed the offence, and for the specific purpose of committing the offence with another person.

63.I find that a proper starting point is that of 2 years’ imprisonment, discounted by one-third to 16 months’ imprisonment in recognition of the defendants’ guilty plea. I will enhance the sentence by slightly less than one-third, resulting in the sentence of 21 months’ imprisonment after the enhancement.

Charge 3

D2

64.The amount of money being laundered was $30,000. There is no evidence to suggest that D2 had knowledge of or took part in the underlying telephone deception. The money laundering was a one off occasion. The defendant did however agree to commit the offence for around $1,000. D2 is a Chinese citizen who travelled to Hong Kong for the specific purpose of committing the offence.

65.I find that a proper starting point is that of 2 years’ imprisonment, discounted by one-third to 16 months’ imprisonment in recognition of D2’s guilty plea. I will enhance the sentence by slightly less than one-third, resulting in the sentence of 21 months’ imprisonment after the enhancement.

Totality in relation to D2

66.The 2 charges involved 2 different victims. Although D2 committed both offences on the same day, the only connection between the two cases is D2 and those who planned the deception behind the scene.

67.Having stood back, I order that 9 months of charge 4 be served consecutively to D2’s sentence in charge 3, the balance be served concurrently, resulting in a total sentence of 30 months’ imprisonment for D2.