HKSAR v. Yang Sigai

[English Translation - 英譯本]
CACC 65/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 65 OF 2014

(ON APPEAL FROM DCCC 208 OF 2013)

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JUDGMENT

Hon D Pang J (giving the judgment of the Court):

1.This is an appeal against a judgment of the District Court. The Applicant was convicted after trial on three counts 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). He was sentenced by District Judge Eddie Yip (the trial judge) to 7 years’ imprisonment on each count, all to be served concurrently. The Applicant now applies for leave to appeal both conviction and sentence.

Salientfacts

The telephone scam in Canada

2.One Mr. Yip Cheung Lung, who had been residing in Canada for a long time, received phone calls at home and was deceived by the caller under various pretexts. It was only after he had on several occasions remitted, by way of telegraphic transfer, sums totalling the equivalent of over HK$9 million to various designated accounts that he became aware of the deception and made a report to the Canadian police.

3.Investigations by the authorities revealed that, of the said remittances, one sum of USD20,000 was remitted by way of telegraphic transfer to Account B (2 December 2010) and two other sums of HK$380,228.14 and HK$495,861.55 were remitted by way of telegraphic transfer to Account A (17 December 2010 and 21 December 2010). Subsequently, these sums were further transferred to other bank accounts including Account C. (“Account A”, “Account B” and “Account C” are defined below).

The Applicant and his companies

4.The Applicant is a PRC citizen residing on the Mainland. He was also issued a Macau permanent resident identity card in 2006. On 23 July 2010, he set up “Qi Long Da Limited” (“QLD”) in Hong Kong, the business of which was claimed to be trading. On 1 November 2010, he set up another company called “Ying Ge Sheng Company” (“YGS”) in Hong Kong, the business of which was also claimed to be trading. The Applicant was the sole owner of those two companies.

5.QLD had two accounts with Bank of China (Hong Kong) Limited, one being a HK dollar account (“Account A”) and the other a foreign currency account (“Account B”). Both accounts were opened on 3 August 2010. YGS had a HK dollar account with Chiyu Bank (“Account C”), which was opened on 16 December 2010. The Applicant was the sole signatory of all those three accounts.

6.Accounts A and B were closed after a mere seven months on 3 March 2011. Account C was closed after only two months on 16 February 2011.

7.The table below summarises the transactions involving those three accounts:

8.QLD and YGS had the same business address, that of an accounting firm in Hong Kong. Upon instructions of its business partner in Shenzhen, the firm set up those two companies and provided to the Applicant secretarial services which included answering phone calls, recording messages and receiving mail. Letters received (including letters from banks) would be sent by courier to the business partner in Shenzhen, who would then forward them to the Applicant. The firm had not provided QLD or YGS with any trading related services. On 14 September 2011, the accounting firm ceased to provide secretarial services to QLD and YGS.

9.On 27 June 2012, the Applicant took a flight from Fujian to Hong Kong and, upon arrival, was arrested by the police at the arrival hall for the offence of fraud. The Applicant remained silent under caution.

10.On 15 August 2012, the Inland Revenue Department received a tax return of individuals for 2011/2012 submitted by the Applicant. According to the tax return, the total income of QLD from 23 July 2010 to 31 December 2011 (including turnover and other incomes) was HK$13,500 (net profit HK$1,440), while the total income of YGS from 1 November 2010 to 31 December 2011 (including turnover and other incomes) was HK$7,100 (net profit HK$335).

11.Neither the Applicant himself nor his two companies (i.e. QLD and YGS) was a registered remittance agent and/or money changer.

12.The Applicant had no criminal conviction record.

Charges

13.Charge (1) alleged that during the said 7-month period the Applicant dealt with the sum of HK$54,653,131.03 deposited into Account A. Charge (2) alleged that during the said 7-month period the Applicant dealt with the sum of USD51,674,795.89 deposited into Account B. Charge (3) alleged that during the said 2-month period the Applicant dealt with the sum of HK$9,508,924.09 deposited into Account C. The prosecution alleged that the Applicant knew or had reasonable grounds to believe that the said three items of properties in whole or in part directly or indirectly represented any person’s proceeds of an indictable offence.

The defence case

14.The Defence did not dispute the matters set out in paragraphs 2 to 12 hereinabove.

15.In his Reasons for Verdict, the trial judge summarised the submissions of the defence as follows:

“2. The Defendant admitted operating an underground bank, but said that he had performed strict gatekeeping and that he neither knew nor had reasonable ground to believe that these monies were illicit. In other words, mens rea was denied. These monies came from 4 groups of clients: (1) clients of Shi Xubo; (2) clients of Yang Wendan; (3) clients of Ke Chengjie; (4) the Defendant’s own clients. The defence did not dispute that the Defendant was responsible for gatekeeping. In addition to testifying by himself, the Defendant also called Shi Xubo, on whom the Defendant had relied to perform gatekeeping in the Philippines, to give evidence.”

The Applicant’s testimony

16.To properly understand the Applicant’s case, it is necessary to review his testimony at trial. This Court would now excerpt his testimony, adopting the headings and sequence used by the trial judge.

The responsibility inoperating an underground bank

17.First, the Reasons for Verdict quoted the Applicant as saying:

“16. Understanding that some clients might launder money through underground banks, he had all along been performing gatekeeping seriously to prevent anyone from laundering money through him.”

The business with Shi Xubo

18.This was followed by matters regarding the so-called first group of clients who were introduced by Shi Xubo. The Reasons for Verdict had this to say[1]:

“17. Shi Xubo was the son-in-law of his cousin Cai Yousheng, who lived in the Philippines and had lots of businesses and properties there including large shopping malls. He heard that many Chinese tenants at the shopping malls were doing import trading with the Mainland or Hong Kong and had to make payments for goods to their suppliers on the Mainland or in Hong Kong. The settlement of these payments for goods involved Peso, USD, Renminbi and HKD because the Mainland and the Philippines imposed forex control which regulated inbound and outbound movements of Peso and Renminbi, and Peso had to be converted into USD before exiting the Philippines. The exchange and remittance business of Shi Xubo and the Defendant would provide services to clients, in which the clients paid on this side and the recipients received payments on the other side in foreign currency.

18. In 2005 Shi Xubo and he started to jointly operate an underground bank. His wife Huang Bifen was responsible for the daily operation on his side, while Shi Xubo’s side was handled by his wife Cai Pingru. The business operated every day except on holidays of the Philippines and of the USA. Cai Pingru would send transaction information of the day to Huang Bifen by fax. Such information included: the names and telephone numbers of the clients on the side of the Philippines, the amounts, the exchange rates, the names and telephone numbers of the clients on the Mainland/Hong Kong side.

19. When a client gave Shi Xubo transaction instructions in the Philippines, Shi Xubo would arrange settlement of currency with him. If the client intended to pay the Mainland recipient in Renminbi, he had to first pay Peso to Shi Xubo who would then pay the recipient in Renminbi. If the client intended to receive payment in Peso in the Philippines, he had to be first paid in HKD or Renminbi, and Shi Xubo would then pay this client in Peso.

20. He had never received on his side documents such as business registrations or goods receipts of the clients from Shi Xubo’s side. Sometimes certain information would also be missing from the transaction records, e.g. the names and telephone numbers of the clients, and he had not followed up or made enquiries with Shi Xubo. With regard to the depositors on the Mainland or in Hong Kong, he had collected copies of proofs of identity, but whatever documents received were destroyed after checking as it would not be convenient to keep documents of underground banking on the Mainland.

21. The underground bank operated by him was located in a kidswear factory in Shishi City. The factory had three storeys with a huge floor area and also a large sports ground. The boss of that factory gave him a room as his office. His wife worked there every day from 3 September 2010 to 28 February 2011 (except on rest days of the underground bank). He and his wife did not know English. Their daughter had a good command of English. She had a full-time job outside, and after work she could, if they so needed, explain the contents of English documents to them.”

The business with Yang Wendan

19.Next came the second group of clients who were introduced by Yang Wendan:

“22. Yang Wendan was his fellow villager and schoolmate and held a lot of job titles on the community level. In 2002, Yang Wendan claimed that he was running shipping and logistics businesses in Dubai where he also owned a shopping mall with lots of tenants and very good business. Many Chinese shop tenants there received payments in USD but had difficulty in remitting the USD to the Mainland. Yang Wendan suggested that he should operate an underground bank. The USD Yang Wendan passed over were money obtained from sales by his logistics clients in Dubai. Yang Wendan arranged to pay USD to him in Hong Kong, and he then paid Yang Wendan or Yang Wendan’s daughter in Renminbi on the Mainland.

23. Before the transactions commenced, Yang Wendan had presented a one-page document printed in English and Arabic and claimed that it was a copy of the business registration of his company in Dubai. The name of the company was “Experiance General Land Transport”. He was satisfied that this document proved that Yang Wendan was the person-in-charge or owner of that company.

24. He in fact did not understand this document in Arabic and English and did not know that the English content actually had nothing to do with Yang Wendan. He had also never heard that his daughter knew Arabic or could explain the content to him. He scanned that business registration document into a computer for record. The official date of printing as shown at the lower left corner of the photocopy now produced to the court was 1 May 2012. He assumed that his staff member had lost his original and, or fear of being scolded by him, obtained this copy from Yang Wendan after 1 May 2012. He had no other documents to produce to the court.

25. He carried out a total of 50 transactions with Yang Wendan between 2 September 2010 and 30 December 2010. The record of Account B of QLD showed that on each of those occasions Experiance General Land Transport had made remittance to Account B through the Standard Chartered Bank in New York, and the total amount so remitted was USD19,589,520.39, equivalent to over HK$152,000,000.

26. Yang Wendan would show him the goods receipts before every transaction to prove that there were genuine trading activities. He destroyed all transaction records every one to two months. He is unable to present these goods receipts now. Nor can he recall if their contents were in Chinese or English. In the course of preparing for this case, he requested Yang Wendan to give him the transaction records that he had for reference, but Yang Wendan refused.”

The business with Ke Chengjie

20.The trial judge then dealt with the third group of clients, who were said to have had actual business dealings with Ke Chengjie[2]:

“27. His younger brother-in-law Huang Binxin introduced Ke Chengjie to him in July or August 2010. Ke Chengjie claimed that his company (known as “Fujian Qicai Trading Company Limited”) engaged in business involving plastic daily utensils. Upon receiving payments for goods in HKD or USD, Ke Chengjie made payments in HKD or USD to Hong Kong, while the Defendant paid Ke Chengjie in Renminbi on the Mainland.

28. Ke Chengjie had a total of 35 transactions with him, all of which involved deposits and receipts in Ke Chengjie’s own name. For each deposit, the Defendant did not ask who the depositor was and why the deposit was not made by a company. He entrusted his assistant Xi Youlin with the coordination of making payments on the Mainland by several relatives into Ke Chengjie’s bank account.

29. Before he carried out the transactions with Ke Chengjie, Ke Chengjie had arranged for him a visit to Ke’s commercial and residential premises with showroom in Shishi City. A lady addressed Ke Chengjie as “Chief Ke”. Before he left, Ke Chengjie showed him at his request a copy of the business registration document of that company. He did not request Ke Chengjie to provide the original. He simply put that piece of paper into the car without studying its content (without noticing that the legal representative of that company was “Chen Guang”). When he was back at the office, he asked his staff to follow up and make a record.

30. It was only in the court that he clearly saw there was a problem with the content of that business registration, i.e. the two official annual inspection chops were both for 2010, but the handwritten annual inspection dates were “2008” and “2009”. The content of this document was self-contradictory. He also admitted that the printing was rather crude. He was of the view that the piece of paper produced to the court was not the one that Ke Chengjie had given him, and guessed that one of his staff had lost the previous one (452) and, seeing that he often lost temper and scolded people, dared not ask him to request Ke Chengjie for a replacement but on his own accord asked Ke Chengjie to fax him this one for filing. Nonetheless, the previous one was found unintentionally in the course of preparing the bundles to be used in the court.

31. Upon his arrest, he requested Ke Chengjie to provide the transaction records. Ke Chengjie therefore provided the statements issued by the Bank of China (Hong Kong) Limited to Ke Chengjie as well as the client deposit advice slips.”

The businesses with other clients

21.This was the fourth group of clients. They were not introduced by Shi, Yang or Ke and were referred to by the trial judge as the Applicant’s own clients. The paragraphs in the Reasons for Verdict which relate to this group of clients read as follows:

“Overview

32. All these clients were his relatives and friends or those who his relatives and friends claimed to be their relatives and friends. He had not seen their identification documents. He requested every client to provide the company business registration document, although he understood that the legal representative on the business registration and the boss were often not the same person. Sometimes he would even ask for copies of goods receipts, but he destroyed these documents not long after the transactions. He would investigate the background of new clients by asking relatives and friends as well as fellow traders. Old clients would take the initiative to provide him with copies of business registration documents with renewed annual inspection proof, but he would not take the initiative to ask old clients for them, and even if the old clients did not provide him with such copies, he would not follow it up. He has produced these copies of business registration documents to court. Below is an account of how he handled the transactions with individual clients.

Shishi City Xinrong Hardware and Leather Goods Company Limited

33. He handled a total of 75 transactions with Shishi City Xinrong Hardware and Leather Goods Company Limited. He received USD deposits from many places around the world, including Mexico, Guatemala, Tanzania, Germany, France, the UK, Dominica, South Africa, Dubai, India, Poland, the USA, Panama, the UAE and Egypt. He arranged to pay Wu Qinghan in Renminbi on the Mainland. He knew the elder brother of Wu Qinghan. They were schoolmates and neighbours. Wu Qinghan became his good friend. He engaged in the sale and exhibition of leather belt buckles; Wu Qinghan gave him a copy of the business registration document of that company. Although there were annual inspection chops for every year since the company’s establishment in 2006, its legal representative was Cai Huixuan and nowhere in the document was Wu Qinghan mentioned. He had not inquired about the said matters and the sources of the deposits.

Ding Jianzhao

34. He handled a total of 19 transactions with Ding Jianzhao. Upon receipt of HKD deposits from Ding Jianzhao, he would arrange for payments to be made to Ding Jianzhao either in Peso in the Philippines or in Renminbi on the Mainland. Ding Jianzhao was a good friend of his, and he had visited Ding Jianzhao’s shop at World-wide House shopping mall in Central. The business card Ding Jianzhao gave him had the names and contact information of several companies of Ding Jianzhao printed on it, but the card made no mention of Ding Jianzhao’s job title. He had not inquired about the said matters and the sources of the deposits.

Lu Enhua

35. He handled a total of 14 transactions with Lu Enhua. In nine of them, he received Renminbi from Lu Enhua on the Mainland and then arranged for payments in USD to be made in Hong Kong to two companies in Taiwan. In the remaining five transactions, he received HKD in Hong Kong and then arranged for payments in Renminbi to be made on the Mainland to a company in Korea and an unknown person in Korea. Lu Enhua gave him a copy of the business registration document of “Panorama Digital Technology Co., Ltd, Shenzhen”, which indicated that Lu Enhua was its legal representative. Since the company’s establishment in 2006, there was only the annual inspection chop for 2011 and the date of inspection was unclear, and there were no annual inspection chops for the other years. He had not inquired about the said matters and the sources of the deposits.

Foreign Economic and Trade Developing Corporation Qingliu Fujian

36. He handled a total of 23 transactions with Foreign Economic and Trade Developing Corporation Qingliu Fujian. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. The copy of the business registration document of this company showed that since its establishment in 1993, there were only four very blurry marks which looked like annual inspection chops, either bearing no date or bearing a date which was illegible. He had not inquired about the said matters and the sources of the deposits.

Hsin Ten Enterprise Ltd.

37. He handled a total of six transactions with Hsin Ten Enterprise Ltd., which was a Hong Kong company. Upon receipt of HKD from this company in Hong Kong, he arranged for payments in Renminbi to be made to this company on the Mainland. He received a copy of the business registration document of this company, which showed that the registration was valid from 21 May 2012 to 20 May 2013, which was subsequent to the present case. He had also not inquired about the sources of the deposits.

Huang Chengjia

38. He handled a total of five transactions with Huang Chengjia. Three Hong Kong persons and one Macau person unknown to him respectively paid him in HKD, and he then arranged to pay Huang Chengjia in Renminbi on the Mainland. Huang Chengjia was his male cousin and lived next to his villa. He knew his character, and the two of them would go out and dine together on weekends; he only heard Huang Chengjia say that these deposits were refunds for his unsuccessful mining business in the Philippines; he felt too embarrassed to ask Huang Chengjia who these four persons (i.e. three from Hong Kong and one from Macau) were; he only produced to the court a one-page document, i.e. a copy of the business registration document of “Garnon Company Limited” as proof of its actual trading. The content showed no connection between Huang Chengjia and this company. He heard that Huang Chengjia had already emigrated to Hong Kong by way of investment in 2010 or 2011. He believed that Huang Chengjia in fact did not have to transfer money to the Mainland through him. He had not seriously verified the said matters and the sources of the deposits.

China Light Industrial Corporation for Foreign Economic and Technical Co-operation (CLETC) Fujian Branch

39. He handled a total of five transactions with CLETC Fujian Branch. Upon receipt of Renminbi on the Mainland from CLETC, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. The client was Xu Xingwang. They came to know each other because the factory of which Xu Xingwang was the factory director sold goods to the garment business which the Defendant initially operated. Xu Xingwang also lent money to the Defendant to help him get married. Xu Xingwang and he were as close as brothers for 30 years. Xu Xingwang had donated a lot of money and claimed to be a shareholder of CLETC. The copy of the business registration document of this company made no mention of this Xu Xingwang at all. He did not know what “ownership by all the people” in the section “economic nature” meant, and the section “mode of operation” was also blank. He had not inquired about the said matters and the sources of the deposits.

Fuzhou Fu’an Leather Clothes Co., Ltd.

40. He handled one transaction with Fuzhou Fu’an Leather Clothes Co., Ltd. Upon receipt of Renminbi from this company on the Mainland, he arranged for payment in USD to be made in Hong Kong to this company on the Mainland. The copy of the business registration document of this company showed that it was established in 1994. The date of issue of this document was 15 February 2011, but the document was pre-affixed with a chop for annual inspection which was to be conducted during the period from 1 March to 30 June 2011; this document did not have the annual inspection chops for 1994 to 2008 and 2010; it only bore a very blurry annual inspection chop which seemed to be for 2009. He had not inquired about the said matters and the sources of the deposits.

Fuzhou Kaifeng Import and Export Trading Company Limited

41. He handled a total of eight transactions with Fuzhou Kaifeng Import and Export Trading Company Limited. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. The copy of the business registration document of this company was very blurry with the text misaligned, and the date of issue, the legal representative and the annual inspection chops on the document could not be seen clearly; the company was established on 23 July 2010, but there was an annual inspection chop for 2010, which suggested that the company had rushed to participate in the annual inspection conducted during 1 March to 30 June 2010 even before its establishment; Xu Xingwang claimed to be the boss of this company, but nowhere in the document was mention made of this Xu Xingwang. He had not inquired about the said matters and the sources of the deposits.

Fuzhou Lianmeng Import and Export Company Limited

42. He handled a total of two transactions with Fuzhou Lianmeng Import and Export Company Limited. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. Xu Xingwang claimed that he was a friend of a friend of the boss of this company. The copy of the business registration document of this company, which was established in 2006, showed only an undated annual inspection chop for 2010 and another undated and very blurry chop which seemed to be the annual inspection chop for 2011. The date of issue of the document was 2011. Not only were the lines and positions of the day and month misaligned, but also this document could “return to the past” and display the annual inspection chop for 2010 notwithstanding it was issued only in 2011. He had not inquired about the said matters and the sources of the deposits.

Fujian Haiyi Import and Export Trading Company Limited

43. He handled a total of three transactions with Fujian Haiyi Import and Export Trading Company Limited. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made Hong Kong to this company on the Mainland. The copy of the business registration document of this company showed that it was established in 2010. The document bore annual inspection chops for 2010 and 2011, although both were undated. The date of issue of the document was 2011. Not only were the lines of the day and year misaligned and the month not easily decipherable, but also this document could “return to the past” and display the annual inspection chop for 2010 notwithstanding it was issued only in 2011. He had not inquired about the said matters and the sources of the deposits.

Fujian Chengfa Import and Export Company Limited

44. He handled a total of two transactions with Fujian Chengfa Import and Export Company Limited. Upon receipt of the deposit, he bought Renminbi from another underground bank (operated by one Shi Xuanxuan) and then paid USD to this company on the Mainland per the instruction of Shi Xuanxuan. He did not say from where the deposit came; the copy of the business registration document of this company showed that two annual inspection chops for 2008 were issued on a single date, namely 18 June 2009. He had not inquired about the said matters and the sources of the deposits.

Worldion Enterprises Limited

45. He handled a total of two transactions with Worldion Enterprises Limited, which was a Hong Kong company. Upon receipt of Renminbi from this company on the Mainland, he arranged to pay USD to this company in Hong Kong. He forgot who the contact person was; the copy of the business registration document of this company showed that the registration was valid from 6 May 2007 to 5 May 2008, and the company ceased to exist long before 17 November 2010 when both transactions were carried out. He had not inquired about the said matters and the sources of the deposits.

Fujian Rui Feng Imp & Exp Co., Ltd.

46. He handled a total of 20 transactions with Fujian Rui Feng Imp & Exp Co., Ltd. Upon receipt of Renminbi on the Mainland from this company, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. Madam Huang Pengpeng, the boss of the shop opposite to his garment shop, claimed to be an investor of this company. She sold garments in Shishi City and had a large chain store. They had known each other for 20 to 30 years; to ask her for proof of identity should pose no problem and would not offend her, but he never did so; the entire copy of the business registration document was very blurry. The legal representative seemed not to be Huang Pengpeng. Strokes had even been added to original characters by way of handwriting. He had not inquired about the said matters and the sources of the deposits.

Fujian Xiexing Industrial Company Limited

47. He handled a total of two transactions with Fujian Xiexing Industrial Company Limited. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. The copy of the business registration document of this company showed that it was established on 10 January 2008, but there was only the annual inspection chop for 2011. He had not inquired about the said matter and the sources of the deposits.

Fujian Jinjiang Huamin Import and Export Co., Ltd

48. He handled a total of eight transactions with Fujian Jinjiang Huamin Import and Export Co., Ltd. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. This company was introduced to him by Huang Pengpeng. He did not know its legal representative. The copy of the business registration document showed that it was established on 10 March 2004, but there were only the undated annual inspection chops for 2009 to 2011; the date of issue of the document was 8 September 2010, but it could “return to the past” and display the annual inspection chop for 2009. He had not inquired about the said matters and the sources of the deposits.

Fujian Sugar, Wines, Non-staple Foodstuff General Co.

49. He handled a total of five transactions with Fujian Sugar, Wines, Non-staple Foodstuff General Co. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. This company was set up by the sworn brother (i.e. former schoolmate and good friend) of Lin Weicong, the husband of Huang Pengpeng. He has forgotten this person’s name. He, his wife, Huang Pengpeng and Lin Weicong had met this person in his office at the business department in Qingyang, Jinjiang. No production or goods were seen there, and the address was also different from that stated in the copy of the business registration document. The entire copy of the business registration document was very blurry, and strokes had even been added to the original characters by way of handwriting; the company was established in 1986, but there was only the annual inspection chop for 2010. He had not inquired about the said matters and the sources of the deposits.

Fujian Guanheng Technology and Development Company Limited

50. He handled a total of three transactions with Fujian Guanheng Technology and Development Company Limited. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. The person-in-charge of this company was introduced by Huang Pengpeng. He has forgotten this person’s name. He had never visited this company and could not recall what business this company did. The copy of the business registration document of this company showed that it was established on 21 August 1995, but there was only an undated annual inspection chop for 2007. He had not inquired about the said matters and the sources of the deposits.

Quanzhou Zhongda Development Co., Ltd.

51. He handled a total of two transactions with Quanzhou Zhongda Development Co., Ltd. Upon receipt of Renminbi from this company on the Mainland, he arranged for payments in USD to be made in Hong Kong to this company on the Mainland. The copy of the business registration document of this company showed that it was established on 10 March 2003, but there were only the annual inspection chops for 2009 to 2012; the date of issue of the document was 12 (the figure looked like “12”) April 2009, but there was a chop for an annual inspection carried out on 24 March 2009. He had not inquired about the said matters. Nor had he seriously verified the identity of the client and the sources of the deposits.

Xiamen Justsun Foreign Trade Co., Ltd.

52. He handled one transaction with Xiamen Justsun Foreign Trade Co., Ltd. Upon receipt of Renminbi from this company on the Mainland, he arranged for payment in USD to be made in Hong Kong to this company on the Mainland. This company was introduced by Huang Pengpeng. He did not know and had never met the boss. He has forgotten who he/she was. Cai Lianghou, his best schoolmate in junior secondary school and high school, had visited this company on his behalf. The copy of the business registration document of this company showed that it was established on 16 July 2002, but there were only two annual inspection chops with the year, month, day illegible; the two lines for the “date of establishment” and the “business period” were obviously misaligned, so that the date of establishment read “16 July 2002 to 15 July 2027” while the business period was blank; the date of issue of the document was 1 February 2012, but this transaction was carried out on 4 January 2011, at which time he could not possibly have obtained this document. He had not inquired about the said matters and the sources of the deposit.

Jinjiang Huangsheng Hardware Products Company Limited

53. He handled one transaction with Jinjiang Huangsheng Hardware Products Company Limited. Upon receipt of USD in Hong Kong, he arranged for payment in Renminbi to be made on the Mainland to a company in Taiwan. This company was opened by Ke Liangzhen, the younger sister of his mother-in-law, and its legal representative was her husband. This company traded in hardware decorations and was located in a rural area. It had mould-making machines in place and employed workers. The format of the copy of the business registration document of this company was obviously different from the other copies of business registration documents mentioned above. The text contained only a few dozen words. This company was established on 20 April 2007; the document did not have a section on annual inspection; the address was “Xintangtang City, Jinjiang City”, and two “cities” and two “tangs” looked funny and also inaccurate; the “scope of business” was right in the middle of the document and was very brief with only one line of text, i.e. “production of shoe buckles (if the above scope of business involves any state provisions regarding special items and monopoly, such provisions shall be followed)” (the italics for “if” was added by me for emphasis). The meaning of this sentence was obviously incomplete, but there were no other text after the sentence. The document did not appear to have been finalised. He had not inquired about the said matters and the sources of the deposit.”

Tax return submitted by the Applicant

22.Finally, the trial judge repeated the Applicant’s explanation on the issues regarding the profits obtained and the filing of the tax return:

“54. His underground bank dealt with monies equivalent to over HK$400,000,000. On the basis that he could earn HK$5 for every HK$10,000, for a sum exceedingHK$400,000,000 he should have earned more than HK$200,000.

55. To earn money, his underground bank had to complete transactions on the Mainland. He thought it was not necessary to declare profits in Hong Kong. He handed to his accountant all the documents, which were destroyed by him not long afterwards. He had no idea how tax returns were filed and how accounting was done, and he took no issue with the fact that he might have to pay a bit of tax as a result of the figures declared on the tax return. The figures finally declared were calculated by the accountant whose professional judgment he trusted.”

The testimony of Shi Xubo

23.Shi Xubo was the only defence witness apart from the Applicant. He did not accept that he had operated an “underground bank”. He said that the Applicant and he had only operated an “exchange and remittance business”, which was an “agent or affiliate of licensed remitters”, and that they both “learned about the business as they did it”. He said that his clients were “all tenants doing legitimate businesses in his shopping malls”. The trial judge summarised the other parts of Shi Xubo’s testimony in the Reasons for Verdict as follows:

“14. His wife and the Defendant’s wife Huang Bifen were responsible for the daily operation. The transaction records, most of which were written by his wife, were faxed to the Defendant’s wife on a daily basis for the purpose of reconciliation with the Defendant[’s records]. This batch of documentary exhibits covered the period commencing on 23 August 2010 and ending on 21 February 2011. He had shown the Defendant these records before or during the transactions. He himself did not go through these records every day. However, before or during the exchange and remittance, he would give an account to the Defendant on the lawful sources of every deposit.

15. He would investigate the background of the clients by making official enquiries through someone at the chamber of commerce or his employee, i.e. General Manager Lin of a shopping mall. One of the tenants of his shopping malls was the official Filipino “Office of No-Conviction List” which had been there for as long as six years. General Manager Lin would contact the people at this office for investigation. He had to pay 20 Pesos upfront to gain access to this office. He would then make photocopies of passports he had taken from clients and fill out forms. The office would know if these persons had committed any crime on the Mainland and in the Philippines. The office could not investigate the sources of incoming remittances from the Mainland, but it could obtain information from the customs, with which in the office maintained close contact, about what goods these clients imported. Since the Philippines was a strange and very corrupt place, he was not worried that this office would contact the law enforcement agencies to investigate his exchange and remittance business.”

Other defence evidence

24.In the end, pursuant to Section 65B of the Criminal Procedure Ordinance, the defence adduced as evidence witness statements of seven persons who were involved in either making remittances to the accounts in question or receiving monies transferred from the accounts in question (Hong Zhaozhu, Huang Baizhao, Liu Guobin, Zhang Junli, Yang Lili, Yang Zhisheng, Yang Xingyou).

Verdict at trial

25.While accepting the Applicant’s claim that the operation was an exchange and remittance business, the trial judge considered that the Applicant had not tried his best to prevent the inflow of illicit money (the excerpts below are taken from the Reasons for Verdict).

How much did the Applicant know about the sources of the remittances?

26.For example, the trial judge expressed considerable reservations about the Applicant’s attitude towards Shi Xubo:

“57. There being no evidence that [the Applicant] had verified the personal integrity of Shi Xubo, he could not possibly have had an in-depth understanding of the personal integrity of Shi Xubo; there being no evidence that he had verified Shi Xubo’s knowledge and experience in performing gatekeeping for underground banks, he could not possibly have harboured any real expectation of Shi Xubo’s gatekeeping ability. I see no basis whatsoever in support of his claim that he verily believed Shi Xubo had the integrity or ability to perform gatekeeping. In my view, in collaborating with Shi Xubo, the Applicant did not require Shi Xubo to perform any gatekeeping.”

27.The trial judge even levelled thorough criticism against Shi Xubo’s own testimony:

“67. The way in which Shi Xubo performed gatekeeping could only tell that the clients had no criminal record, but it revealed nothing about the sources of the deposits.

68. If a deposit came from a company instead of under the personal name of a client, Shi Xubo would not be able to perform gatekeeping because he had not asked for the business registration record of the company in order to ascertain the connection between the client and the company.

69. He repeatedly emphasised in the court that what he and the Defendant operated was not an underground bank but was merely akin to an agent or affiliate of licensed remitters, and he objected to the business being labelled an “underground bank”. In my view, the gatekeeping which he claimed to have performed would unavoidably require frequent disclosure of this business of his to corrupt officials. I find that this gatekeeping approach was something he made up casually.

70. He said on the one hand that he did not look at these records every day, but said on the other hand that he would give an account to the Defendant of the legitimate source of every deposit before or during the remittance. This assertion, in my view, defies reason: how could he account to the Defendant for the source of the money on a day on which he had not looked at the records? I do not believe he had accounted to the Defendant for the legitimate sources of the deposits.”

28.Likewise, the trial judge did not think that the Applicant had performed gatekeeping for the remittances from Yang Wendan:

“58. He had a total of 50 transactions with Yang Wendan. Every remittance from Experiance General Land Transport to Account B of QLD was made through the Standard Chartered Bank in New York. The amounts totalled USD19,589,520.39. The defence submitted that as a result of forex control of the Mainland, the merchants in Dubai were unable to make direct payments to the factories on the Mainland, and that Yang Wendan’s remittances to Hong Kong through the USA were purely arrangements between remitting banks. In my view, these assumptions had no factual basis. He did not ask Yang Wendan why he proceeded in such a roundabout way instead of directly remitting the monies from Dubai to the Mainland; nor did he suggest that Yang Wendan could at least have remitted the sums from Dubai to Hong Kong, which would have helped save time and money. This indicates that he deliberately turned a blind eye.

59. I do not believe he had looked at goods receipts showing that the transactions with Yang Wendan were based on actual trading activities.”

29.The judge did not think that the Applicant had performed gatekeeping for the remittances from Ke Chengjie:

“60. He was invited by Ke Chengjie to visit his company in 2010. In the court he initially said that that company was located in Shishi City. Subsequently, when he was cross-examined as to why the address set out in the copy of the business licence produced to the court was in Quanzhou City, he said instead that he only visited the showroom in Quanzhou of that company. This is one of the doubts in his testimony. Second, he had not paid attention to what characters were on the signboard. After Ke Chengjie gave him the copy of the business licence, he simply left it in the car without taking a look at the content. He neither cared about nor verified the content, which defeated the purpose of his visit. Third, the copy of the business licence stated that “Chen Guang” was the legal representative, without making any mention of the relationship between the name “Ke Chengjie” and his company. Fourth, the Defendant’s own understanding was that the legal representative was not necessarily a shareholder, and so he said he believed Ke Chengjie’s claim that he was the majority shareholder and that Chen Guang was also a shareholder. However, I notice that the copy of the business licence contained the words “sole proprietorship by a natural person”. How then could Ke Chengjie and Chen Guang be shareholders at the same time? Fifth, the copy of the business licence specified that an annual inspection was conducted every year. In the section on annual inspection status, one of the official annual inspection chops showed 2010, and right below the chop was handwritten a date “2009.4.23”. Another official annual inspection chop also showed 2010, but right below the chop was handwritten another date “2008.5.6”.  Such information was obviously contradictory to each other, suggesting that the copy of the business licence was unreliable and had a dubious origin.

61. This inspection was intentionally arranged by Ke Chengjie; it was not the case that he suddenly dropped by to look for Ke Chengjie. Ke Chengjie had the chance to pre-arrange what that lady was to say. That he did not inquire of Ke Chengjie about these documentary irregularities suggests that he deliberately turned a blind eye.

62. He claimed that Ke Chengjie had submitted to him a copy of the business registration document before the transactions, and he guessed that his staff had lost the first one and then privately asked Ke Chengjie for a second one. I do not believe such testimony.

63. I do not believe he had at any stage firmly believed that the content of this document was reliable. In my view, his so-called visit to Ke Chengjie’s company and listening to Ke Chengjie’s description were all fabricated by him.

64. In the transactions entrusted by Ke Chengjie, the recipient of the sums was not Fujian Qicai Trading Company Limited to which the copy of the business registration document was related. The defence submitted that, as far as the Defendant understood it, on the Mainland it was common for corporate accounts and personal accounts to be used together interchangeably. I find that according to the Defendant, what he firmly believed was the Fujian Qicai Trading Company Limited which had been introduced by Ke Chengjie, and this company had nothing to do with any of these 35 transactions. He knew little about Ke Chengjie himself and had never looked at Ke Chengjie’s proof of identity, goods receipts or other documents. Nor had he asked why Ke Chengjie used a personal bank account for receiving the payments.”

30.Although the trial judge did not make an express finding regarding the fourth group of clients, it is clear from his description of this group of clients (see paragraph 21 hereinabove) that he considered that the sources of the remittances from this group were unknown.

31.The trial judge also considered that the seven witness statements (see paragraph 24 hereinabove) did not help the defence:

“72. The defence submitted the written statements of seven persons with additional documents. Five of them had received deposits from [QLD] (Accounts A and B), while the remaining two had made deposits into [QLD] and [YGS] (Account A or C). The additional documents appear to be capable of proving that the monies received or paid involved actual trading activities. In my view, there was no evidence that he had looked at or received these documents at the material times. Even if someone subsequently obtained these documents and produced them to the court, as he had not looked at or received them at the material times, they could not have affected the facts or circumstances as he knew or believed them at the material times.”

Determination of the facts

32.   By way of conclusion, the trial judge said:

“77. The Defendant understood that the deposits might come from illegal dealings and he had to perform gatekeeping and supervision to prevent clients from laundering money through him. The Defendant did not know much about his clients. In respect of Shi Xubo personally, Shi Xubo’s clients, Yang Wendan personally, Yang Wendan’s clients, Ke Chengjie personally and other clients, I am of the view that there was nobasis for him to believe that these people would not launder money through him.

…

80. Viewing the above testimonies as a whole, I find that the approach or attitude adopted by the Defendant throughout the various transactions was: he would mechanically ask the clients for documents (including copies of business registration documents or goods receipts of the companies) for record or updating, but would leave it to the clients to decide whether to submit and how many to submit. He would not seriously go through the contents of the documents, and would still proceed to transact with the clients who failed to provide any or any sufficient documents.” (bold type and italics added for emphasis)

Application of the law and conclusion

33.As regards the application of law, the trial judge briefly but correctly pointed out the mental element of the offence of money laundering (then applicable)[3]:

“78. According to the case of HKSAR v Pang Hung Fai (CACC 34/2012), the first question is: what were the facts and the objective factual circumstances known to the Defendant when he dealt with the property in question? The next question is: do the above facts and objective factual circumstances provide a common sense, right-thinking man with sufficient grounds to believe that the property in question in whole or in part represented the proceeds of an indictable offence?”

34.The trial judge analysed one by one “the facts and the objective factual circumstances known to [the Applicant] when he dealt with the properties involving [Shi Xubo[4], Yang Wendan[5], Ke Chengjie[6] and the other clients[7]]”, applying the first limb of the test laid down by the Court of Appeal (CA) in Pang Hung Fai.

35.Applying the second limb of the test laid down by the CA in Pang Hung Fai, the judge further found that:

· “The identities of and the sources of the deposits from [Shi Xubo’s]clientswere unknown. There were sufficient grounds for a common sense, right-thinking man to believe that Shi Xubo and Shi Xubo’s clients would launder money through [the Applicant]”[8].

· “The identity of and the sources of the deposits from [Yang Wendan’s company (Experience General Land Transport)]were unknown. There were sufficient grounds for a common sense, right-thinking man to believe that Yang Wendan would launder money through [the Applicant]”[9].

· “The identity of and the sources of the deposits from [Ke Chengjie]were unknown. There were sufficient grounds for a common sense, right-thinking man to believe that Ke Chengjie would launder money through [the Applicant]”[10].

· “The identities of and the sources of the deposits from [the other clients]were unknown. There were sufficient grounds for a common sense, right-thinking man to believe that they would launder money through [the Applicant]”[11].

36.Accordingly, the trial judge convicted the Applicant on all three counts.

The appeal against convictions

37.Three grounds of appeal against convictions have been advanced on behalf of the Applicant.

Ground (1)

38.Ground (1) complains that the analysis of the present case by the trial judge went against the Hong Kong Bill of Rights Ordinance.

Particulars in the Perfected Grounds of Appeal

39.The Perfected Grounds of Appeal filed on behalf of the Applicant divides this complaint into two.

40.The first one, hereinafter referred to as Complaint (A), states that the verdict of guilty, based on the Applicant’s failure to perform adequate gatekeeping in operating the underground bank, violated the presumption of innocence safeguarded by article 11(1) of the Bill of Rights (as abbreviated). This means that, on the trial judge’s analysis, the Applicant had to prove that he had performed adequate gatekeeping, failing which he would be convicted. Such reasoning, it is argued, was in

the same vein as section 30 of the Summary Offences Ordinance[12], but that provision had been held unconstitutional by the Privy Council in Attorney General v Lee Kwong Kut [1993] 2 HKCLR 186 on the ground that it reversed the criminal onus of proof.

41.The second complaint, hereinafter referred to as Complaint (B), states that everyone knows that underground banks exist, but operating an underground bank is not necessarily tantamount to money laundering. This view has even found support in the Court of Final Appeal (CFA) (HKSAR v Yan Suiling (2012) 15 HKCFAR 146). However, the trial judge equalled the two, so that the Applicant’s operation of an underground bank automatically constituted money laundering. This, it is argued, erroneously applied offences of different natures to acts of different natures, contrary to article 12(1) of the Bill of Rights which provides that “no one shall be held guilty of any criminal offence on account of any act which did not constitute a criminal offence at the time when it was committed”.

Elaborations in the written submissions

42.The contents of the written submissions made on behalf of the Applicant are more complicated than the Perfected Grounds of Appeal.

43.For example, Complaint (A) is portrayed as two major errors of law, as follows:

(1)  The CFA held in Pang Hung Fai that the subjective/objective two-limb test was wrong in that it would divert the attention of the fact-finding tribunal so that it would wrongly focus on the abstract concept of an ordinary reasonable person. By applying this erroneous test, the trial judge must have ignored the Applicant’s own perception. In other words, in violation of the presumption of innocence, the Applicant was convicted before it was established that the requisite mental element had been satisfied.

(2)  This (i.e. the second) alleged error of law is in line with what the Perfected Grounds of Appeal states. In other words, by requiring the Applicant to prove that he had operated an underground banking and performed adequate gatekeeping, the trial judge had reversed the criminal onus of proof.

44.Similarly, Complaint (B) has been developed into two major errors of law:

(1)  This (i.e. the first) alleged error of law is consistent with what the Perfected Grounds of Appeal states. In other words, erroneously equalling the two, the trial judge had wrongly applied the offence of money laundering to the act of operating an underground bank, thereby violating the principle that “no one shall be held guilty of any criminal offence on account of any act which did not constitute a criminal offence at the time when it was committed”. This means that operating an underground bank is not the same as money laundering and should not be dealt with according to the charge of money laundering. By way of reference, the Applicant also points out that merely lending one’s account to others for the purpose of depositing or withdrawing money does not by itself constitute the offence of money laundering (HKSAR v Salim Majed CACC 184/2013).

(2)  By taking the total amount of deposits paid into and accepted by each account in question as one offence, the prosecution had, it is argued, violated the rule against duplicity (Salim Majed, above). Furthermore, since there had been constant withdrawals, the relevant total amounts were merely abstract numbers which never represented the actual balances. The inevitable consequence of what the prosecution did was that the trial judge wrongly focused on the huge total amounts and was diverted from the Applicant’s actual perception of each occasion or item of remittance. In fact, except for part of the money obtained by deceiving Mr. Yip Cheung Lung in Canada, the prosecution was not able to prove that any of the remitted sums was not generated from legitimate overseas commercial and trading activities.

Ground (2)

45.Ground (2) complains that neither the prosecution evidence nor the conclusion drawn by the trial judge satisfied the requirements of section 25 of the Organized and Serious Crimes Ordinance, namely that it had to be proved with certainty that the Applicant knew or had reasonable grounds to believe that any of the remittances he dealt with represented proceeds of an act which would constitute an indictable offence under Hong Kong law.

Particulars

46.The Applicant accepts that the actus reus of money laundering is not dealing with the proceeds of an indictable offence, and it is not necessary for the Prosecution to prove that a certain item of property was the proceeds of an indictable offence. It only had to be proved that the Applicant had dealt with the property concerned[13]. What the Applicant emphasizes is that, in order to establish the mens rea for the offence of money laundering, the prosecution has to prove that the defendant knew or had reasonable grounds to believe that certain property represented proceeds of an indictable offence[14].

47.On this basis, the Applicant complains that the prosecution and the trial judge had not separated Yip Cheung Lung’s remittances from the other remittances, the reason being that the prosecution and the trial judge had both misinterpreted the words “any property in whole or in part… represents any person’s proceeds of an indictable offence”[15] under section 25(1) and thought that Yip Cheung Lung’s remittances would bring all the other remittances within the purview of the charges[16].

48.Instead, a property may be deemed “proceeds” only if it was generated from an indictable offence[17]. The CFA also pointed out in HKSAR v Li Kwok Cheung George (2014) 17 HKCFAR 319 that, in order to make out the charge, the property has to possess certain characteristics so that at law it constitutes proceeds of an indictable offence, since knowing or having reasonable grounds to believe that property was proceeds of an indictable offence is an essential mental element of the offence of money laundering[18]. In the present case, however, the prosecution simply could not prove that the remittances other than those from Yip Cheung Lung possessed any relevant characteristics. As a result, the trial judge was only able to describe these sums as “from unknown sources”. The trial judge further found the Applicant guilty, relying solely on the abstract concept of a reasonable person rather than the Applicant’s own actual perception.

49.Finally, the Applicant points out that under section 25(4), references to an indictable office “include a reference to conduct which would constitute an indictable offence if it had occurred in Hong Kong”[19]. The Applicant submits that this is significant as almost all of the sums involved in the present case were from outside Hong Kong, and therefore the prosecution bore the burden of proving that the Applicant knew or had reasonable grounds to believe that the foreign activities generating these sums were acts which would be regarded as indictable offences under Hong Kong law. If, in the understanding of the Applicant, these activities contravened the criminal law of another jurisdiction but not of Hong Kong (e.g. avoiding forex control) or also violated the criminal law of Hong Kong but not of such severity as to constitute indictable offences (e.g. gambling in a casino), then the court could not convict the Applicant. As regards how the said mens rea was to be proved, the Applicant submits that the prosecution would have to “prove the contents of such foreign acts” (quoting from the Applicant himself)[20].

Ground (3)

50.Ground (3) complains that the trial judge erred in his analysis of the defence evidence.

Particulars

51.The Applicant’s first criticism is levelled against the trial judge’s statement that “the Defendant understood that the deposits might come from illegal dealings and he had to perform gatekeeping and supervision…” (see paragraph 32 hereinabove, paragraph 77 of the Reasons for Verdict) The Applicant submits that, given the deposits might have come from illegal dealings, it was also possible for them not to have come from illegal dealings. In the relevant circumstances, therefore, the court could not be sure that the Applicant knew or had reasonable grounds to believe that the remittances were proceeds of indictable offences.

52.The Applicant further submits that if (and this is merely an assumption) he did have the burden of proving that he had performed adequate gatekeeping, it would still only be an evidential burden, not a more onerous burden of proof on a balance of probabilities. However, the trial judge took an ambiguous approach to this issue, leaving room for doubts and misgivings.

53.The Applicant submits that the correct way to put it should be that the Applicant bore no burden of proof at all. At the same time, the evidence adduced by the Applicant was indeed such as to render the trial judge unsure about his guilt.

Discussion

The burden of proof reversed?

54.In our view, this complaint is unfounded.

55.The operation of an underground bank was something put forward by the Applicant himself as a ground of defence. That an underground banking operation may be exploited for money laundering is not only common sense but was also a risk that the Applicant himself knew he had to bear. In order to reduce if not eliminate such risk, the Applicant and/or his business partner had to stay extremely alert to the sources of the funds and could not be negligent. This was also a fact that the Applicant knew. This being the case, how prudent was/were the Applicant and/or his business partner to the sources of the funds would naturally have a bearing on the probability of the underground bank being exploited for money laundering and on the extent to which the Applicant had reasonable grounds to believe that the underground bank would be exploited for money laundering. (The present case has never involved the issue of the Applicant knowing that he was laundering money.)

56.As paragraph 77 of the Reasons for Verdict (paragraph 32 hereinabove) clearly shows, the above is the approach taken by the trial judge in considering the issues. This approach was based on the objective fact that the more prudent one is, the lower the probability of one being exploited and vice versa. This has nothing to do with reversing the criminal onus of proof. Having assessed all the defence evidence, the trial judge held that the Applicant and/or his business partner had hardly performed any gatekeeping, and it was only a matter of general inference that an ordinary reasonable person would have sufficient grounds to believe that their underground bank was laundering money[21].

Operation of an underground bank was made equal to money laundering?

57.We do not think that the trial judge has done so.

58.The approach of the trial judge, as explained above, also serves to answer the Applicant’s complaint under this heading. It has to be added that the facts of Yan Suiling[22] were entirely different from those of the present case. In that case, the defendant was a customer (not operator) of an underground bank, and during the deposit and withdrawal process (depositing Renminbi on the Mainland, withdrawing HK currency in Hong Kong) a sum of illicit money was received. In its judgment, in accepting that underground banks existed, the CFA on the one hand had regard to the objective reality, and on the other hand had to explain why the version put forward by the defence might be true. While it is true that the CFA never said that operating underground banks equalled money laundering, the CFA had also not said that underground banks would not be exploited for money laundering.

Duplicity and relatedissues

59.Whether, and if so how, the rule against duplicity applies to the offence of money laundering, were issues dealt with by the CA in Salim Majed (paragraph 44(2) hereinabove). These issues are now the subject of a pending appeal to the CFA[23], and therefore no definite answers are available at this stage. Besides, according to the relevant decided cases (R v Thompson [1914] 2 KB 99 (at 104); R v Lin Wing Wo [1977] HKLR 306 (at 307); AG v Yeung Kwok Sang & Another [1989] 1 HKLR 256 (at 258)), a complaint based on duplicity should only be raised before plea; if it is raised only at the appeal, the defendant must show that the duplicity constituted embarrassment or prejudice to his defence at trial. A classic example is that a charge covers an excessively long time period and involves too many allegations, rendering it impossible for the defendant to put forward an alibi or adduce other relevant evidence as defence. However, none of these has occurred in the present case. At the trial, the Applicant was able to thoroughly explain the various sources of the sums, and in this respect he was assisted by five bundles (Exhibit D1). We do not think that his defence was affected by duplicity.

60.As to the other issue arising from duplicity, i.e. whether the huge total amounts involved would cause the trial judge’s attention to be diverted from the Applicant’s actual perception of each or every remittance, this concern is, in our view, wholly imaginary. The trial judge was experienced and also benefitted from the assistance of a team of defence lawyers led by a Senior Counsel. Coupled with the clarity of the prosecution and defence cases and the evidence adduced, the trial judge could not possibly have misplaced the focus. It is true that the trial judge did not expressly say he would consider the Applicant’s perception of each and every remittance, but common sense also tells us it was not possible for him to do so. Given that the numbers of deposits were as large as 134 for Account A, 289 for Account B and 20 for Account C (see the table in paragraph 7 hereinabove), the only thing the trial judge could have and indeed had done was start by looking at the extent of gatekeeping by the Applicant to see how much he could have known about the incoming remittances, and then make an inference as to whether he had reasonable grounds to believe that he was laundering money. This approach caused no unfairness to the Applicant at all: even if the prosecution split the charges into 443 counts (134 + 289 + 20), as the evidence remained unchanged, the trial judge could only have adjudged the case by taking the same approach.

Mental element for the offence of money laundering

61.There is no denying that the test applied by the trial judge was wrong.

62.According to the judgment of the CA in Pang Hung Fai, in determining whether a defendant had reasonable grounds to believe certain property constituted proceeds of an indictable offence, the first step for the court is to identify all the facts known to the defendant that related to the dealing with that property. Depending on the circumstances, these facts may extend beyond those relating only to the dealing with the property and may include facts known to the defendant about other persons or circumstances linked in some way to the dealing[24]. The second step is to make a determination by applying the standards of the common sense, right-thinking member of the community who is objective and uninfluenced by the personal beliefs, perceptions or prejudices of the defendant[25].

63.In its judgment in the same case, the CFA held that the correct test for section 25(1) of the Organized and Serious Crimes Ordinance should be the test put forward by the Appeal Committee in Seng Yuet Fong v HKSAR [1999] 2 HKC 833 at 836E-F, namely that it has to be proved that the defendant had grounds to believe that the property constituted proceeds of an indictable offence, and that those grounds must be reasonable, which means that any person looking at those grounds objectively would believe the property constituted proceeds of an indictable offence[26]. In other words, the defendant “ought to have known” what he dealt with was proceeds of an indictable offence. The CFA also corrected the CA by saying that the jury may also consider the defendant’s personal beliefs, perceptions and prejudices in deciding whether the defendant had reasonable grounds to believe that the property in question constituted proceeds of an indictable offence.

64.In very broad terms, the difference between the two lies in the question of whose perception is the most important. The answer from the CFA is that the defendant’s own perception is the most important. The CFA considered that one should not jump from the highly culpable mens rea of “knowing” that oneself was laundering money to the other end where a conviction can be entered simply on the basis of “reasonable grounds to believe” as recognised by an ordinary reasonable man.

65.The question is: even when the trial judge applied the wrong test, did it make a difference? It can be seen from the paragraphs under the headings “The Applicant’s testimony” and “The testimony of Shi Xubo” hereinabove that the trial judge knew in great detail the people and matters relating to the sources of the remittances. In fact, the trial judge wrote a paragraph each on “the facts and the objective factual circumstances known to [the Applicant] when he dealt with the properties involving [the four sources of clients]” (see paragraph 34 hereinabove).

66.First, on Shi Xubo:

“81. I find that what he knew are, in gist, as follows:

(1) As the operator of an underground bank, he was responsible for gatekeeping;

(2) He and Shi Xubo became acquainted because they were cousins-in-law, but he did not have an opportunity to test Shi Xubo’s personal integrity;

(3) Shi Xubo had no knowledge and experience in performing gatekeeping for an underground bank;

(4) He had no basis for firmly believing that Shi Xubo possessed the integrity or ability to perform gatekeeping;

(5) He did not require Shi Xubo to perform gatekeeping;

(6) Shi Xubo did not submit, nor did he require Shi Xubo to submit, any document obtained in the course of performing gatekeeping in the Philippines;

(7) He did not ascertain the identities of the clients and the sources of the deposits and failed to discharge his gatekeeping responsibility.”

67.Next, on Yang Wendan:

“83. I find that what he knew are, in gist, as follows:

(1) As the operator of an underground bank, he was responsible for gatekeeping;

(2) Although Yang Wendan was his fellow villager and schoolmate and held a lot of job titles on the community level, he did not have an opportunity to test the personal integrity of Yang Wendan;

(3) The one-page document submitted by Yang Wendan concerning Experiance General Land Transport did not show the connection between Yang Wendan and that company;

(4) There was no reason, and he did not ask Yang Wendan, why the deposits had to be made to Hong Kong via the USA, thereby wasting time and money for no reason;

(5) Yang Wendan did not provide him with goods receipts or other documents. He did not seriously ascertain the sources of the deposits and failed to discharge his gatekeeping responsibility.”

68.Then on Ke Chengjie:

“85. I find that what he knew are, in gist, as follows:

(1) As the operator of an underground bank, he was responsible for gatekeeping;

(2) He came to know Ke Chengjie upon his relative’s introduction and they did not know each other well. He did not have an opportunity to test the personal integrity of Ke Chengjie;

(3) The copy of the business registration document of Fujian Qicai Trading Company Limited submitted by Ke Chengjie did not show the connection between Ke Chengjie and that company;

(4) Ke Chengjie did not provide him with any proof of identity, goods receipts or other documents. He did not seriously ascertain the sources of the deposits and failed to discharge his gatekeeping responsibility.”

69.And then on the other clients:

“87. I find that what he knew are, in gist, as follows:

(1) As the operator of an underground bank, he was responsible for gatekeeping;

(2) These were his friends and relatives, or those who his friends and relatives claimed to be their friends and relatives. He did not have an opportunityto test these people’s personal integrity;

(3) The copies of the business registration documents submitted by these clients failed to show the connections between these companies and these people; instead, there were many instances of the contents and formats of these documents being clearly inconsistent with those of the official documents;

(4) These clients had not provided him with goods receipts or other documents. He did not seriously ascertain the identities of these clients and the sources of the deposits, and failed to discharge his gatekeeping responsibility.”

70.The above analysis explained the trial judge’s conclusion in paragraph 77 of the Reasons for Verdict. We now quote that paragraph again (bold type and italics added for emphasis):

“77. The Defendant understood that the deposits might come from illegal dealings and he had to perform gatekeeping and supervision to prevent clients from laundering money through him. The Defendant did not know much about his clients. In respect of Shi Xubo personally, Shi Xubo’s clients, Yang Wendan personally, Yang Wendan’s clients, Ke Chengjie personally and other clients, I am of the view that there was no basis for him to believe that these people would not launder money through him.”

This conclusion, which was an express finding of fact, tore apart the Applicant’s false claim that he knew there were risks and tried his best in gatekeeping and hence had no grounds to believe that he was dealing with illicit money. As paragraph 80 of the Reasons for Verdict pointed out, the Applicant’s conduct was at variance with his words. He simply did not have reasonable ground not to believe that he was dealing with illicit money:

“80. Viewing the above testimonies as a whole, I find that the approach or attitude adopted by the Defendant throughout the various transactions was: he would mechanically ask the clients for documents (including copies of business registration documents or goods receipts of the companies) for record or updating, but would leave it to the clients to decide whether to submit and how many to submit. He would not seriously go through the contents of the documents, and would still proceed to transact with the clients who failed to provide any or any sufficient documents.”

71.In a nutshell, the trial judge had sufficiently and thoroughly considered the Applicant’s personal perception. In applying the standards of the ordinary reasonable person in making his final determination (see paragraph 35 hereinabove), he was simply following the formula laid down by the CA. The essence of his reasoning was no different from the test laid down by the CFA. As a matter of fact, the Applicant has neither pointed out any specific omission by the trial judge nor complained that the trial judge has ignored any factors relevant to the Applicant’s personal beliefs, perceptions or even prejudices.

The remittances did not have the characteristics required by law?

72.There is no basis for the Applicant to complain that the trial judge thought that the remittances from Yip Cheung Lung would taint other remittances. Nor can we discern any such point having been made by the prosecution or any intent on the part of the prosecution to mislead the trial judge on this issue. As a matter of evidence, Mr. Yip’s remittances at most showed that illicit money had in fact infiltrated into the Applicant’s underground bank. Whether the Applicant had reasonable grounds to believe that he was dealing with illicit money (generally referred to all the sums being the subject matters of the charges) was another matter altogether. In his analysis, the judge had never relied on the fact that Mr. Yip had been deceived.

73.Section 2(6)(a) of the Organized and Serious Crimes Ordinance is an interpretative provision the only purpose of which is to explain the meaning of “proceeds” in the Ordinance[27]. As agreed by the Applicant, it did not require the prosecution to prove positively that the properties in questions were proceeds of indictable offences[28]. The case of Li Kwok Cheung George, which points out that properties have to possess characteristics of this type of proceeds[29], serves the same purpose as section 2(6)(a). It explained the judgment of the CFA in that case, i.e. dealing with money to be used in the commission of crime would not constitute the offence of money laundering because the money was still “clean money”. In short, neither section 2(6)(a) nor Li Kwok Cheung George assists the Applicant. The Applicant still fails to explain why it was wrong for the judge to say that the Applicant, by failing to perform adequate gatekeeping on his underground bank, had reasonable grounds to believe he was laundering money, given that one did not have to prove the inflow of illicit money and that the Applicant was aware of such a risk. It is a fact as well as common sense that someone engaging in commercial exchange and remittance activities would easily get in contact with illicit money.

74.Section 25(4) of the Organized and Serious Crimes Ordinance is also an interpretative provision. It points out that what constitutes an “indictable offence” is to be determined by reference to Hong Kong law[30]. This is very easy to understand. Law enforcement in Hong Kong should not be subject to the standards adopted by foreign countries/territories in defining violation of the law; this is a matter of principle. Nor should law enforcement in Hong Kong be subject to meaningless technical issues, e.g. where an act which generated property violates the law of one country/territory but not that of another, an absurd situation may arise in which the act may sometimes be prosecuted but sometimes not. These issues were analysed by the Court of First Instance (CFI) in HKSAR v Lok Kar Win and Others [2000] 1 HKLRD 733[31]. What we disagree is that the prosecution bore the burden of proving the “contents” of the foreign conduct generating the properties[32]; the Applicant’s submission that this was a necessary step in proving the Applicant had the requisite mens rea (i.e. he knew or had reasonable grounds to believe that those foreign activities would constitute indictable offences in Hong Kong) cannot be made out.

75.The same view has already been refuted in the earlier case of HKSAR v Yam Chim Kwan FAMC 57/2012. There the defendant, who was charged with money laundering, claimed that the money was from her investment on the Mainland. She had not filed tax returns merely because she worked as a sex worker and did not know that the relevant incomes and the returns on her Mainland investment were taxable. Having been refused leave to appeal by the CA, the defendant renewed her application for leave to appeal before the Appeal Committee of the CFA, putting forward a few points of law said to be of great and general importance, one of which was: the charge required that the defendant knew or had reasonable grounds to believe that the properties she was dealing with were proceeds of indictable offences, but if the prosecution evidence did not rule out the following two possibilities, i.e. the conduct generating the properties could have occurred outside Hong Kong, and such conduct might not amount to a criminal offence either there or in Hong Kong, then could a conviction for money laundering still stand without going against the provision of section 25(4)?[33]

76.The defendant submitted that the answer to the above question was “no”, saying that in the above circumstances, in order to establish that the charge satisfied the requirements of section 25(4), the prosecution had to prove that the conduct generating the properties constituted a specific indictable offence[34]. However, the Appeal Committee did not agree with that submission, taking the view that it would completely undermine section 25(1). They reasoned that, as money laundering activities were mostly hidden and might take place across jurisdictions, the legislative intent could not have been to require the prosecution to prove the relevant predicate offences before the offence of money laundering could be established[35].

77.We respectfully adopt the above judgment of the Appeal Committee although it was not made by the full court of the CFA after a formal hearing. Were the case otherwise, any defendant charged with money laundering might simply say “the money was earned abroad” and the prosecution case would collapse by reason of the difficulty in proving the predicate offences. Section 25(4) is of course not meant to be there for no reason. As mentioned in paragraph 74 hereinabove, the provision serves an obvious purpose. The reason why the provision refers only to “indictable offence” but not also “summary offence” should be the one pointed out by the CFI in Lok Kar Win, i.e. the Ordinance is only directed at proceeds of the more serious offences[36].

78.We appreciate that the facts of the present case are different from those of Yam Chim Kwan. That case involved mostly cash (HK$28,000,000) which was all found at the defendant’s residence and the safe deposit boxes at the bank, whereas the present case involves only remittances from abroad. However, at no stage at trial did the Applicant, who was represented by a Senior Counsel and who gave evidence as well as called witness, raise any query regarding section 25(4). On the contrary, he expressly said that he was aware of the risk of money laundering. Therefore, there is simply no evidential basis for the section 25(4) issue to be considered in the present case.

79.The mens rea of the offence of money laundering lies in knowing or having reasonable grounds to believe a property represented proceeds of an indictable offence. If there is evidence that the conduct generating the property known or believed by the defendant may not be conduct which will constitute an indictable offence in Hong Kong, then the court has a duty to consider whether such evidence is true or not and whether it raises a reasonable doubt in the case. In the absence of evidence in this regard, the court is not required to consider the section 25(4) issue. In any event, under no circumstances is the prosecution required to adduce evidence on any relevant predicate offence.

Did the trial judge errin hisanalysis of evidence?

80.This is the complaint made in ground of appeal (3). The complaint has no merit whatsoever and should not have been raised.

Conclusion

81.Although, in respect of the mens rea of the offence of money laundering, the trial judge applied a test which was subsequently proved to be wrong, this has not affected the soundness and safety of the conviction. Accordingly, we allow the Applicant’s application for leave to appeal the convictions but dismiss the appeal.

The appeal against sentence

The Applicant’s personal background

82.The trial judge quoted in the Reasons for Sentence:

“32. The Defendant is now 51 years of age with no criminal record. He has received education up to high school level. He lives in Shishi City, Fujian with his wife and his daughter, while his son is studying in Australia. His father passed away a few days ago because of illness. He is the only son of the family. By way of mitigation, the Defendant has submitted letters from a judge in Shishi City, the chairperson of an investment group in Xiamen, the chairperson of the board of a real estate company in the Philippines, Shishi City Clan Hong Kong Association, Hong Kong Federation of Fujian Associations and Hong Kong Fukuenese Association. In summary, the Defendant is committed to charitable services, friendly and caring.”

Mitigation

83.The trial judge further quoted:

“33. In mitigation, the defence submitted that the defence produced to the court the written statements of seven persons and additional documents which had been found from the unused bundle(s) of the prosecution[37], and of those seven persons, five had received deposits from [QLD] (Accounts A and B), while the remaining two had made deposits into [QLD] and [YGS] (Account A or C). The additional documents appear to be able to prove that these receipts or payments involved actual trading activities.

34. The profits made by the Defendant in the present case as a whole is HK$233,095.

35. The accounts he dealt with had received from Yip Cheung Lung three sums of deposit from Canada, which were equivalent to a total of HK$1,030,903.33, representing part of the money Yip Cheung Lung had been defrauded of in Canada.”

Sentencing in first instance

84.Finally, the trial judge passed judgment as follows:

“36. The defence submitted that there was no specific sentencing tariff for this type of offence. As the present case involves a huge amount of money, the Defendant’s culpability will not be low. However, as the Defendant has been convicted on the basis of “having reasons to believe”, and he did not know if there was any predicate offence underlying these monies, he should be less culpable than those who had knowledge. The Defence has not drawn my attention to any decided cases on sentencing.

37. In HKSAR v. Boma [2012] 2 HKLRD 33, 43, the Court of Appeal set out a number of sentencing considerations for money laundering cases. In addition to the amount of money laundered, the factors to be considered are as follows:

(1) nature of the predicate offence that generated the illicit money and the sentence therefor;

(2) whether the defendant knew what the predicate offence was;

(3) whether there was any international element;

(4) whether the offence of money laundering involved sophisticated steps, planning or deceptive practice;

(5) whether the case involved any criminal syndicate;

(6) the number of transactions and the length of time over which the offence was committed;

(7) whether the defendant continued to launder money even after he became aware of the nature of the predicate offence;

(8) the defendant’s role and reward.

38. The Defendant herein claimed that he had performed strict gatekeeping. Nevertheless, in order to make profits, he was prepared to accept whoever and whatever came along. His clients and deposits were from all over the world. This underground bank of his had made it all the more convenient for people to launder money. Huge sums of money had been dealt with, transactions had been extremely frequent, and the offences had spanned as long as 7 months. In my view, the present case is a very serious example of its type. A starting point of 7 years’ imprisonment should be adopted for each charge. In the absence of mitigating factors, this shall be his sentence for each charge. As all the charges arose from his underground banking business, the sentences are to be served concurrently.”

Grounds of a ppeal

85.The Applicant has put forward two grounds of appeal.

86.Ground (1) is twofold:

(1)   The prosecution could not possibly prove that the Applicant had reasonable grounds to believe that the remittances other than those from Yip Cheung Lung were proceeds of indictable offences. The court could only pass sentence on the basis of the sum remitted from Yip Cheung Lung (approximately HK$1,030,000). On this basis, a concurrent sentence of 7 years’ imprisonment on each count is manifestly excessive.

(2)   Even if the court does not accept the above submission and maintains that the sentence should be based on the total amount of remittances deposited into the three accounts in question (approximately HK$450,000,000), in Pang Hung Fai the CFA had raised the moral blameworthiness for the offence of money laundering from a lower level of the perception of an ordinary reasonable man to a higher level of the defendant’s personal perception, and in light of this, and as the remittance which the Applicant himself could indeed have believed to be illicit money amounted only to HK$1,030,000, the sentence of 7 years’ imprisonment is still manifestly excessive.

87.Ground (2) complains that even if ground (1) is not made out, the sentence of 7 years’ imprisonment is still manifestly excessive. The Applicant relies on the case of SJ v Lau Man Ying [2012] 4 HKLRD 435. The defendant in that case was a registered remittance agent who dealt with $530,000,000 over a period of 2 years and 8 months, during which she kept no record and made no enquiries about the sources of the funds. She was sentenced to 18 months’ imprisonment, suspended for 2 years. Upon application for review by the Secretary for Justice, the CA increased the sentence to 4 years’ imprisonment.

Discussion

88.In respect of ground (1), it serves no purpose to distinguish the remittances from Yip Cheung Lung from the other remittances. The Applicant simply did not care about the sources of the remittances, and the so-called gatekeeping was more nominal than real. To quote the trial judge, the Applicant was “prepared to accept whoever and whatever came along”. It was for this reason that the Applicant was found to have had reasonable grounds to believe the total amount involved was illicit money. It was correct to use the total amount involved as the basis for sentencing. In fact, the CA has repeatedly pointed out that even if only part of the properties the defendant dealt with were proved to be illicit money, it would not lessen the severity of the offence or lead to a lower sentence.

89.The case of Lau Man Ying cited in relation to ground (2) is distinguishable from the present case. The defendant in that case was a registered remittance agent and the criminal activities were not carried out underground, which means they could be detected more easily. Furthermore, in that case the period over which the offence was committed was much longer than that in the present case (longer by 2 years and one month), although the amount involved was comparable to the amount involved in the present case (only $80,000,000 on top of $450 million). All the same, the CA in that case considered that the appropriate starting point was “not less than 5 years”. As the defendant committed the offence out of loyalty to her husband and she simply followed his instructions, and as that case was an application by the Secretary for Justice for review, the CA fixed the final term of imprisonment at 4 years. Lau Man Ying does not support the contention that the sentence in the present case is manifestly excessive.

90.The sentence in the present case is not lenient but, whether on its own facts (see paragraph 84 hereinabove, paragraph 38 of the Reasons for Sentence) or on comparison with other decided cases, is not manifestly excessive. We also dismiss the Applicant’s application in respect of sentence.

Ms. Maggie Yang, Senior Assistant Director of Public Prosecutions, for the HKSAR, the Respondent

Mr. Robert Lee SC, Mr. David Iu and Ms. Sharon Chan, instructed by Messrs. Cheung & Liu, for the Applicant

Translated by the Judgment Translation Unit of the Judiciary and vetted by Mr. Edmund Cham, Solicitor.

[1] The defence submitted 5 bundles to the court at trial, collectively referred to as Exhibit D1, which contained documents said to have been provided by four different groups of clients. In the course of giving evidence, the Applicant had extensively referred to those documents for support.

[2] Three sums of money generated from the telephone scams in Canada and remitted by way of telegraphic transfer to Accounts A and B could be traced back to remittances pertaining to Ke Chengjie.

[3] The judgment in the present case was issued on 23 January 2014, when the test laid down by the Court of Appeal in Pang Hung Fai was still in effect. It was not until October 2014 that the final appeal in Pang Hung Fai was heard, and the Court of Final Appeal delivered its judgment on 10 November 2014.

[4] Paragraph 81 of the Reasons for Verdict.

[5] Paragraph 83 of the Reasons for Verdict.

[6] Paragraph 85 of the Reasons for Verdict.

[7] Paragraph 87 of the Reasons for Verdict.

[8] Paragraph 82 of the Reasons for Verdict.

[9] Paragraph 84 of the Reasons for Verdict.

[10] Paragraph 86 of the Reasons for Verdict.

[11] Paragraph 88 of the Reasons for Verdict.

[12] Section 30 of the Summary Offences Ordinance, which was repealed in 1995, provided that: “Any person who is brought before a magistrate charged with having in his possession or conveying in any manner anything which may be reasonably suspected of having been stolen or unlawfully obtained, and who does not give an account, to the satisfaction of the magistrate, how he came by the same, shall be liable to a fine of $1,000 or to imprisonment for 3 months,” (No Chinese version)

[13] Qei Hengky Wiryo v HKSAR (2007) 10 HKCFAR 98.

[14] The Applicant cites the following passage from the judgment of Appeal Committee in HKSAR v Wong Ping Shui & Another (2001) 4 HKCFAR 29: “… section 25(1) of Cap 455 does not define the actus reus as dealing with the proceeds of an indictable offence. It defines it as dealing with ‘property’ which the defendant knows or has reasonable grounds to believe represents the proceeds of an indictable offence. The quality of the goods being such proceeds is therefore an element in the mens rea but not the actus reus.” This passage was affirmed by the CFA in Qei Hengky Wiryo (see note 13 above).

[15] The full text of Section 25(1): “… a person commits an offence if, knowing or having reasonable grounds to believe that any property in whole or in part directly or indirectly represents any person’s proceeds of an indictable offence, he deals with that property.”

[16] The Applicant has made an analogy, namely mixing one ml of alcohol with 1000 ml of water and then thinking that there is 1001 ml of alcohol in the bucket.

[17] Section 2(6)(a) of the Organized and Serious Crimes Ordinance provides that: “a person’s proceeds of an offence are - (i) any payments or other rewards received by him at any time … in connection with the commission of that offence; (ii) any property derived or realised, directly or indirectly, by him from any of the payments or other rewards; and (iii) any pecuniary advantage obtained in connection with the commission of that offence.”

[18] The middle part of paragraph 17 of the judgment in that case reads as follows: “It is nevertheless a necessary ingredient of the offence that the characteristics of the property known to the defendant or giving reasonable grounds for belief must be such as to qualify the property in law as the ‘proceeds of an indictable offence’ as an element of the mens rea.”

[19] The full text of section 25(4) reads: “In this section and section 25A, references to an indictable offence include a reference to conduct which would constitute an indictable offence if it had occurred in Hong Kong.”

[20] Paragraph 25 on page 14 of the Applicant’s Submissions on Appeal.

[21] The issues arising from the judge’s use of the test laid down by the CA in Pang Hung Fai will be discussed later in this judgment.

[22] See paragraph 41 above.

[23] The CA granted a certificate on 12 December 2014 certifying that the case involved points of law of great and general importance.

[24] The original English text reads: “The first step ... is to identify all the facts known to the defendant that relate to the dealing with property that is the subject of the charge. These facts may, depending on the circumstances of each case, extend beyond those relating to just the dealing with the property and include facts known to the defendant about other persons or circumstances linked in some way to the dealing.”

[25] The original English text reads: “The second step is to 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. When this reasonable person considers these facts objectively it means he does so uninfluenced by the personal beliefs, perceptions or prejudices of the defendant.”

[26] The original English text reads: “To convict, the jury had to find that the accused had grounds for believing; and there was the additional requirement that the grounds must be reasonable: that is, that anyone looking at those grounds objectively would so believe.”

[27] See note 17 above.

[28] See paragraph 46 and note 13 above.

[29] See paragraph 48 above.

[30] See note 19 above.

[31] The three defendants in that case were professional footballers. It was alleged that they conspired to “fix a match” in Thailand (by deliberately losing the match at a certain score) and, upon their return to Hong Kong, received gambling winnings for Hong Kong losing the game as their reward, i.e. they dealt with proceeds of an indictable offence. One of the grounds of appeal was that the prosecution had not adduced any evidence to prove that cheating at gambling was a criminal offence in Thailand. The CFI rejected that ground of appeal, holding that what constituted an “indictable offence” could only be determined by reference to Hong Kong law and that the prosecution did not have to prove that the foreign act generating the property violated the laws of the country/territory concerned.

[32] See paragraph 49 above.

[33] The original English text reads: “Where the prosecution evidence permits the possibility that conduct allegedly constituting the indictable offence required in the mens rea could have occurred outside Hong Kong which may not amount to an offence either there or in Hong Kong, can a conviction be consistent with section 25(4) of the Organized and Serious Crimes Ordinance?”

[34] The beginning of paragraph 7 of the judgment in that case: “Mr Robert Lee SC, for the applicant, told us that underlying these points of law and fundamental to them is his submission that in order to establish that a defendant has ‘reasonable grounds to believe’ the prosecution must prove that the defendant has reasonable grounds to believe that the property was the proceeds of a specific indictable offence.”

[35] Paragraph 8 of the judgment in that case: “His submission, if correct, would completely undermine s 25(1) as this later passage at p 32C [of the judgment in HKSAR v Wong Pui Shui & Another (2001) 4 HKCFAR 29] shows: ‘Quite apart from these points of construction, it is wholly implausible that the legislature could have intended proof of money laundering offences to require proof of the underlying criminal offences that generated the money being sanitised. There is the obvious likelihood that such activities would be cloaked in secrecy and that they may well have taken place in one or more foreign jurisdiction.’”

[36] The judgment of the CFI at 739H-I: “… the section by use of the words ‘indictable offence’ recognises that it is concerned only with what is regarded in Hong Kong as the more serious types of criminal conduct.”

[37] See paragraph 24 above.