HKSAR v. SUBBA WILLIAM AND ANOTHER

DCCC 2/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 2 OF 2015

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REASONS FOR SENTENCE

1.  The defendants both stand convicted after trial of two separate charges of dealing with property knowing or having reasonable grounds to believe the property represented the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance.[1]

2.  Full particulars of the offences are set out in my reasons for verdict delivered on 28 October 2015.  In summary in March 2013 Mr Mohammed Abdulqawi Mohammed Saeed of “Sami Trading Centre” (“Sami Trading”) in Saudi Arabia was deceived into remitting US$140,000 to Subba Limited.  The email accounts of Mr Saeed and Mr Waleed, who ran a branch of Sami Trading in Yemen called “Al-Alimi Exhibition For Trading”, were hacked.  An email sent by Mr Waleed to Mr Saeed requesting payment to their supplier Hong Kong G.S. International Co Ltd was intercepted and replaced with an email requesting payment to Subba Limited.  On 9 March Mr Saeed, believing the request was genuine, remitted US$140,000 to Subba Limited from Sami Trading’s HSBC account in Jeddah, Saudi Arabia. 

3.  The sum of US$139,973 (i.e. US$140,000 less banking charges) was credited to the US dollar account of Subba Limited on 13 March 2013.  D1 was the sole director and shareholder of Subba Limited and the sole authorized signatory of the bank account.  This sum formed the basis of charge 2 against D1. 

4.  Two days earlier on 11 March 2013 the sum of US$59,938 (US$60,000 less banking charges) was credited to the same account.  This sum was remitted from Riyadh, Saudi Arabia[2]. This sum formed the basis of charge 1 against D1. 

5.  On the 14 March D1 remitted US$120,000 from the US dollar account of Subba Limited to Yamazaki Global Sources Limited (“Yamazaki”).  D2 was the sole director and shareholder of Yamazaki and a signatory of the bank account when the sum of US$120,000 was transferred to Yamazaki.  The transfer of US$120,000 to Yamazaki formed the basis of charge 3 against D2.

6.  D2 was arrested in December 2013.  In a video recorded interview D2 said that he received the sum of HK$418,014 in cash from D1 on 14 March, the same day US$120,000 was transferred to Yamazaki.  The receipt of HK$418,014 cash from D1 formed the basis of charge 4 against D2.

7.  At trial D1 testified that the monies were credited to the Subba Limited US dollar account pursuant to an agreement made for the sale of garments with a male called Kingslay.  D1 further testified that the transfer of US$120,000 to Yamazaki on 14 March together with HK$418,014 cash, paid the same day to D2, was made pursuant to an agreement between Subba Limited and Yamazaki for the supply of the garments.  I rejected D1’s evidence and found that there were no such agreements and that the documents purporting to show these agreements were fabricated.[3]

8.  Although the prosecution do not have to prove the monies represented the proceeds of an indictable offence they were able to do so in respect of the sum of US$139,973.  Mr Saeed having been deceived into remitting US$140,000 to Subba Limited I was satisfied the sum of US$139,973 credited to the Subba Limited US dollar account represented the proceeds of an indictable offence and that D1 dealt with the monies knowing that they represented the proceeds of an indictable offence or in the alternative had reasonable grounds to believe the monies were the proceeds of an indictable offence.

9.  There was no evidence that the sum of US$59,938 was also credited to the bank account of Subba Limited as a result of fraudulent conduct.  By reason of the fabrication of documents I was satisfied that the only inference to draw was that the documents were fabricated because D1 knew the monies represented the proceeds of an indictable offence or in the alternative had reasonable grounds to believe the monies were the proceeds of an indictable offence.

10.  In the video interviews D2 explained that the transfer of US$120,000 to Yamazaki and the cash payment of HK$418,014 were made pursuant to an agreement between Subba Limited and Yamazaki for the supply of garments.  I rejected D2’s explanations and found that there was no such agreement and that the documents purporting to show there was an agreement were fabricated.[4]

11.  I was satisfied the transfer of US$120,000 to Yamazaki and the cash payment of HK$418,014 represented the proceeds of an indictable offence and thatthe only inference to draw was that documents were fabricated because D2 knew the monies represented the proceeds of an indictable offence, or in the alternative had reasonable grounds to believe the monies were the proceeds of an indictable offence.

12.  Money laundering is a serious offence for which deterrent sentences are required.  A number of significant factors have been identified as relevant in determining the culpability of a defendant, including the nature of the predicate offence that generated the laundered money; the extent to which the offence assisted the crime or hindered its detection; whether the defendant had knowledge of that underlying offence or has turned a blind eye to the source of the money; the amount of money involved; whether there was an international element to the commission of the offence; the degree of sophistication of the offence and the level of the defendant's participation, including the length of time the offence lasted and the benefit he derived from the offence (see for example Secretary for Justice v Jerome Yuval Arnold Herzberg[5]; HKSAR v Hsu Yu Yi[6] and HKSAR v A male known as Boma Amaso)[7].

13.  The courts have emphasised that a defendant is to be sentenced on the facts of the money laundering charge and not on the facts of the underlying offence(see for example HKSAR v Chen Szu-ming[8] and HKSAR v Yam Kong-lai)[9].  Further, sentence should mainly reflect the amount of the money laundered (see for example Secretary for Justice v Ngai Fung Sin, Apple)[10]. 

Mitigation

14.  I have carefully considered everything said by Mr Tam on behalf of D1 and by Mr Mughal on behalf of D2 together with the background reports.  I have read the letter from D2’s employer which speaks very highly of D2.

15.  I take into account both defendants have clear records and have a young child to take care of.  In Secretary for Justice v Ngai Fung Sin, Apple[11] the Court of Appeal said that courts should not totally ignore the consequences which a defendant and his family would suffer as a result of the sentence, but in considering sentence a court cannot pay too much attention to this factor and sentence the defendant in an exceptionally compassionate manner.  From the reports both children appear, for the time being, to be well looked after in the absence of their fathers.

D1

16.  When US$59,938 was credited to the US dollar account of Subba Limited on 11 March 2013 the balance in the account was zero.  On 12 & 13 March respectively D1 transferred US$12,912.96 and US$47,000 to the HK dollar account of Subba Limited.  After US$139,973 was credited to the US dollar account on 13 March the next day D1 transferred US$19,900 to the HK dollar account and remitted US$120,000 to Yamazaki, leaving a balance in the US dollar account of US$74.76. 

17.  At the time of the transfers to the HK dollar account there had been no activity in the HK dollar account for almost two months, with a balance of $209.40 being maintained.  On 13 and 14 March D1 withdrew $353,000 and $254,800 from the Hong Kong dollar account of Subba Limited leaving a balance in the account of HK$10,534.69.

18.  When D1 was arrestedan application form for the transfer of US$140,000 from Sami Trading to Subba Limited[12], and a transaction confirmation purportedly issued by HSBC[13], were found in his bag.

19.  The application form being a document submitted by Mr Saeed to HSBC there was no reason whatsoever for D1 to be in possession of a copy.  I was satisfied the form was intercepted when Mr Saeed sent the forms to Mr Waleed for his confirmation[14]. The transaction confirmation dated 6 March purporting to confirm that US$140,000 was transferred to Subba Limited was a forgery, no remittance having been made on that date[15].

20.  I found inherently improbable that such documents would be given to anyone who was not involved in the fraud.  I was satisfied by possessing these documents D1 knew theUS$139,973 represented the proceeds of an indictable offence[16].

21.  Taking into account that:

(a) the amounts involved: US$59,938 and US$139,973;

(b) both sums were remitted from Saudi Arabia thereby adding an international element to the charges;

(c) D1 dealt with the monies between 11 and 14 March 2013and within three days transferred part to the HK dollar account which he then withdrew in cash and part to Yamazaki;

(d) the possession of the application form and transaction confirmation showed D1’s connection to the email fraud;

(e) D1 knew the monies represented the proceeds of an indictable offence;

(f) the fabrication of documents to conceal the source of the monies; and

(g) the clear record of the defendant together with his family circumstances;

I am satisfied the proper sentence after trial is 2 years and 6 months imprisonment on charge 1 and 3 years and 6 months imprisonment on charge 2.

D2

22.  Prior to US$120,000 being credited to the US dollar account of Yamazaki on 14 March the account had maintained a zero balance since 21 January 2013.  On 16 March the money was transferred to the Yamazaki HK dollar account, which account had been inactive since July 2012 and had maintained a balance of only $17.80.  The HK dollar equivalent HK$929,580 credited to the account was, save for $790.00, withdrawn by D2 in cash on 16 and 20 March, leaving a balance in the account of HK$907.08. 

23.  Taking into account that:

(a) the amounts involved: US$120,000 and HK$418,014;

(b) both sums were traced to the monies remitted from Saudi Arabia to Subba Limited thereby adding an international element to the charges. There is however no evidence D2 knew this;

(c) D2 dealt with the monies between 14 and 20 March 2013 and within six days, except for HK$907.08, withdrew all the money in cash;

(d) D2 knew the monies represented the proceeds of an indictable offence. There is however no evidence D2 knew they were from an email fraud;

(e) the fabrication of documents to conceal the source of the monies; and

(f) the clear record of the defendant together with his family circumstances;

I am satisfied that the proper sentence after trial is 3 years imprisonment on charge 3 and 2 years imprisonment on charge 4.

Agreement of the prosecution case

24.  Both Mr Tam and Mr Mughal ask that credit be given for both defendants agreeing the entirety of the prosecution case.  In HKSAR v Hsu Yu Yi[17] the Court of Appeal approved of the reduction of one month on account of admitting the prosecution case.  Hsu Yu Yi was referred to in HKSAR v Tam Lap Shek & another[18] where the Court of Appeal said that a small discount ought to have been given for agreeing the prosecution case.[19]  In the circumstances I am satisfied the sentences are to be reduced by one month.  

Delay

25.  Where there has been unreasonable delay in bringing an offender to justice this is a mitigating factor which may be taken into account in sentence.  All the circumstances must be looked at including whether the offender has acknowledged guilt; where the delay has given the offender the opportunity to rehabilitate himself; whether restitution has been made; whether there was a legitimate expectation the matter will not be further pursued; the size of the investigation and whether the time taken to bring the case to court was longer than necessary[20].

26.  D1 was arrested on 17 April 2013 and D2 on 16 December 2013.  Charges were laid on 6 November 2014.  Mr Lee has provided to court a chronology of major events.  The investigation took just under one year before the police sought legal advice.  The time taken is partly attributable to the fact that when D1 was further interviewed in July 2013 he told the police for the first time, inter alia, the involvement of D2.  The police therefore needed further time to investigate the new version of events put forward by D1 and to locate D2.    

27.  Mr Tam submits that the police should not have waited until the arrest of D2 before seeking legal advice.  Whilst the police could have sought legal advice earlier with regard to D1, I am satisfied the police are not at fault by waiting until D2 was arrested before seeking legal advice.  In my view the time taken to investigate the matter is not open to criticism. 

28.  The longest period is the obtaining of legal advice from the Department of Justice.  Whilst the video recorded interviews alone run to over 1000 pages and the documentary exhibit bundle produced at trial was 340 pages, this was not a complex case.  Just over 7 months to give legal advice therefore seems on the long side.  Arguably the matter could reasonably have been brought to court earlier than it was.  I am satisfied some credit should be given in sentence for this delay (see HKSAR v Wong Ka Wah)[21].  In the circumstances I further reduce the sentences by 1 month imprisonment. 

Sentence

29.  The defendants are sentenced as follows:

D1

Charge 1 - 2 years and 4 months imprisonment;

Charge 2 - 3 years and 4 months imprisonment;

Although the amounts involved in each charge arise from two different sources I am satisfied on overall sentence of 3 years and 4 months imprisonment properly reflects your criminal culpability. Accordingly I order the two sentences to be served concurrently.

D2

Charge 3 - 2 years and 10 months imprisonment;

Charge 4 - 1 year and 10 months imprisonment;

I am satisfied on overall sentence of 2 years and 10 months imprisonment properly reflects your criminal culpability and accordingly order the two sentences to be served concurrently.