HKSAR v. MILOS COSMIN AND OTHERS

DCCC 224/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 224 OF 2014

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Reasons for Sentence

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1. The defendants have pleaded guilty to all the charges that they face.

2. Charge 1 was against all three defendants.  The offence was conspiracy to steal.  The particulars are that all three defendants together conspired to steal a total of HK$70,800 on 12 May 2013. 

3. Charge 2, again, against all three defendants, is a second conspiracy to steal offence.  And the particulars are that all three defendants together conspired to steal HK$548,100, between 4 and 11 May 2013. 

4. Charge 3, against the 1st defendant only, is the offence of possessing false instruments.  The particulars are that on 13 May 2013, the 1st defendant possessed 690 false plastic cards encoded with credit card account data purportedly to be genuinely encoded by VISA International, MasterCard Worldwide or Maestro.  He had the intention to use them to induce somebody to accept them as genuine and in turn that person would do an act to his own or another’s prejudice.

5. Charge 4, against the 3rd defendant only, is the same offence as the 3rd, possessing false instruments.  The particulars are the same except that the 3rd defendant possessed 92 such cards. 

6. Charge 5, against the 2nd defendant only, is the offence of dealing with property known or believed to represent proceeds of an indictable offence.  The 2nd defendant had in his possession HK$1,552,800.  He dealt with the said sum. 

7. The facts are as follows.  On 6 May 2013, a joint police report was made by three banks, Hong Kong and Shanghai Banking Corporation (“HSBC”), the Hang Seng Bank and Citibank.  Their complaint was that false bank cards had been used in their ATM machines since 4 May.  They knew this as many false cards had been retained or swallowed by their machines; a total of 121 cards.  On the back of each card in the magnetic strip they discovered to be encoded with overseas credit card account details. 

8. The 1st to the 3rd defendant were caught on CCTV footage at respective ATM machines.  All three defendants are Romanian passport holders.  The 1st and 3rd defendant arrived in Hong Kong on 2 May whilst the 2nd defendant arrived on 3 May.  From 6 May they were staying together in the Best Western Grand Hotel in Tsim Sha Tsui. 

9. By 12 May the police had enough detail of the defendants to mount a surveillance operation.  They identified the defendants and followed them in the Tsim Sha Tsui area.  They observed all three defendants go from one ATM machine to another.  They followed the three defendants for about three hours before the operation turned overt.  All three were arrested outside a Hang Seng Bank at an ATM machine on Pak Hoi Street, Yau Ma Tei.

10. After a search, the 1st and 2nd defendant each had three fake gift cards on their persons while D3 had two.  The 2nd defendant had $8,250 cash.  And both the 1st and the 3rd defendant had an HSB, Hang Seng Bank, ATM withdrawal slip. 

11. The banks later confirmed that on that day, 12 May, the three defendants had made 40 attempts to withdraw cash, specifically $70,800 using 31 sets of overseas credit card account data.  Three attempts were successful and $12,700 was withdrawn.  Hence, Charge 1.  The cards with these exact 31 sets of credit card account details were later recovered. 

12. After further investigation, it was revealed that from 4 May to 11 May the three defendants had via 117 transactions successfully withdrawn HK$548,100 from ATM machines of the victim banks with the use of 47 sets of overseas credit card account details.  The cards with those exact 47 sets of details were later recovered.

13. After all three defendants were arrested, their hotel room was searched.  And the police seized the following.  From the 1st defendant’s suitcase, 690 gift cards, the subject matter of Charge 3, as well as an encoder and a CD-ROM.  There was also 3,300 RMB.  In the 3rd defendant’s suitcase, the police seized 92 gift cards, the subject matter of Charge 4.  In D2’s suitcase, the police seized $1,522,800 in cash, the subject matter of Charge 5.  In addition, inside the hotel room, police seized one laptop computer, one USB and five mobile phones.

14. The cards seized and examined appeared to be ordinary gift cards, one can purchase from retailers such as WHS Smith, Apple and Pizza Express.  But the magnetic strip was actually encoded with 16 digit numbers which were credit card account details from three financial institutions in countries all over the world, at least 13, including the United Kingdom, Spain, Norway, Brazil, Russia, Japan, Canada, etc. 

15. A total of 782 cards were found in the 1st and the 3rd defendant’s suitcase.  Of these, 84 cards were encoded with MasterCard or Maestro credit card account details.  According to MasterCard Worldwide, the average potential loss per counterfeit credit card account was US$1,300.  That means approximately US$109,000 or HK$850,000 where 84 cards are concerned.

16. VISA International were unable to provide the police with an estimated potential loss for each counterfeit VISA credit card account.  Here, 660 cards.  In fact, even without an estimated potential loss, I can take into account the fact that there is a huge number of cards, 782 cards that could have been used to steal from victims’ accounts.  All that loss could have stemmed from fraudulent use of credit card account data in Hong Kong.  It must be detrimental to the reputation of Hong Kong’s financial status worldwide and the reputation of banks here and their security systems to be associated with such fraudulent activity.

17. The 1st defendant had an encoder in his suitcase.  When that is connected to a computer, installed with programmes found on the CD-ROM in his bag, one is able to read data on the gift cards.  The encoder can then erase, write, re-write or overwrite data onto a new card.  It means the crime spree or operation was not limited to the cards seized.  If they had more or new credit card account data, more cards could have been produced.

18. The police found files named “Credit Card Number” deleted on the laptop found, three files that contained 309 sets of credit card account data.  The USB device also contained deleted files, 10 in total; all purported to be credit card account numbers saved between April and May 2013.  None of the account numbers found in the files of the laptop or the USB matched those encoded on the gift cards seized.  That means these credit card account details were additional to those encoded on the seized gift cards. 

19. Other than 782 cards found in the 1st and 3rd defendant’s bags, the victim banks in this case retained or swallowed another 121 gift cards in their ATM machines.  Therefore, in this case there is a total of 903 gift cards, all encoded with a credit card account number.  A huge amount of cards could have generated a potential significant loss to financial institutions. 

20. As I have said, all three defendants are Romanian nationals.  So the fact that they have a clear record in Hong Kong is not unusual. 

21. The 1st defendant is 28 years old, married with a 3-year-old child.  The 2nd defendant is 36, divorced, but has a 10-year-old child.  The 3rd defendant is 30, married with a 7-year-old child.  They are responsible financially for all their young families.

22. In 2008 and 2009 all lost their jobs that they had at home and subsequently moved to or travelled to Italy looking for work to support their families.  I have been told that it was there that they fell prey to masterminds who convinced them to carry out these crimes in Hong Kong.  They were promised air fares, expenses and 10 per cent of the money ultimately withdrawn using these fake gift cards.  In essence, they were recruited to come to Hong Kong and were not the masterminds, only mere cogs in the machine. 

23. I have received three letters from the defendants, all expressing remorse, their shame and asking for leniency.  All promise to lead law-abiding lives after serving their sentences for these offences.

24. There are no guidelines for these offences.  But I have referred myself to an authority, R v Chan Sui To & another CACC115/1996, which is a well-known authority for sentencing offences relating to fake or counterfeit credit card crimes.  The Court of Appeal set out relevant sentencing considerations.  One, the size of the operation is relevant.  Here there are a large number of fake cards, gift cards, a significant amount of money involved and three defendants.  Two, the planning involved in this operation can only be described as sophisticated.  There was much planning involved.  Three, is there an international element to these offences?  Clearly there is.  Four, were the defendants major players or mere cogs in the machine?  There is no evidence to suggest that they were the masterminds.  Bearing in mind the planning was sophisticated, they were clearly involved.  Lastly, five, their pleas are relevant. 

25. I have been referred to several similar District Court cases, all involve fake gift or bank cards encoded with credit card account data used at ATMs all over Hong Kong to steal money, specifically HKSAR v Kavangh Darren & another DCCC572/2008 where two Englishmen used similar cards to successfully withdraw $447,100 and attempted to withdraw further $891,600.  238 gift cards were recovered.  In that case, a starting point of 4 years’ imprisonment was taken. 

26. In HKSAR v Ionut Leonard Oancea & others DCCC782/2011, three Romanian nationals withdrew HK$1.5 million and attempted to withdraw further $1.1 million.  A few gift cards were recovered and less than 100 retained by ATM machines.  A 5-year starting point was taken. 

27. Now, I have taken into account the cases I have been referred to.  The case before me involves a successful withdrawal of $560,800 in Charges 1 and 2.  There were many unsuccessful attempts to withdraw money.  A total of 782 fake gift cards were seized from the 1st and the 3rd defendant.  Another 121 were seized by the banks in their ATM machines.  That is a total of 903 cards. 

28. The 2nd defendant had over $1.5 million cash in his suitcase, all I am sure are proceeds of crime.  Clearly, the offences involved significant sums of money and the potential risk or loss cannot be ignored.  This case has an international element and, as I have said, was a sophisticated operation. 

29. I find all three defendants as culpable as each other.  I do not differentiate between their roles.  They will serve identical sentences to show that they were equally culpable. 

30. The best mitigation is their pleas of guilty.  By their pleas and letters, they express their remorse.  However, they were caught red-handed and remorse after the event carries little weight beyond the discount they are entitled to for their pleas, particularly as these offences are so serious. 

31. There is no real restitution here.  The proceeds of crime were recovered from the 2nd defendant’s suitcase.  However, it is relevant that the banks will ultimately not suffer a loss. 

32. Defendants, please stand up.  Having taken into account all the factors I have mentioned above, I find the following starting points for each charge appropriate.  For Charge 1, for all three defendants, I find a starting point of 4 years to be appropriate.  For Charge 2, for all three defendants, I find a starting point of 5 years appropriate.  For Charge 3 where the 1st defendant is concerned, for Charge 4 where the 3rd defendant is concerned, Charge 5 where the 2nd defendant is concerned, I find a starting point of 6 years’ imprisonment appropriate. 

33. The defendants having pleaded guilty are entitled to a discount of one-third from those starting points.  After that discount, for Charge 1, all three defendants will be sentenced to 2 years and 8 months’ imprisonment.  For Charge 2, all three defendants will be sentenced to 3 years and 4 months’ imprisonment.  For Charge 3, the 1st defendant is sentenced to 4 years’ imprisonment.  For Charge 4, the 3rd defendant is sentenced to 4 years’ imprisonment.  For Charge 5, the 2nd defendant is sentenced to 4 years’ imprisonment. 

34. I considered the totality principle and order that all sentences be served concurrently.  All defendants therefore are sentenced to 4 years’ imprisonment.  All three defendants are sentenced to a total of 4 years’ imprisonment.

COURT: Can I ask if all three defendants understand that sentence?

INTERPRETER: They understand.