HKSAR v. PENG XINYUAN

DCCC 943/2022

[2023] HKDC 1831

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 943 OF 2022

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REASONS FOR SENTENCE

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1.  The defendant was convicted on his own plea and agreement to Amended Summary of Facts of:

(i)  a charge of fraud, contrary to section 16A of the Theft Ordinance, Cap 210 (1^st charge);

(ii)  a charge of falsely pretending to be a public officer, contrary to section 22(1)  of the Summary Offences Ordinance, Cap 228 (3^rd charge);

(iii)  a charge 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 (4^th charge); and

(iv)  a charge of possessing false instruments, contrary to section 75(1)  of the Crimes Ordinance, Cap 200 (5^th charge).

2.  As for the 2^nd charge, the same is left on the court file and not to be proceeded with without leave of the court.

Facts

1^st and 4^th Charge

3.  On 2 April 2022, PW1 received a phone call from a Putonghua-speaking male (in voice recording), claiming to be a customer service officer of the China Mobile, informing PW1 that another unknown phone number was registered under his name and the said number was involved in a case investigated by the Lo Wu branch of the Public Security Bureau (“PSB”)  in Mainland China.  The phone call was then redirected to a “孙才” of Lo Wu branch of PSB (“SUN”). PW1 checked online and confirmed that the phone number belonged to Lo Wu branch of PSB.  PW1 therefore believed that SUN was a genuine PSB officer.

4.  In the telephone conversation, upon SUN’s request, PW1 disclosed to SUN that he had 4 bank accounts, owned a property in Hong Kong and his residential address.  SUN then sent by WhatsApp his PSB warrant card, a Notice of Assistance in Investigation, Letter of Mandatory Freezing of Assets and Letter of Criminal Arrest bearing PW1’s name.  Believing what SUN said was true, PW1 felt scared.  He was told to co-operate without telling the others and to turn his phone camera for video call as and when directed.

5.  At 7 pm on 2 April 2022, PW1 was instructed by SUN to book a hotel room at “STAY MK”.  At 9:12 pm on the same day, SUN called PW1 and said his supervisor named “王靜” (“WANG”)  would contact him.  WANG told PW1 that a PSB officer would come and investigate if PW1 had committed money laundering.

6.  At around 9:30 pm on 2 April 2022, the defendant came to PW1’s room in STAY MK, claiming that he was instructed by PSB to investigate if PW1 had committed money laundering.  The defendant requested PW1 to provide his bank account with online banking function for the defendant to investigate.  PW1 then logged into his Hongkong and Shanghai Bank Corporation (“HSBC”)  online banking account and passed his phone to the defendant.  PW1 later checked that his balance remained unchanged.

7.  At around 11 pm on the same day, the defendant brought PW1 to an ATM machine of HSBC inside Olympic MTR station and asked PW1 to insert his ATM card to the machine.  The defendant then took a picture of the security code shown on the screen but did not withdraw any money.  The defendant left while PW1 was instructed to stay in the STAY MK with his phone camera turned on during video call with WANG.  On 3 April 2022, PW1 checked out from STAY MK and returned to his residence.

8.  In the afternoon of 7 April 2022, WANG told PW1 that the defendant would investigate at PW1’s residence.  Afterwards, the defendant attended PW1’s residence and brought PW1 to STAY MK.  After a purported call, the defendant brought PW1 to Mongkok branch of HSBC and asked PW1 to transfer HK$637,000 to the defendant’s bank account held at Hang Seng Bank Limited (“HSB”)  as per the defendant’s supervisor’s instructions.  PW1 initially refused.  The defendant made a purported phone call with his supervisor, and after the call, the defendant told PW1 that if PW1 refused to transfer the money, his assets would be frozen, and that the money would be returned to PW1 4 hours after the transfer.  Fearing his assets would be frozen, PW1 transferred the HK$637,000 to the defendant’s HSB account.

9.  Afterwards, the defendant brought PW1 to another branch of HSB in which the defendant withdrew cash of HK$230,000 from his own account.  The defendant, together with PW1, went to various branches of Bank of China (“BOC”)  to deposit the money.  The defendant and PW1 then returned and stayed at STAY MK together.  During the stay, PW1 was originally asked to sell his shares in CITIC but PW1 was unable to sell the shares since the CITIC bank froze his account due to inactivity.  Further, PW1 also enquired about the return of the money, namely HK$637,000, transferred.  The defendant made a purported phone call and explained to PW1 that his supervisor was still investigating PW1’s case and the money would be returned to PW1 upon conclusion of his case.

10.  During 8 and 11 April 2022, PW1 and the defendant stayed in Room 1803 of Metro Winner Hotel (“Room 1803”)  together.  At around 7:40 pm on 11 April 2022, police raided the Room 1803 where PW1 and the defendant were located.  

11.  As a result, PW1 suffered loss of HK$637,000.

3^rd Charge

12.  On 5 April 2022, PW2 received a voice recording from phone, informing PW2 that her phone number would be deactivated.  She was then redirected to a PSB officer named “李正东” (“LI”). LI requested for PW2’s identity proof and later informed PW2 that she had been involved in a financial fraud case in Mainland China.  Believing what LI said was true, PW2 felt scared and was told to co-operate without calling the others. The alleged PSB officer asked PW2 to find a quiet hotel room.  PW2 followed suit.  During her stay in the different hotels, she transferred money to various bank accounts as instructed by alleged PSB officers.  PW2 also provided her banking credentials and online banking password to the alleged PSB officers.

13.  At around 8:12 pm on 6 April 2022, the alleged PSB officers asked PW2 if she saw the defendant, whom the alleged PSB officers represented as a Hong Kong police officer, at Hotel COZI Wetland.  The defendant at this juncture emerged and showed a purported Hong Kong police warrant card to PW2, and asked PW2 to return to Harbour Plaza Resort City in Tin Shui Wai together.  They subsequently went to the defendant’s residence in Luen Wo Hui, Fanling.  The defendant left, leaving PW2 alone in the defendant’s residence.  Since then, PW2 had never met the defendant.  PW2 then complied with the requests of the alleged PSB officers at the defendant’s residence, including taking video clips pretending to be kidnapped.

14.  Subsequently, PW2 made a report to police and informed them of the address of the defendant’s residence.  The identity of the defendant was then revealed.

15.  PW2 lost around HK$2,289,990 as a result.

5^th Charge and Arrest of the defendant

16.  At 7:44 pm on 11 April 2022, the defendant was arrested in Room 1803. Under caution, he stated that he received a call from PSB officer and prosecutor from Mainland, claiming that he was involved in a money laundering case, they asked the defendant to make amends by working for them and dealing with the suspects in Hong Kong.  The police identity proof was provided by them, and they gave HK$7,000 to the defendant for expenses and as remuneration.

17.  In the Room 1803, a forged warrant card of Hong Kong Police bearing the name and photo of the defendant, 3 deposit slips from BOC showing a total sum of HK$230,000 was deposited to a BOC account held in the name of TSOI Ho-lung, and 2 keys to defendant’s residence were found.

18.  House search was conducted on defendant’s residence in which 4 forged warrant cards of Hong Kong Police bearing the name and photo of the defendant were found.

Criminal Record

19.  The defendant has a clear record.

Mitigation

20.  The defendant came to Hong Kong from Mainland in 2019 and has settled in Hong Kong since then.  He is now 24 years old and has finished secondary vocational school education in mainland.  At the time of arrest, he worked as a chef at a Japanese restaurant and his monthly salary was approximately HK$16,000.

21.  Defence counsel submitted that the most valid mitigating factor is the fact that the defendant pleaded guilty to the charges in question, he is therefore entitled to full one-third sentencing discount.

22.  Defence counsel submitted that in the case of HKSAR v Yu Jing, DCCC 692/2019, the modus operandi used by the defendant was similar to the present case.  The court in that case took 4 years’ imprisonment as a starting point for the conspiracy to defraud charges and 3 years’ imprisonment for the money laundering charges.  The court ordered that the sentence of the 3 counts of conspiracy to defraud and 5 counts of money laundering to run concurrently.  The defendant in that case was eventually sentenced to 32 months’ imprisonment.  Prosecution did not apply for enhancement of sentence in that case. 

23.  In the present case, defence counsel urged the court to consider totality principle and to impose a concurrent sentence for the 1^st and 4^th charge because they were in fact part and parcel of the same set of incident and in view of the proximity of the two charges.  In relation to the 3^rd and 5^th charge, defence counsel submitted that there is no sentencing guideline.  Regarding the 5^th charge, he submitted that there is no evidence to suggest the defendant possessed the 4 purported police warrant cards for unlawful or illegal purposes.

24.  He also cited the case of HKSAR v Hung Yung Chun & Another [2011] 2 HKLRD 174 where the appellate court has made thorough analysis in a case of typical telephone scam, including the discussion of enhancement of sentence.  The appellate court in that case was of the view that the sentencing starting point in a typical telephone scam case be 4 years’ imprisonment.  In that case, the appellate court enhanced the sentence by one-third according to the Organized and Serious Crimes Ordinance, Cap 455.

25.  Defence counsel urged this court to consider the defendant’s young age, clear record, guilty plea and the fact that he is not the mastermind in the scam, and to impose a lenient sentence. 

26.  Defence counsel also submitted that duress is a valid mitigating factor in this case as the WhatsApp messages in the defendant’s phone showed that there were conversations between the defendant and other mainlanders, LI, WANG and ZHANG, where the defendant was instructed to follow their instructions subsequent to their allegations against the defendant that he was involved in a money laundering case in the Mainland.

27.  Mitigation letters from the defendant’s mother and colleague from the sushi shop where the defendant used to work were also submitted for the court’s consideration.  These letters asked the court for leniency so the defendant could return to society and rehabilitate himself.  The mother said that the defendant lost his job because the sushi shop where he worked closed during COVID in December 2021.  She said that the defendant used to be a man of good character, hardworking and cares for his family.

Discussion

28.  Before sentencing, this court has carefully considered all that was said on behalf of the defendant, including but not limited to the authorities cited and the mitigation letters lodged.

1^st Charge

29.  On conviction upon indictment of this charge, a person is liable to imprisonment for 14 years. 

30.  The Court of Appeal did not lay down sentencing guideline for this offence for the reason that the modus operandi, sophistication of the scheme, number of persons involved, number of victims affected, amount of money involved, duration during which the offence was committed and the effect of the offence on the victims, varies immensely.

31.  The fraud practised on the victim in this case is highly sophisticated, well premeditated and well executed.  It involves a number of persons.  They first put the victim in fear by saying that he was involved in a criminal case in the mainland, and these allegations were made by people from Public Security Bureau in the Mainland.  They also said that therefore they needed to investigate the victim, and this gave them the excuse of asking the victim to disclose the password and all other details about his personal banking account.

32.  No doubt, the defendant is the frontline person responsible for contacting and closely monitoring the conduct of the victim over a period of 10 days.  The defendant received orders from the others.  During this time, the victim was kept under close supervision by the defendant and his accomplices.  The victim was directed to stay at different hotels with the defendant and was asked not to disclose the incident to any other persons.  He was also asked to disclose the security code for his banking account and was directed to go to bank personally to transfer money from his account in total sum of HK$637,000. At one time, the victim was even asked to sell his shares which he did not manage to do as his account was frozen due to inactivity.

33.  During these 10 days, the victim was controlled by the defendant and the syndicate.  One could imagine the fear instilled in this victim during these 10 days.

34.  In the case of Hung Yung Chun, Tang VP said that the telephone deception cases were more serious than street deception cases, and a higher starting point should be adopted for deterrence.  It was said that the general sentencing starting point for that type of phone deception case should be 4 years’ imprisonment.  The modus operandi of the scam in that case is different from ours.  In that case, the elderly victims received phone calls purportedly from their children claiming to be detained for acting as guarantors owing money, and the elderly victims were demanded money to secure the release of their children.

35.  Considering the circumstances of the present offence, the court finds the only sentencing option viable is one of immediate imprisonment and the appropriate sentencing starting point is 4 years’ imprisonment.

36.  The defendant has pleaded guilty and is therefore entitled to full one-third sentencing discount.  The defendant used to have a clear record but it is well established that the same has already been subsumed in the one-third sentencing discount.

37.  Defence counsel submitted that when committing the offence, the defendant acted under duress from those people who pretended to be PSB officers from the Mainland who contacted the defendant since 27 February 2022.  Defence counsel said the defendant was suspected of money laundering by these people and he was asked to co-operate by them.

38.  Defence counsel produced WhatsApp messages between the defendant and LI, and between the defendant and WANG.  This court notes that in late February to early March, the defendant at one time did ask LI about the case alleged against him, and LI said that they needed further investigation against the defendant.  This exchange apparently arose from allegations against the defendant, suspecting him of a criminal offence by these people.

39.  Apart from this entry, there appears to be no other entry which suggests threat or inducement or coercion in the messages directed against the defendant.  Defence counsel agreed to the observation by the court.

40.  This court finds that at the time of the offence, whatever influence that these people had on the defendant as on 27 February 2022 had become less significant, although this court notes that the defendant appeared to continue to heed or take instructions from them.  This court also notes that these people had allowed the defendant’s own residence address to be exposed to the victims.

41.  This court finds the mind of the defendant to a certain extent affected by the threat of these people as a result of this so-called ongoing investigation, which would amount to duress to a certain extent.  This court also notes that in this case, the defendant was given HK$7,000 out of the money cheated from the victim.  This court would discount the sentence of this charge by 3.5 months.

Enhancement of sentence

42.  Prosecution applied for enhancement of sentence for the 1^st and 4^th charge, both being specific offences within the meaning of the Organized and Serious Crimes Ordinance, Cap 455, and has furnished information to this court pursuant to section 27(2)  of the ordinance.

43.  According to the statement from Detective Chief Inspector Tang Kai-ming, in the first half of 2023, there were 353 “pretend officials” telephone deception cases, as in the present case, representing a decrease of 29.4% when compared to 500 “pretend officials” telephone deception cases reported in the same period in 2022. 

44.  Nevertheless, from the statement of Mr Tang, one can see the number of telephone deception cases in 2021, 2022 and the first half of 2023 are 68, 795 and 765.  The rise of the telephone deception cases in 2023 as compared to 2022 is alarming, and the associated money laundering activities are said to be prevalent in Hong Kong.

45.  This court agrees with the observation of Mr Tang that these crimes are of obvious concern to the society of Hong Kong in terms of the harm caused to the community and the repeated occurrences.

46.  Defence have no objection to the enhancement of sentence but he urged this court to enhance the sentence slightly.

47.  Considering the alarming rise of the telephone deception cases, this court would enhance the sentence by 33%. 

48.  Accordingly, the defendant is sentenced to 38 months’ imprisonment for the 1^st charge.

3^rd Charge

49.  A person guilty of this offence shall be liable to a fine of 2,000 and to imprisonment for 6 months. 

50.  The defendant produced his fake Hong Kong Police warrant card to the victim of the telephone deception, and he asked the victim to return to Harbour Plaza in Tin Shui Wai together.  Obviously, the victim acceded to his request because she believed that he was a police officer.  This victim was later requested by the defendant to go to the defendant’s residence where, at the request of the alleged PSB officer, video clips pretending her to be kidnapped were taken. 

51.  This is a serious case and the defendant had meant to deceive the victim that he was in fact a genuine police officer.  However, this court is tied with the ceiling for sentence of this offence.  Appropriate sentencing starting point is therefore 5 months’ imprisonment.  The same is discounted to 3 months and 10 days’ imprisonment by reason of his guilty plea and discounted further by 10 days by reason he was acting under the influence of duress at the time.

52.  The defendant is sentenced to 3 months’ imprisonment for this charge.

4^th Charge

53.  On conviction upon indictment of this offence, a person is liable to a fine of HK$5 million and to imprisonment for 14 years. 

54.  In HKSAR v Boma[2012] 2 HKLRD 33, Stock JA (as he then was)  explained that it was not realistically possible or desirable to lay down guidelines in relation to the offence of money laundering because of the highly variable circumstances in which such offences are committed and the widely different roles played by those convicted of these offences.  He said that deterrence was paramount in the sentencing exercise as the criminality in laundering arose from the encouragement and nourishment it gave to crime in general.

55.  He said that the amount of money laundered is a significant factor, and the court should take into account of factors such as :

(a)  nature of the predicate offence;

(b)  the state of the offender’s knowledge;

(c)  where the operation involved an international dimension, this would be a significant aggravating feature;

(d)  the sophistication of the offence, including the degree of planning;

(e)  where the offence was committed by or on behalf of an organised criminal syndicate, this would be an aggravating feature;

(f)  whether there was one transaction only or many and the length of time over which the offence was committed;

(g)  whether the offender continued to launder funds after he had discovered the nature of the funds were proceeds of an offence or a serious offence was involved;

(h)  the role of the offender and the acts performed by him.

56.  In this case, the amount of money laundered is HK$637,000. 

57.  The predicate offence is fraud which attracts a maximum sentence of 14 years’ imprisonment.  The bank account of the defendant was used to receive the money cheated out of the victim in this telephone deception case.  The fraud in question concerned a number of persons, including the defendant.  2 bank accounts were involved.  One is that of the defendant himself and another bank account held in the name of TSOI Ho-lung. 

58.  The scheme involved is highly sophisticated, premeditated and well executed.  It clearly involved a criminal syndicate.  The role of the defendant was significant as he was the one who confronted the victim and monitored him transferring money from his account to the defendant’s bank account.  The defendant well knew that the lending of his bank account was for money laundering purpose, and the offence was committed for an organised criminal syndicate.  The defendant had actual knowledge of the predicate offence but clearly, he just heeded to the instructions given by those alleged PSB officers. 

59.  There was only 1 deposit into the defendant’s bank account and 3 withdrawals made subsequently shortly afterwards.  The benefit or gain to the defendant for commission of this offence is HK$7,000. 

60.  In the case of Secretary for Justice v Wan Kwok Keung [2012] 1 HKLRD 201, Cheung JA (as he then was)  said that money laundering is a serious offence and must be deterred.  The sentence should reflect the amount of “black money” laundered and not the benefit obtained by the defendant or others.  However, it is said that if the “black money’ originated from various and organised indictable offence or the defendant’s benefit was huge, then the sentence should be adjusted upwards.

61.  Considering the above, the court finds that the appropriate sentencing starting point in this case is 3 years’ imprisonment. 

62.  Money laundering is a very serious offence and the personal background of the defendant is seldom a valid mitigating factor.  He has pleaded guilty and is therefore entitled to full one-third sentencing discount.  The court allows the sentence deduction of 3 months by reason of the duress as aforesaid.  Again, the same is enhanced pursuant to application by prosecution by 33%, bringing the sentence for this charge to 27 months and 27 days’ imprisonment.

5^th Charge

63.  On conviction upon indictment of this charge, a person is liable to 14 years’ imprisonment. 

64.  The only possible reason that the defendant had these 5 forged police warrant cards with him was for the purpose of showing it to someone, inducing the others to treat him as if he was a genuine police officer.

65.  In my view, criminality of possessing these false instruments is analogous to the falsely pretending to be a public officer as in the 3^rd charge.  Sentencing starting point therefore is 5 months’ imprisonment.  The same is discounted by one-third by reason of his guilty plea and is further discounted by 10 days by reason that he was acting under duress at the time. 

66.  The defendant is therefore sentenced to 3 months’ imprisonment for this charge. 

Totality Principle

67.  Coming to consider the totality principle and considering the overall criminality of the defendant in this case, the court finds just and proportionate sentence on the defendant is 41 months’ imprisonment. 

68.  As the 1^st and the 4^th charge offence are part and parcel of the same set of events, this court orders that sentence for the 1^st charge and the 4^th charge are to run totally concurrent with each other.  2 months of the sentence for the 3^rd charge and 1 month of the sentence for the 5^th charge are to run consecutive to the sentence of the 1^st charge, the rest to run concurrently, bringing the total sentence to 41 months’ imprisonment.