HKSAR v. LIU TJONG- SLAM AND ANOTHER

DCCC 452/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 452 OF 2011

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Reasons for Sentence

1.  I convicted the defendants after trial of offences of money laundering which were brought against them. 

2.  D1 was convicted of two offences, whilst D2 was convicted of one offence.

3.  Charge 1

D1 was convicted of using his 3 bank accounts between the period of 1 June 2009 and 14 July 2010 knowing that about HK$10,061,000 were the proceeds of an indictable offence contrary to section 25(1) and (3) of the Organised and Serious Crime Ordinance (OSCO) Cap. 455.

4.  Charge 2

D1 and D2 were both convicted of conspiring to use D2’s bank account between the period of 1 June 2009 and 14 July 2010 knowing that about HK$853,438 were the proceeds of an indictable offence contrary to section 25(1) and (3) of OSCO and sections 159A and 159C of the Crimes Ordinance cap 200.

5.  Facts

The defendants were brothers. I had found that D1 and D2 aged 29 years and 24 years at the time of the offence had knowingly assisted their father in laundering the proceeds of drug dealing or were tainted with crime through their personal bank accounts in Hong Kong.

6.  The brothers declared income with the Inland Revenue Department was very far below the amounts that were remitted into and withdrawn from their bank accounts.  D1’s declared aggregate income as coordinator at Ocean Park and as a CEO with a company for the years 2004-2010 amounted to $259,717.  D2’s aggregate income as a business development executive in the insurance business between the years 2008 and 2010 earned by commissions was $174,557.

7.  There were obvious indicators that the defendants accounts were used for money laundering.  The accounts were used as a temporary repository for funds.  There were significant cash and largedeposits then withdrawals of almost all the money deposited.  Almost all the money deposited into the accounts was withdrawn within a very short time.  Much of the money was withdrawn in cash.  Large amounts of cash were withdrawn.  The bank balances would at times be nominal then balloon with large deposits then return to nominal balances.

8.  Their father was a self confessed drug trafficker.  He was found by customs officer on the 14 July 2010 inside premises (Unit 1) which was for the manufacture of the drug methamphetamine hydrochloride (“Ice”).  The father was the tenant of these premises.  The lease for Unit 1 was for the period 1 June 2009 to 31 May 2011.  Equipment and paraphernalia which could produce about 69 kg of the drug ice to the estimated value of about $50 million and 3 packets of ice containing 11.78 grammes methamphetamine hydrochloride was found there.  The father led the customs officers to three other premises referred to as, Unit 2, a hotel room in the Panda Hotel and his residence he shared with his family.  In Unit 2 approximately 3.14 kilogrammes of ice with an estimated retail value of about $2.2 million was found.  In the Panda Hotel room 70 packages containing 65.269 kilogrammes of ice with an estimated retail value of about $47 million was found.  In the residence a total of 13 packets containing 2.375 kilogrammes of ice were seized from 2 handbags in the on the sofa and from a drawer of a tea table in the sitting room with an estimated retail value of about $1.6 million.

9.  The total estimated value of the drugs found was about $100 million.

10.  D2 was arrested when he was about to enter the hotel room on 14 July 2010 and D1 was arrested when he returned home on the same date.

11.  Upon search of the residence the defendants and the father’s bank passbooks were found.  The father’s passbook had transactions from 2008 to 2010.  There were however only about 7 transactions over those two years.  It had a small bank balance of about $13,000.  On the other hand the defendants bank accounts had numerous transactions which involved substantial amounts of deposits and withdrawals.  For the charge period 1 June 2009 to 14 July 2010 for D1’s accounts the amount was about $10 million and for D2’s account the amount was about $800,000. 

12.  The father had pleaded guilty to 4 charges of trafficking in drugs involving the drugs found on 14 July 2010 at the 4 premises and is waiting to be sentenced in the High Court later this month.  I had rejected the father’s evidence at trial that none of the funds in the two charges were proceeds from drug trafficking or were crime proceeds. 

13.  The defendants were highly educated persons both with University degrees and D2 even holding a Masters Degree.  At the trial the defendants evidence was that the source of the money was from their father. They believed it was from their father’s legitimate business.  They however never asked their father any questions relating to the funds or his business or the use by the father of their accounts.  They just silently abided by all instructions their father gave them in relation to the transactions of funds in the accounts.

14.  In general and in brief, D1 alleged he did not know that his father had a bank accounts therefore his father used his accounts and he never asked his father if he had a bank account.  Whilst D2 said he never thought about whether his father had a bank account, he never asked his father whether he had a bank account and it did not occur to him to ask his father.  I rejected the defendants evidence. More particularly I rejected their evidence that :-

i. they had no knowledge at all and never knew anything about their father’s business,

ii. that they had no involvement with the dealings in drugs or the knowledge of the drugs in the hotel room or residence,

iii. they accepted unconditionally and blindly that the funds were for household expenses despite the household expenses being a very small part of the funds and

iv. that there existed a bond of unquestioning trust between the sons and the father such that they were intimidated by their father and filial sons obeying instructions without question.

15.  I found that the defendants were linked to the drugs.  I had found that the father had stored the drugs in the premises shared with his sons and not at any other premises unconnected with his sons, as the sons knew that he was involved in dealing with illegal drugs.  D1 was paying the rent for Unit 1 the premises which the father had leased for the manufacture of drugs.  Drugs were found in the residence he shared with his two sons, the defendants. Drugs were stored in the hotel room which the father rented and used with D2 for the facilitation of D2’s studies. 

16.  I found that the father was laundering the money from his criminal activities or drug dealings through his sons accounts with inward and outward remittances as well as used his sons the defendants to make cash withdrawals and transfers.  He had done this with their knowledge to disguise the source of the funds and to avoid suspicion to himself.

17.  Their father had used the sons bank accounts in the same manner for many years prior to the charge period. 

18.  The dates of the charge were based on the commencement date of the lease of Unit 1, the premises used to manufacture ice up until the date of the arrest of the father. 

19.  At the trial D1’s 3 bank accounts were referred to as A/C 1-3 and D2’s bank account as A/C4.

20.  Charge 1 transactions

The total amount of the cash and transfer deposits to AC 1 was $8,018,042.

21.  The Cash deposits to AC 1 were $1,760,502.  Over $ 1.6 million of this amount was made in the 8-month period beginning 14 November 2009 by 19 deposits.  These deposits were in amounts of $40,000 & over.  Between 13 April & 5 July 2010, 8 cash deposits (totalling $800,000) each in the amount of $100,000 were made to the account.  On 19 June 2010, (total $300,000) 3 of them were made within 1 ½ hours at 3 different branches of the NCB, and on 5 July 2010, 2 were made to A/C 1 within 6 minutes at two different branches. 

22.  Cash deposits were also made to A/C 3 & A/C 4 on the same dates as the cash deposits to A/C 1 and in large amounts.  

23.  The Transfer deposits to A/C 1 total $6,257,540.  Of this amount, $5,472,751 came from 30 overseas transfers through Remittance agents (RA) or money changers (MC) in Hong Kong on the instructions of RAs in Taiwan, or persons in the Philippines.

24.  The cash & transfer deposits to A/C 1 were followed shortly after by large cash withdrawals & a few large transfers. 

25.  Total cash withdrawals in the charge period were $5,055,300.00.  Of this amount, 13 large withdrawals totalling $4,268,000 were made by D1 in person by signing bank slips in amounts between $100,000 and $1 million. 

26.  It was a systematic pattern of moving funds into & out of the account from the outset of the charge periods.  

27.  Charge 2 transactions

The total deposits to the account during the charge period were $853,439.

28.  There were 14 cash deposits which totalled $707,970.  Two transfer deposits originated from overseas both of $50,000 on 7 and 8 July 2010. 

29.  Total cash withdrawals in this period were $81,500.00.

30.  The transfer withdrawals from A/C 4 were $616,544.  D1 was made cash deposits into A/C4 in the sum of $460,000 and one transfer deposit of $30,000.

31.  D2 made several transfers to D1’s accounts.  The transferred funds amounted to $339,000

32.  Sentence

D1 and D2 are of clear record. They are 31 years and 26 years old respectively. I have taken into account the very thorough and lengthy pleas in mitigation advanced by their solicitor Mr Haldane.

33.  In summary Mr Haldane has, although acknowledging that a sentence of deterrence should be passed, submitted that no term of imprisonment should be imposed on these two defendants as that will not be a deterrent for them.  The conviction alone has in effect ruined their whole future in society.  They will not be able to travel easily and even once if they have served a term of imprisonment they will never be able to hold a bank account and thus will find it very difficult to conduct any business or enjoy gainful employment.  This itself is punishment enough for these two otherwise law abiding very well educated defendants. This offence resulted on account of lack of judgment by the defendants in abiding unquestionably to their father’s instructions.  In the circumstances no sentence of immediate imprisonment should be imposed. 

34.  There has been a very recent decision on relevant factors to be taken into account in sentencing in money laundering cases by the Court of Appeal handed down on 1 February 2012 in HKSAR v Boma Amaso CACC 335 of 2010.  The court acknowledged that it was difficult to provide guidelines or suggested starting points.

Stock VP in giving the judgment of the court said this :-

“The first factor to which any sentencing court should in this context have regard is the maximum penalty available. “ (para 35)

The second matter to which the sentencing court must have regard is the fact that in this category of offence, deterrence is paramount. It is to be remembered that “the criminality in laundering arises from the encouragement and nourishment it gives to crime in general. Without it many crimes would be rendered much less fruitful and perhaps more difficult to perpetrate”: R v Basra [2002] 2 Cr App R (S) 469 at 472. (para 36)

Then there is the question of the amount of money laundered. This is not the be-all and end-all of a case but is a significant feature. (para 38)

Stock VP went on to mention also significant features for which the court should look into and take into account: (para 40)

(1)The nature of the predicate offence, if known, and the penalty available for the predicate offence: see R v Karen Monfries [2004] 2 Cr App R (S) 9. So, for example, where the predicate offence is trafficking in dangerous drugs, the offender should expect a sentence significantly greater than where the predicate offence is gambling. It has in this regard been said that: “Those who launder large sums which are the proceeds of drug trafficking play an essential role in enabling the drugs conspiracy to succeed and as such can expect severe sentences comparable to others playing a significant role in the supply of drugs although it has to be borne in mind that Parliament has provided different upper limits to a judge’s sentencing process for dealing in Class A drugs (life imprisonment ) and money-laundering (14 years)”: R v El-Debi [2003] EWCA Crim 1767 at [90], (in reference to statutory provisions in England); although it is suggested that there must be a difference between the offender who knows what the predicate offence is and the offender who does not : R v Gonzalez [2003] 2 Cr App R (S) 35 at [13].

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

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

(3)An international dimension,

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

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

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

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

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

35.  In taking into account the above factors the maximum penalty for the present offence is one of 14 years imprisonment.  A sentence of deterrence is paramount.  

36.  In HKSAR v Hui Kam [2000] 3 HKLRD 211 Deputy Judge Carlye Chu (as she then was) said

“It is not uncommon for criminals to make use of their family members to hide or dispose of proceeds of crime partly because it is easier and more convenient to derive assistance from within the family. The relationship between the Appellant and the main penetrator of the crime therefore does not per se constitute an exceptional circumstance that justifies suspending the sentence. For the same reason, the fact that the Appellant derived no personal benefit from committing the offence is also not a ground for suspending the sentence.

37.  Despite Mr Haldane’s vigorous submissions on the facts before me there are no grounds for suspending any sentence of imprisonment.

38.  In charge 1 – the amount of money laundered was about $10 million.  Not an insignificant sum of money. 

39.  In charge 2 the amount was about $800,000. 

40.  The nature of the predicate offence is one of drug trafficking.  The flurry of deposits and withdrawals into the accounts commenced soon after the father signed the lease of Unit 1 that manufactured the drug ice. 

41.  There was an international dimension as money was remitted from overseas, including Philippines and Taiwan.  Money was brought across from Mainland China to Hong Kong. 

42.  On the facts of this case there was no sophistication of the offence.  The father simply used the sons accounts to avoid suspicion to himself.  There is no evidence of the offence being committed by an organised criminal syndicate. 

43.  There were numerous transactions over a period of about 1 year. 

44.  As to the role of the defendant’s and the acts performed by them they are clear differences in D1 and D2’s role.

45.  D1 operated his account I found with knowledge that the funds were tainted with crime or from drug dealings.  He was dealing with funds without the presence or directions or instructions of the father in dealing with the funds.  I had found that he deposited and withdrew cash when the father was not in Hong Kong.  D1 not only operated the accounts, he deliberately deposited less than $100,000 in cash each time to avoid the suspicions of the bank when he deposited such large sums of cash.  As can be seen on one occasion on 19 June 2010 he darted around to three different branches within a very short time of about 2 ½ hours to deposit $500,000 in cash.  D1 made three deposits of $100,000 each into his own account at three different bank branches whilst he deposited at two different branches $100,000 into his brother’s D2 account.  Shortly after D1’s return from China or from overseas he made cash deposits.

46.  D2’s role was significantly less than D1’s.  D2 operated his account knowing that the funds were tainted with crime or from drug dealings but his role was one where I was satisfied that he was receiving instructions either from D1 or his father as to what to do with the funds.  His role was less culpable than D1’s. 

47.  The defendants knew that the funds were proceeds of crime all along however as to the drug dealings by the father I was satisfied that D1’s knowledge was to be inferred from September 2009 when he commenced paying for the rent in respect of Unit 1.  As for D2 his knowledge was to be inferred from April 2010 when D2 took over the payment of the Panda hotel room from his father.  The inference is drawn from all the evidence and the circumstances of the evidence collectively. 

48.  Although I was satisfied that D1 and D2 knew of the dealings in drugs by their father and there were drugs stored at their home and D2 knew of the drugs at the Panda Hotel.  I was not satisfied that they knew of the quantity of the drugs kept in the bags in the sitting room or the suitcases in the hotel room. 

49.  What however they did know was the amount of the crime proceeds and their dealings amounted to which for D1 was about $10.8 million (total of charge 1 and 2) and for D2 was about $800,000 (charge 2).

50.  Without the defendants participation in assisting their father he would not have been able to have used their accounts.  Their father used the defendants accounts as they were family members, he chose them more likely as they were more trustworthy than third parties.  I accept in the beginning when it first commenced the sons may have found it difficult for the sons to turn down his request but by the charge period they were voluntarily and willingly assisting their father and they had been doing so for years. 

51.  As a result of the father’s involvement in very serious crimes he deliberately with selfish disregard to his family brought his sons into the evils of his wrongdoings.  The family has had to pay a heavy price.  As a result of the father’s serious transgressions and unwise decisions to include his sons he has ruined his family, the wife has as a result suffered mentally and physically.  It is on I am sure on the father’s consciousness that D2 was, always has been and is principally focused on academic pursuits.  From a young age he was a very high academic achiever.  His goal of a doctorate remain unfilled.  His past efforts have been shattered by his father his future goals have consequentially been hampered.  D1 and D2 hard work and achievements in their academic success is in ruins. 

52.  D1 was a key player in the laundering activities.  D2 played a far lesser role.  D2  was allowing his brother and father to use his account and then operating the account according to their directions. 

53.  The defendants were nevertheless assisting their father to launder money knowing the funds were tainted with crime.  As stated by Stock VP above “With their knowledge that these were proceeds of drug dealings they can expect severe sentences comparable to others playing a significant role in the supply of drugs.” 

54.  In Boma Amaso the CA observed when considering sentence that the aggravating factors in that case was the large sums of money involved ($10 million), the applicant used false identities in the operation of the accounts and he actively operated the accounts over a lengthy period of time and the international element which involved transactions from many countries. 

Cheung JA said :

“If anything, the notional starting point of 4 years’ imprisonment adopted by the Judge is plainly too low.” (para 22(4))

55.  Taking into account all the above factors and having regard to the sentence passed in Boma Amaso I consider a starting point of 5 years imprisonment to be appropriate for D1 in charge 1 and 2 years for charge 2.

56.  For D2 I consider a starting point of 18 months imprisonment to be appropriate. 

57.  I take into account the principle of totality when sentencing D1 I consider a total term of 5 years 6 months or 66 months imprisonment is appropriate for both charges. 

58.  In arriving at the totality starting point of 5 ½ years, I consider 6 months of charge 2 should run consecutive to charge 1 making a total term of 5 years 6 months imprisonment. 

59.  D1 and D2 admitted the majority of the prosecution case.  For that I consider a discount of 3 months is warranted.  I therefore discount 3 months from Charge 1 for D1 and charge 2 for D2.  Therefore the sentence for charge 1 is reduced to 57 months and for charge 2 for D2 is reduced to 15 months.

60.  Upon deduction of 3 months D1 is sentenced to 57 months imprisonment on charge 1.  On charge 2 he is sentenced to 2 years imprisonment, 6 months of charge 2 is to run consecutive to charge 1.

61.  D1 is therefore sentenced to a total term of 63 months imprisonment or 5 years 3 months. 

62.  Upon D2’s arrest on July 2010 D2 was incarcerated for some 5 months on a charge of trafficking in dangerous drugs relating to the drugs found in the Panda Hotel and the residence.  He was granted bail on 15 December 2010 in the High Court.  Thereafter the charge of trafficking dangerous drugs was not proceeded against him.  That period of incarceration is not taken into account for the present charge.  I however consider in fairness to D2 that it should be taken into account as the two charges relate to a similar matter.  In the circumstances I shall deduct 5 months from the present term, making the total term 10 months imprisonment. 

63.  D2 sentenced to 10 months imprisonment on charge 2.