HKSAR v. KWAN KIM FUNG

HCCC 400/2025

[2026] HKCFI 1474

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO. 400 OF 2025

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REASONS FOR SENTENCE

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The Charge

1.  On 17 November 2025, the Defendant pleaded guilty in the magistracy to seven 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 Ordinance, Cap. 455.  On the same day, he admitted a Summary of Facts dated 12 November 2025 and he was committed to the Court of First Instance for sentencing.  Today, before this Court, the Defendant confirmed his guilty pleas to the charges and his admission of the Summary of Facts.

Facts Admitted

2.  The facts of the case can be summarized as follows. 

3.  An email fraud involving a Canadian victim was reported to the Hong Kong Police in August 2017. The fraud involved a total of CAD11.8 million and part of the crime proceeds (around HK$23 million equivalent) was remitted to a local bank account (“Account 1”) of a company in the form of a sole proprietorship (“the Company”).  The Company was owned by the Defendant and he was the sole authorized signatory of Account 1.

4.  Apart from Account 1, the Defendant had exclusive control of six other bank accounts in Hong Kong:

(1) Three personal accounts in his own name (“Accounts 2-4”) all opened in 2016;

(2) A personal account belonging to his friend (“Account 5”) opened in 2017; and

(3) Two personal accounts belonging to his wife (“Accounts 6 & 7”) opened in 2017 and 2016 respectively.

5.  The transaction patterns in all seven bank accounts displayed hallmarks of money laundering.  The total amount of money laundered in the seven accounts was around HK$592.5 million equivalent, and there is no dispute that the amount would be reduced to around HK$381.7 million after inter-bank transfers amongst the accounts are deducted:-

Account	Total Deposit (HK$ equivalent)	Inter-bank Transfers (HK$ equivalent)	Net Amount (HK$ equivalent)
1	341,370,409.93	78,419,916.17	262,950,493.77
2	47,522,649.70	41,754,045.39	5,768,604.31
3	69,686,477.92	36,279,991.04	33,406,486.89
4	30,239,350.15	14,332,653.36	15,906,696.79
5	31,785,340.71	575,397.13	31,209,943.58
6	26,875,292.75	16,627,593.07	10,247,699.68
7	45,098,502.77	22,790,001.09	22,308,501.68
Total:	592,578,023.94	210,779,597.24	381,798,426.70

6.  The deposits and withdrawals in each of the seven accounts within the examined period were more or less of the same amounts.  According to the Treasury Accountant (“TA”), the fund patterns showed indications that the accounts were being used as temporary repository for funds.  The total deposits received by the accounts in the period under review were as follows:-

Account	Examined Period	Total Deposit
1	23 June 2016 – 28 August 2017	USD 44,047,794.83
2	23 January 2017 – 8 August 2017	USD 6,131,954.8
3	6 June 2016 – 24 May 2017	USD 4,480,367.59 CNY 30,941,264.69
4	23 December 2016 – 23 March 2017	USD 1,914,000.84 CNY 13,633,489.95
5	24 January 2017 – 18 August 2017	CNY 28,128,620.1
6	8 February 2017 – 26 June 2017	USD 3,467,779.71
7	14 June 2016 – 5 June 2017	USD 2,526,988.57 CNY 22,579,063.14

Provenance of funds & circular fund flows

7.  Account 1 was opened in the name of the Company, which was allegedly in the business of frozen seafood trading.  However, the Company reported no income, turnover and profit to the Inland Revenue Department (“IRD”).  All fund flows in Account 1 appeared to be wholly unconnected with its alleged trading business.

8.  As to the source of funds in Account 1, its top depositor was Sea Treasure Global Ltd. (approximately HK$154.5 million) which according to the IRD’s records did not carry out any business or have any assessable profits.

9.  Apart from Sea Treasure Global Ltd., the other major depositors of Account 1 were the personal accounts of the Defendant (including Accounts 2-4) and of the Defendant’s wife (Accounts 6-7) which deposited close to HK$50 million and around HK$28.6 million to Account 1 respectively.  A significant source of funds of Accounts 2-4 and Accounts 6‑7, in turn, were some CNY cash deposits, totalling CNY33.5 million.  As Accounts 2-4 and Accounts 6-7 were direct depositors to Account 1, the TA considered them to be Layer 1 accounts.

10.  From the analysis of Layer 1 accounts, the TA identified Account 5 as a depositor of Accounts 2-4 and Accounts 6-7.  In total, Account 5 deposited around CNY7 million into Accounts 2-4 and Accounts 6-7 in the relevant period.  On the other hand, CNY cash deposits were also one of the major sources of funds for Account 5: a total of CNY12.87 million was deposited into Account 5 by 1,139 transactions in the charge period which made up 45.8% of the deposits.  Apart from CNY cash deposits, Account 5 also received large amount of deposits from the bank account of the Defendant’s mother (approximately HK$4.1 million).

11.  The TA observed that one possibility for the patterns of transactions in the accounts was “smurfing”, which was aimed at breaking up large sums of money into smaller deposits.

12.  As for withdrawals from Account 1, almost all were paid out to other counterparties, totalling an amount equivalent to HK$341.9 million.  Out of the total withdrawal from Accounts 1, an amount equivalent to HK$56.8 million went back to Sea Treasure Global Ltd. Such large and circular fund flows could not be explained as both the Company and Sea Treasure Global Ltd. reportedly did not carry out any business.

Arrest and Cautioned Statements of the Defendant

13.  The Defendant was arrested on 2 September 2017.  In cautioned interviews, he admitted, inter alia, that:

(1) The seven bank accounts were under his exclusive control at all material times. It was his business to use the Company to make money transfers for clients to earn handling fees and margins at the rate of HK$200 to HK$300 for every HK$100,000 handled. The Defendant did not question the provenance and purpose of the funds, nor did he perform any gatekeeping precautions for the transfers; and

(2) His clients would deposit CNY into his bank accounts in the Mainland and the Defendant would withdraw CNY from his bank accounts in the Mainland in cash and bring the cash to Hong Kong for deposit physically. Eventually the Defendant would act as per his clients’ instructions to pay USD to the clients in Hong Kong. The Defendant also admitted that he had attended anti-money laundering seminars before.

14.  In the Summary of Facts, the Defendant admitted that at the material times, he had dealt with the property as particularized in the charges, knowing or having reasonable grounds to believe that the said property in whole or in part directly or indirectly represented any person’s proceeds of an indictable offence.

Background andmitigation

15.  Born in Fujian and raised in the Mainland, the Defendant is now aged 60.  In 1985, he migrated to Hong Kong with his wife and worked as a programmer in a textile company.  In 1990, the Defendant graduated with a degree of computer science.  From 2007 until his arrest, the Defendant worked as an insurance agent earning a monthly salary of around HK$10,000.

16.  The Defendant’s parents are in their 80’s and the Defendant has two younger brothers.  The Defendant’s wife is also aged 60 and their daughter and son are aged 35 and 30 respectively.  Since his remand, his wife has been taking care of their son who is suffering from schizophrenia.  This has taken a toll on her mental and physical conditions, causing symptoms such as high blood pressure.  The Defendant’s father has developed cancer recently and is receiving medical treatment.

17.  The Defendant has suffered from depression since 1992 with on‑and-off conditions throughout the years and received medications prescribed by doctors.  This Court was told that his conditions have become worse since his remand.  He has also developed high blood pressure and stomach-ache during his remand.

18.  The Defendant has a clear record.  He had been a treasurer and chairman of the incorporated owners of his building and contributed to the incorporated owners by solving building management issues together with other members from 1997 to 2020.

19.  A total of nine mitigation letters were submitted to the Court on his behalf, which were written by the Defendant himself, his family members and friends.  Collectively they portray him to be a man of good character who had strayed due to momentary lapse, and now being profoundly remorseful.  In all the mitigation letters, the authors pleaded for the Court’s leniency in sentencing.

20.  In his own letter, the Defendant asserted that his offending stemmed from financial pressures and a weak legal awareness, but he gave his full co-operation to the police and provided prompt restitution to the victim; and he has had deep self-reflection during his remand for nearly two years. 

Circumstances of the Offences

21.  His counsel, Mr. Danny Chan (leading Mr. Benjamin Chong), told the Court in mitigation that the Defendant had committed the present offences due to financial pressure in meeting his family’s expenses and out of his ignorance of the law. With the use of the Company, the Defendant operated a money exchange business and earned handling fees and margins for every money exchange.  Due to weak awareness of his legal obligations, he did not question his clients as to the sources and purposes of the funds nor did he undertake any anti-money laundering measures when conducting this business.  The Defendant asserted that he did not know any predicate offence behind the transactions.

22.  As to the email fraud afore-mentioned, the Defendant had no knowledge of it, nor was he was aware of the transfer of CAD into Account 1.   The Court was informed that after learning that the proceeds had originated from a fraud, the Defendant signed an authorization to the bank with a view to effecting restitution of the proceeds to the victim.  As Account 1 had already been frozen by then, no actual restitution was eventually effected.

23.  The Court was told that the Defendant now fully understands the seriousness of his offending and he is willing to face the consequences.

Sentence

24.  In Secretary of Justice v Wan Kwok Keung [2012] 1 HKLRD 201 (at §13), the Court of Appeal held that generally, the sentence for a “money laundering” offence should mainly reflect the amount of “black money” laundered and not the benefit obtained by the defendant or others.  The Court of Appeal also observed (at §15) that in HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, the following range of starting points was identified: the sentencing starting point is 3 years or so where the “black money” involved is between 1 million and 2 million dollars; 4 years or so where it is between 3 million and 6 million dollars; and could be over 5 years where it is above 10 million dollars.

25.  In the case of Secretary for Justice v Herzberg [2010] 1 HKLRD 502, which was cited by Mr. Chan, the defendant was responsible for the laundering of some HK$683 million over a period of some 21 months with an international element, which activity continued after the defendant had been warned of the underlying fraudulent scheme.  For such activities, the Court of Appeal considered a 9 years’ starting point to be appropriate.  Apart from the one-third discount due to the defendant’s guilty pleas, the Court of Appeal did not give any further discount by virtue of his previous good character.

26.  In HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545 (at §15), the Court of Appeal further held (at §9) that whilst there are no sentencing guidelines for the offence of dealing with the proceeds from an indictable offence, the following factors are to be taken into account when determining sentence[1]:-

(1) It is the amount of money involved that is a major consideration and not the amount of benefit received by a defendant in the transaction;

(2) The culpability of the offence lies in the assistance, support and encouragement offered to the commission of an indictable offence. So, a defendant’s level of participation and the number of occasions on which he is involved in the “money laundering” activities are relevant factors to be considered;

(3) The offence of dealing with the proceeds from an indictable offence does not necessarily have any direct correlation with the indictable offence in question. However, if the relevant indictable offence can be identified, the court may take into account the sentence imposed on the indictable offence per se when determining the sentence of the dealing offence;

(4) If the case has an international element involving activities carried out across different regions, the court may impose a more severe sentence. This is to protect Hong Kong’s reputation as an international finance and banking hub from being tarnished; and

(5) The length of time the offence lasted.

27.  In the recent case of HKSAR v Tsang Yiu Kong CACC 77/2022, [2024] HKCA 1062, the Court of Appeal suggested the following approach (at §24):

“… A sentencing approach which is on the one hand the most well‑ordered with the most predictable result while, on the other hand, the fairest without rendering the sentence disproportionate is: (1) ticking the cross deposit-and-withdrawal amounts off; (2) determining the starting point according to the actual amount of the black money; and (3) increasing the term with regard to the seriousness of layering in an individual case to reflect the defendant’s true culpability. Regarding the result achieved from this approach, one cannot rule out the possibility that the outcome may be closer to the sentence applicable to the case where cross deposit-and-withdrawal is a feature, but it may also be closer to the one where cross deposit-and-withdrawal has been ticked off. It all depends on the seriousness of layering in an individual case.”

28.  In the present case the total amount of deposits into the seven accounts less the inter-bank transfers was equivalent to some HK$381.7 million.  I will use this figure to be the actual amount that was laundered by the Defendant to avoid double-counting. The deposits were paid into the accounts in USD or CNY; therefore the activities clearly involved an international element which is an aggravating factor.  The activities continued over the span of some 14 months, and a great number of transactions were conducted with the use of layering accounts, giving rise to further aggravation of the offences.  As the Defendant had exclusive control of all seven accounts, he was entirely responsible for all the money laundering activities in those accounts and based on his own admission, he was rather handsomely rewarded for his participation in such activities.  There is also evidence to show that part of the proceeds had come from a predicate offence, namely the afore‑mentioned email fraud, although there is no evidence to show the Defendant’s awareness of that predicate offence or any other predicate offence(s).

29.  Taking a global approach to sentence and given the aggravating factors articulated earlier, I take the view that an overall starting point of 7 years and 9 months would be appropriate for the seven offences.  In light of the Defendant’s clear record, his personal circumstances and his willingness to effect restitution of the crime proceeds to the victim as afore-mentioned (which demonstrated, to some extent, that he did not knowingly seek to benefit from crime proceeds), I shall discount the overall starting point by 6 months, bringing it to a reduced overall starting point of 7 years and 3 months’ imprisonment. 

30.  Lastly, given his pleas of guilty at the earliest opportunity, the Defendant would be given a further one-third discount, bringing the overall sentence down to a term of 4 years and 10 months’ imprisonment.

31.  The Defendant has pleaded guilty to a total of seven charges of “money laundering”.  In order to achieve the total sentence of 4 years and 10 months, I shall sentence the Defendant in the following way.  For the 1^st charge, I shall use a starting point of 7 years to be discounted by 6 months due to his clear record, personal circumstances and willingness to effect restitution, to be further discounted by one-third due to his plea, resulting in a sentence of 4 years and 4 months’ imprisonment.  For each of the 2^nd, 3^rd, 4^th, 5^th, 6^th and 7^th charges, I shall use a starting point of 5 years and 6 months to be discounted by one-third due to his pleas, resulting in a sentence of 3 years and 8 months’ imprisonment for each of those charges.  Taking into account the totality principle, I shall order one month of each of the sentences for the 2^nd, 3^rd, 4^th, 5^th, 6^th and 7^th charges to be served consecutively with the sentence for the 1^st charge, making a total sentence of 4 years and 10 months’ imprisonment. 

32.  The Defendant is therefore sentenced to a total term of imprisonment for 4 years and 10 months.