HKSAR v. LAM CHI YUEN

DCCC 370/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 370 OF 2012

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Reasons for Verdict

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1. The defendant faces 7 charges of dealing with property known or believed to represent proceeds of indictable offence, contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap. 455.

2. The prosecution case was that between 3 October 2006 and 9 February 2010, the defendant had dealt with the funds in 6 bank accounts and the Hong Kong Jockey Club account with a total sum of more than $109 million. Among these accounts, all were held in the sole name of the defendant except that 2 accounts were held in the name of Chun Fat Finance Assurance Company (“Chun Fat”) where the defendant was the sole proprietor.

3. The prosecution submitted that from the IRD records of the defendant and Chun Fat, and also from his record of interview, the defendant only had modest income, or had even been trading at a loss, while there were numerous bank transactions, large in number and sum between various accounts, and yet the total sum deposited and withdrawn were nearly the same. The prosecution said the defendant had reasonable grounds to believe these funds represented the proceeds of indictable offence and he still dealt with them. 

4. The defendant, however, stated that in fact, he had 24 companies employing 80 staff at its peak, though the companies were held by his staff or friends. These companies operated guarantee business and debt collection business. The defendant said the above accounts showed the business income and expenses, including staff remuneration and other items, where all amounts were from legitimate business. He also called upon more than 30 witnesses to confirm as his supervisors and clerks. There were also friends and a director of a financial company saying having business dealings with him. 

5. Most of the prosecution case was not challenged, and the following facts were admitted pursuant to section 65C of the Criminal Procedures Ordinance (P15):-

1) The defendant was, at all material times, the named holder of the following accounts:-

i. Bank of China account 012-351-1-009038-0 (P6) (Charge 1)

ii. Hang Seng Bank account 777-017484-888 (P7) (Charge 4)

iii. Hang Seng Bank account 777-017484-001 (P7A) (Charge 5)

iv. HSBC account 586-189797-288 (P8) (Charge 6)

v. Hong Kong Jockey Club account 01827992 (P9) (Charge 7)

2) The defendant was the sole proprietor of Chun Fat Finance Assurance Company.

3) Chun Fat Finance Assurance Company was at all material the named holder of the following accounts:-

i. Bank of China account 012-561-0-000937-4 (P10) (Charge 2)

ii. Bank of China account 012-561-1-003371-6 (P10A) (Charge 3)

4) The defendant was the sole signatory of the above Bank of China’s accounts.

5) The defendant’s income and tax payable for the following periods is tabled below:-

Year	Income (HKD)	Tax Payable
2004 / 2005	Nil	Nil
2005 / 2006	Nil	Nil
2007 / 2008	Nil	Nil
2008 / 2009	Nil	Nil

6) The defendant has not filed a tax return since 2008 / 2009.

7) Chun Fat Finance Assurance Company’s income and tax payable for the following period is tabled below:-

Year	Income (HKD)	Tax Payable
2004 / 2005	Loss of $18,690	Nil
2005 / 2006	$55,758	Nil
2007 / 2008	Nil	Nil
2008 / 2009	Nil	Nil

8) The defendant was arrested by DPC 52062 at Fu Yin house, Tai Wo Hau Estate, Kwai Chung at about 1034 hours on 5 January 2010, for the offence of carrying on business as a money lender without a lawful money lender’s licence. Under caution, defendant stated, “Let’s talk in the police station.”

9) The chain of evidence of the documentary exhibits produced is not disputed.

10) The statement of Choi Sau-kuen of Inland Revenue Department together with exhibits attached (P3).

11) The following computer certificates of evidence pursuant to section 22A of the Evidence Ordinance:-

i. The records of a betting account with the Hong Kong Jockey Club, account number 01827992, registered under the name of Lam Chi-yuen between 28 June 2007 and 1 February 2010;

ii. The travel records of Lam Chi-yuen between 3 October 2006 and 9 February 2010, prepared by Tai Lap Chi, Senior Immigration Officer of the Hong Kong SAR (P4);

iii. The documents kept by the Inland Revenue Department in respect of Lam Chi-yuen between 2004 to 2010 (P5);

iv. The documents kept by the Inland Revenue Department in respect of various defence witnesses (P11), translation (P11A);

v. Notice to person in custody (P1 and P1A);

vi. Defendant’s record of interview made on 5 January 2010 (P2), translation (P2A);

12) The record of interview were given voluntarily by the defendant. There is no dispute as to its admissibility.

13) Mok So‑chi is the ex-wife of the defendant.

14) The bank opening mandates for BOC, HSB and HSBC are produced as P12, P13 and P14 respectively.

Summary of Evidence

6. The prosecution only called upon the investigation officer and the customer service officer of the Hong Kong Jockey Club to give evidence, while 4 statements of the officer of IRD were admitted pursuant to section 65B of the Criminal Procedures Ordinance (P3). 

7. Sergeant 52062 Leung Wing-hon, the investigation officer had in Court produced 7 charts of each account of each charge, which showed the summary of transactions including all types of deposits and withdrawals from the bank records, cash or transfer deposits as well as ATM, transfer or cheque withdrawals (C1 to C7). 

8. At the end of each chart, the total number of deposits and withdrawals and the total amounts were listed out. For example of Charge 1 relating to defendant’s Bank of China savings account number 012-351-1-009038-0, the account was opened on 27 June 2006.  Between 3 October 2006 and 26 January 2010, there were altogether 663 deposits for a total sum of $8,704,787, while there were 747 withdrawals totalling $8,696,728. Annexe I and II of the prosecution opening also provided a useful breakdown of each account for each charge, where reference could be made.

9. The most significant amount could be seen on Charge 4 of defendant’s Hang Seng Bank account number 777-017484-888 where there were altogether 567 deposits for $36,472,608, and 596 withdrawals for $36,465,802. Charges 2 and 3 also involved a substantial sum, about $22 and $21 million, with very close amount for deposits and withdrawals respectively. For Charge 5 and 6, it involved about $7.9 and $8.8 million, also with similar sums for both deposits and withdrawals. 

10. For Charge 7, Mr Chu Kam-lun of the Hong Kong Jockey Club also confirmed the records which show the amounts for deposit and withdrawals were both about $4.4 million. By deducting the winning sum of about $367,000, the charge sum was amended to $4,045,885 accordingly. He agreed that most cash deposits were made at off-course betting centre in Mong Kok from the records. 

Record of Interview

11. The record of interview was given voluntarily by the defendant on 5 January 2010 (P2, P2A). Under caution, defendant said he worked as a mainland property agent for 3 years, earning commission from sale and purchase of flats and land. He said the commissions were paid in cash and not taxable because he came to know the sellers through his friends and he looked for buyers. He was self-employed and not working for any company. He had no other business or income, other than working as a property agent in the mainland.

12. When asked for source of deposits and debits between 16 July 2009 and 14 November 2009 of his Hang Seng Bank account 777-017484-888 (Charge 4), he said he did not remember, but he did not let anyone else use this account and he used this account for savings. 

13. When referring to a set of documents and invoices relating to placing advertisement in the Oriental Daily News by issuing cheque from his Hang Seng Bank account 777‑017484-001 (Charge 5). He said the cheque was issued for a friend to make payment, and he did not know the content of ads. He also did not know the background of the company placing the ads, or whether that company had a moneylender’s licence, but he himself did not have a moneylender’s licence.  (The document attached showed that the advertisements were placed by Honest City Investment Company advertising of personal loan.)  

Defendant’s evidence

14. The defendant elected to give evidence. As to his record of interview, he admitted telling lies therein. The funds in his Hang Seng Bank savings account were used to repay debt collection companies. The amounts was about a third of the total funds withdrawn. As to the above advertisement, he said it was for his own business.

15. The defendant said in fact he had 24 companies and 80 staff at its peak. They carried on guarantee business and debt collection business. As to the nature of the guarantee business, the defendant said there were customers whom, because of various reasons, say, bankrupt or lack of stable income or proof, could not get loans from financial companies. The defendant would then act as guarantor to assist them to get loans, but charged them for commission about 15-40% of the loan amount for ever successful loan (so-called “guarantee money”), and he said the general loan amount may be around $10,000. The customers also had to pay $50 for photocopying charge. There were also mortgage referrals, where he would charge 1-3% of the loan. 

16. He got involved into this business around 1997 to 1998, through introduction by friends, then he started Chun Fat in 2004. As his companies were frequently disturbed or harassed by the police, he therefore asked his friends or staff to open different companies on his behalf in different districts to avoid the harassment. Exhibit D1 were part of the list of his companies he could remember.  Most were for guarantee business except Kin Fung Fact Finders Company, Shun Shing Finance Assurance Company and Sze Shun Credit Management Company, which were in debt collection business

17. In 2006, the loan amount of these companies were around $7 million per month. With average guarantee money of about 30%, the guarantee money received were about $2 million monthly, however, it was difficult to calculate net profit because of the bad debt. Since 2008, the business got worse because other financial companies were hiring more low-salaried staff from mainland and were more competitive. 

18. The defendant said he would pay for all the expenses, including advertisements, salaries, commission, bonus, rent and usual office expenses, and would get all the profits from the business. Advertisements would be placed to attract customers. When a customer approached, they would need to fill the application form and sign the agreement. Example, D12(1) and (2). Each customer would be assessed to determine the commission rate according to their financial background. They would then be accompanied by his staff to a designated financial company to apply for loans. Once successful, the staff would get commission, i.e. guarantee money from customer, and then make cash or transfer deposit back to the defendant’s bank account as directed by the defendant through the supervisor of different companies at the end of each working day. Sometimes it may be done by the supervisor through ATM or bank transfer deposit, or even to the defendant directly if they could meet each other. If so, defendent may, in turn, deposit the cash he got to his Hong Kong Jockey Club account. However, some staff may deposit the guarantee money into their account first and then transfer to the defendant’s account since the deposit machine did not take $50 note. 

19. The defendant also explained that he needed to open so many bank accounts to facilitate money transfers, since there were limits for transfer through ATM. Staff salary would be paid on 5th and 20th every month and commission on the 10th or nearer date if it falls on a holiday. Amongst the 7 accounts, only the Bank of China account used a bank book, where the defendant may make use to check for updates, while Hang Seng Bank savings account (Charge 4) was mainly used to repay bad debts to financial companies. The average bad debts was about 10-15% per month. While the guarantee money was collected in cash, when reaching certain level, it would be credited to the defendant or Chun Fat’s Bank of China’s account, as directed by the defendant.

20. For company expenses, including remuneration, he would either pay the supervisor a sum in cash or through bank transfer. Sometimes, the supervisor may also get all the amount and further distribute to other staff. 

21. The defendant further said, in case where a customer did not repay, the respective financial company would inform them, the case would transfer to his other debt collections companies to chase the amount. However, if it turns out to be a bad debt, the defendant has to repay the loan amount to the financial company.  However, there wasn’t any formal written agreement between the defendant and the financial companies, since the owners of which would not want any linkage with the defendant’s company as appearing on the books. Thus, for repaying loan from bad debts, the financial company would arrange or designate different accounts for defendant to repay. For example, see Exhibit D6, page 7, list of Bank of China’s cheques paid, including altogether $1.1 million paid to Tai Mak & Partners 戴思華麥家榮律師行 (Volume 10, p.4385 and Volume 11, p.4405-4583). 

22. For daily routine, defendant said he went to Nam Fung Centre office every morning checking business, and after lunch, he would go to Mong Kok office to collect money from supervisors. For convenience, he would deposit cash into his Hong Kong Jockey Club account in Mong Kok.

23. As to the formal records of business transactions, he said the police would, from time to time, seize documents from his companies for investigation, and when returned, it would always appear very disorganised and the computer hard disc was either missing or damaged and files could not be retrieved. Defendant also produced a list of his staff having been arrested or dealt with by the police in different police stations (D4). The defendant also referred to a case where some staff of his KS Properties Consulting Company were even charged, but acquitted after trial (TWCC1224/2010 & there appeared having 18 box of files containing 1,366 application forms as exhibits, which had been returned after trial). 

24. As to his ex-wife Mok So-chi, defendant said he did give substantial sum to her for investment. He also trusted her to keep money for him. 

25. For tax returns, he admitted the tax returns of Chun Fat were not correct because he did not and could not have all the documents and records for filing as police had seized and did not return properly. Yet, he said he did not lodge any complaint in this regard. But he, therefore, only instructed his secretary to use simple tax return approach to file tax returns, presumably just from documents left at hands. As to those companies he asked his friends or staff to open, the respective tax returns were also not correct. 

26. He also said he had helped his friend, Mr Wong Kok-yan, to invest in mainland and there were also joint ventures for karaoke and hot pot business.

27. In summary, as to Charge 1, 3, 4 and 6, the defendant was referred to defendant’s Exhibit DA and DB extracted from C1 to C7 categorising by different account holders where money had been transferred to and from the defendant’s account. By reference to D7 to D11, one may tally the amount possibly with evidence of other defence witnesses. 

28. As to Charge 2 relating to Chun Fat Bank of China’s accounts, most sums were deposited through the defendant or other Chun Fat Bank of China’s accounts (Charges 1 and 3) where with reference to Exhibit D5 and D6, one may find the sums were then used to pay staff, car expenses, fuel, management fees, advertisement, office stationery and phone bills. 

29. As to Charge 5, relating to Hang Seng current accounts, most deposits were from the defendant’s other Hang Seng Bank account (Charge 4) and similarly, these were for paying staff salary, advertisements; substantial sums had  also been transferred to ex-wife for investment. 

30. As to Charge 7, the defendant’s banking account with Hong Kong Jockey Club, as said defendant would collect guarantee money and deposit cash into Mong Kok off-course betting centre. This account was also linked to the defendant’s HSBC account (Charge 6) where money accumulated would be transferred to. 

Defence Witnesses

31. Apart from defendant, he also called 14 supervisors and 16 clerks, allegedly all working for him in his companies to give evidence. Other than 3 more friends and a director of a financial company purportedly to have dealings with him, for all the supervisors and clerks, other than DW2 to DW4, namely Chiu Yu, Leung Chung-hup and Leung Ka-yu, all others had their witness statements prepared and admitted by section 65B of the Criminal Procedures Ordinance (DW5 to DW25, statements D15 to D25, DW29 to DW34, statements D37 to D42).

Supervisors’ Evidence

32. The content of their statements and evidence in Court of all supervisors were very similar, if not the same. For example, DW5, Mr Hui Lee-kuen, his statement essentially tells that he was instructed by his boss, the defendant, to establish a company for him. In this case, Jun Fat Financial Planning Company (“Jun Fat”), was held in the name of Mr Hui as sole proprietor but defendant was the actual owner. The defendant paid all expenses and pocketed all profits. 

33. The business was to act as guarantor to customers seeking loans from licensed financial company. Often, these customers would have difficulty to get loan because of their financial background. Mr Hui was in charge of daily operations. Advertisements would be posted in newspapers. When customer approached, they needed to fill the form and he would check the ID card, employment nature, salary and address proof, if any, before deciding whether to act as guarantor for them and determine the commission (guarantee money) charged, usually around 15-40% of the loan amount. Then an agreement would be signed. The clerk would then accompany the customer to the financial company to get loans, if successful. Money lender would issue cheque and the clerk would go with the customer to the bank to encash and get the guarantee money, plus $50 photocopying charges. If not successful, no charge would be imposed. 

34. Thereafter, the clerk would bring the guarantee money to the office. The defendant may come to the office to collect, or the defendant would direct a designated defendant’s account to be deposited into. Sometimes, the guarantee money may first be deposited into his or staff’s account before transferring back to the defendant’s account. 

35. The operational expenses of Jun Fat were salary, commission, bonus, advertisement, rent, management fees, office equipment, all borne by the defendant. Sometimes he or his staff would pay first before being reimbursed by the defendant through cash or bank transfer. Salaries were usually paid on 5th or 20^th, about 3% commission from monthly turnover would also be given on 10th or nearer date. Sometimes he would get all sums from defendant first and then distribute to other staff accordingly. These salaries or commission to be paid by cash or through bank transfer. DA and/or DB, and extracted summary of accounts attached with statement also showed the respective items to or from his account to defendant’s. In gist for sums deposited or withdrawn, they were all related to the business (also see his statement D15, annex A-F2). 

36. During the operation of Jun Fat, he had been arrested by police of operating unlicensed moneylender. Documents, files and computers were seized, but after some period of time, he was released unconditionally with return of documents, only to find them disorganised and computer dismantled or damaged. 

Clerks’ Evidence

37. Similarly, all statements and evidence in Court were very similar, if not the same. For example, DW29, statement D37, Mr Chan Wai-lung said he worked as a clerk for defendant, he was deployed by the defendant to work in his different companies. The nature of the business was the same as said by all supervisors. The clerk would ask the client to fill in the form for the supervisor to assess and determine the rate of guarantee money, usually 15-40% of the loan amount. After signing the agreement, the clerk would accompany the customer to the moneylender to apply for loan. If successful, the clerk would go with the customer to the bank to encash and get the guarantee money. 

38. For the guarantee money, as directed by the supervisors, sometimes it would be paid to the supervisor or made deposit to different accounts as directed. If asked by the defendant to pay for some expenses, the clerk would get the reimbursement from defendant by cash or through bank transfer. Salary was paid on 5th and 20th, while commission on 10th. It could be by cash or bank transfer, DA and/or DB and extracted summary of account attached to the statement D37 also showed the respective items to or from his account to defendant’s. In gists for sums deposited or withdrawn, they were all related to the business. He had been arrested and the office been raided with documents and files taken away. Months later, he was released unconditionally with damaged documents and computer returned. 

39. Under cross-examination, when asked why they would be willing to open a company for the defendant, most supervisors inevitably said they knew the defendant was busy and/or that the defendant had been harassed by the police, but they thought the business was legitimate, so they would agree to do so. However, when confronted with the tax returns of the respective companies, which apparently would not tally with their saying that they were just employees and not owners, most supervisors elected to refuse to answer any tax-related questions after warning of self-incriminating issue. Their salary was about $8,000 to $10,000 per month, plus 3% commission on monthly turnover, maybe about a few thousand more, but amongst these 3%, supervisors would normally take half and the rest be shared by all other staff. 

40. And for the clerks, they did not have any written employment contract. They worked under the supervisor and earned about $7,000 per month, plus commission as directed by the supervisor. Most also refused to answer any tax-related matters after warning of self-incriminating issue. 

The Friends

41. Defendant called upon 3 friends to testify, namely DW26 Kwan Man-chung, DW27 Lai Kam-cheung and DW28 Joeson Chung-kei. Mr Kwan said he had borrowed altogether $200,000 from the defendant between 2007 and 2008. The said sum had been repaid, but there was no proof of repayment. He also said all dealings were through defendant’s HSBC account.

42. Mr Lai said he had borrowed $200,000 from the defendant and that had been repaid, but there was no proof as well.

43. Joeson said the defendant had given him $500,000 to invest, but later on, defendant wanted the money back. Joeson then gave back around $500,000 to $600,000 including some profit. There was a payment slip D36 of $250,000 by his sister-in-law Chan Mei-yee to the defendant, and another cash deposit of $100,000.  For the rest, because of long lapse of time, the details of which could not be remembered. 

The Money Lender

44. DW35 Leung Chin-yan Elaine, was one of the owners and director of Gain Hero Finance Limited, where she said having dealings with the defendant.  Ms Leung said Gain Hero was a licensed moneylender. There was a transfer slip from the defendant to Gain Hero (Volume 7, p.5563) and defendant also transferred substantial sum to her sister’s personal account 254-3-031724, whom was also another director of Gain Hero (see D43 and DA Charge 4, p.56/168, showing total withdrawals from defendant to Ms Leung’s account, a total sum of about $2 million, while deposits from her about $939,000). 

45. She also produced some sample loan agreements, where Mr Leung Ka-yu of Honest City Investment Company had acted as guarantor for the borrowers, D44(1)-(3), translation D44(1A)-(3A). However, there was no written agreement between the defendant and Gain Hero.

The Law

46. The law on money laundering is quite settled. The prosecution need not prove the commission of the original indictable offence that gave rise to the proceeds. What is required is to prove that the defendant had reasonable grounds to believe that the property represented a person’s proceeds of the offence and there is no need to prove the specific conduct of the underlying offence. See HKSAR v Lee Ching [1998] HKEC 278 and HKSAR v Lam Hei-kit CACC 84/2003. Further, the prosecution also does not need to prove that the property is in fact the proceeds of an indictable offence, HKSAR v Wong Ping-Shui Adam [2001] 1 HKLRD 346.

47. Recently, the Court of Appeal in HKSAR v Pang Hung Fai CACC34 /2012 also formulated the two-stage test as follows:- 

1) The first step in determining whether a defendant had reasonable grounds to believe is to identify all the facts known to the defendant that relate to the dealing with property that is the subject of the charge.

2) The second step is to process these facts through the mind of the common sense, right-thinking member of the community and determine whether this person, possessed of these facts, objectively would consider them sufficient to leada person to believe that the property in question constitutes the proceeds of an indictable offence.

Analysis

48. Ms Gwilt for the defendant, essentially submitted that the bank transactions involved only related to the normal business transactions of his guarantee business as explained in Court by the defendant, as well as most defence witnesses, including all supervisors and clerks in detail. The significant number of transactions under 7 Charges were all inter-related or just inter-bank transfers as required for day-in and day-out payment of all company’s expenses and also from daily business income.

49. However, on this aspect, the defendant even portrayed that he was the boss of 24 companies, with 80 staff at its peak; yet, all companies were not held in defendant’s name, as appeared in the business registration records, except Chun Fat, where the defendant was the sole proprietor, but this was also formally ceased in April 2007, as revealed by the defendant’s letter to IRD (Volume 2, p.3619- 3635). Apart from defendant’s own stories, there wasn’t even one single piece of written document which could possibly link the defendant to any of these companies as said.

50. While for asking friends or staff to open companies on defendant’s behalf as alleged, if the reason were to avoid police harassment, why then other companies also be frequently disturbed as said. If for development, why having so many people getting involved to hold companies in their names, but not defendant’s, not to mention, why would any person, just earning perhaps $10,000 to $20,000 per month, be that willing to let their names be used as sole proprietor of a company, both facing heavy legal or commercial burden, even acting as guarantor on papers, example see D44(1)-(3), where Leung Ka-yu as sole proprietor of Honest City, yet also seeing numerous transactions going through their personal accounts. These arrangements, as alleged, clearly defied any common sense, commercially or realistically.

51. Apart from more serious issue on the tax returns (staff appearing only as sole proprietor but not employees), there also wasn’t any written employment contract nor any employer’s confirmation in writing whatsoever (except some appeared only in early stage of tax returns filed by Chun Fat). Clearly, there must be more story and details behind were there any actual linkage to the defendant; yet, none had told the whole truth to the Court. 

52. Ms Gwilt would of course, further point to the numerous bank transactions of small thousands transferred from defendant’s various accounts to different account of DWs on 5th or 20th or nearer 10th, which may tally with the pattern of income or commission as said by all staff. However, with closer look to the details, one may easily find that the entries were very irregular and/or intermittent; some by cash, some by bank transfer, some from supervisors, claiming that they would further distribute. Were these just genuine payment of salary or commission? Why would this irregular pattern exist? Why would different account be used? Why would the tax return not tally? Why wasn’t there any formal proof? All these could only suggest secrecy and undisclosed dealings behind, where likewise, none have been willing and prepared to tell the whole truth to this Court.

53. More importantly, looking at the nature of the business as alleged, if these customers were of poor financial background, then why would licensed moneylender approve the loans? If it were said because of the guarantee from the defendant, why wasn’t there any written guarantee agreement between the defendant and the financial companies?  Why, then, say for example, the sole proprietor of Honest City, Mr Leung, would then act as the guarantor as said?  See D44(1)-(3). Further, defendant said the risk of bad debt was high. If the customer defaulted, he had to repay the loan. If so, why the licensed moneylender would designate a different account for defendant to deposit? Defendant said the moneylenders didn’t want any linkage in papers, but why and what to be afraid of, if these were legitimate and proper, again, the whole plot was clearly left undisclosed and unexplained. 

54. Further, DW35 Ms Leung, the director of a moneylender, was said to have business dealings with the defendant, yet why the personal account instead of the moneylender’s account i.e. company’s account be used for defendant’s alleged repayment of loan for the customer in default. When substantial amounts were involved, why wasn’t there any formal written receipt of that be shown? Defendant kept on saying that documents had been seized, but returned disorderly. Even if it were true, why couldn’t any useful material or information be produced in that regard? Not to mention, further, that there was also lack of documentary proof of investment or business venture with his friends or wife, as alleged. 

55. Yet, it must be noted that the defendant has no burden to prove anything. The entire burden rests on the prosecution to prove the case beyond all reasonable doubt. 

56. As to the business turnover, the defendant said it could be up to $2 million per month at the peak, though in subsequent years, it turned worse, but where did the substantial profit go? Amongst 7 accounts, why would eventually the amount of total deposits and withdrawals be so close, if not nearly the same? Mr Chau for the prosecution, also tried to tabulate some examples on each charge of money coming in and out within the same day, which was said as hallmarks of money laundering as referred in paragraphs 39 to 45 of his closing submission. However, Ms Gwilt submitted that those same or similar amounts could also be easily matched against most of DWs’ evidence as for payment of salary and/or receiving the so-called guarantee money. 

57. With the numerous transactions, but lack of the evidence from forensic accountant to check against the fund flow, it clearly could not be easy to match all money in and out. However, the significant outcome was simply that for all 7 accounts, it was so surprising to find, eventually, the total deposits and amounts withdrawn were all so close if not the same as follows:-

58. When assessing defendant’s evidence, one must also not lose sight that there was great disparity between his declared income to IRD and the significant deposits in all 7 accounts. While there was only a declared loss of $18,690 and profit of $55,758 for year 2004 to year 2006 of Chun Fat, there was no declared profit nor tax payable for both the defendant and Chun Fat in the charge period. However, the total deposits for all the accounts were up to more than $109 million. 

59. Although the defendant in Court admitted that the tax returns filed were not correct due to the lack of documents and simple tax approach was used, it could hardly be imagined that there could be nil income nor tax payable. No doubt, the defendant also admitted telling lies in the record of interview, whereas in his statements he said his only income was just as property agent in China and the Hang Seng Bank accounts was only used for savings and cheque for advertisement was just issued for friends, where defendant not knowing the content or background of the company, now, what the defendant said in Court was totally different. Not only had he been operating and controlling such a large number of different companies held by others as alleged, there was also a very substantial income from the business involving so many accounts, and also with advertisement put up for promotion of his own business. 

60. Though it must be noted that lies itself could not prove guilt and there could be many innocent reasons behind. However, taking into account the many queries and odds as aforesaid, all in all, I must conclude that the defendant and his witnesses were clearly not telling, nor willing to tell the whole truth to this Court, and thus, their evidence shall be rejected accordingly. 

61. Now, when applying the two-stage test in the present case, no doubt the defendant had been operating these 6 bank accounts and the Hong Kong Jockey Club account as sole signatory. The objective facts were that there have been numerous bank transactions with so many banks throughout the charge period of such a substantial sum totalling over $100 million, yet there had not been any declared taxable profit from the defendant and Chun Fat, while Chun Fat even formally ceased business in April 2007, and yet there was still many active Hang Seng Bank transactions till 2009 (see C2 to C3). 

62. As observed by the Court of Appeal in HKSAR v Tam Lap Shek CACC199/2012, paragraph 93,

“The fact that on numerous occasions monies were deposited and withdrawn as cash and that transfer were made to and from particular accounts to other accounts spoke obviously and by itself to the resulting difficulties in tracing an audit trail and establishing the ownership of funds. What else is the nature of money-laundering?

The receipt of monies, particularly as cash deposits, without any obvious pattern suggestive of business or employment raised questions by itself. Similarly, a pattern of withdrawal of large sums of money in cash raised its own obvious questions.”

63. In the present case, even if one may say that there could be some pattern of business activities between the parties, the exact nature and details were far from clear and concrete, and no doubt there must be unlawful business engaged, where none would be willing to reveal the whole truth. See also HKSAR v Oei Hengky Wiryo [2007] 10 HKCFAR 98, paragraph 68, McHugh, NPJ of CFA noted the following:-

“The evidence established that very large sums of money passed between Kam and Oei. That they had a business relationship of some kind is hardly open to doubt. Moreover, the evidence from tax returns indicated that Kam was not involved in any lawful business that could have generated the sums of money that passed between him and Oei. Furthermore, Oei had not filed any tax returns that indicated that he was engaged in any lawful business in Hong Kong. Thus, the evidence proving the transfers of money between their respective bank accounts and others gave rise to the inference that Kam and Oei were probably engaged in an unlawful business of some kind.”

64. Now, with the facts and circumstances in this case as aforesaid, and by allowing all defendant’s accounts be used in such frequency and fashion as exhibited in C1 to C7 involving substantial amounts together, and where the total deposits and withdrawals were nearly the same and with the closing minimal balance in each account of the charging period, I agree with the prosecution that the defendant clearly had been using these accounts as a repository for funds. No doubt, each charge has to be considered separately, but the circumstances were no different, either in its pattern and of similar amounts in and out. I therefore conclude, that the defendant must have reasonable grounds to believe that the funds passing through his 7 accounts, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence, and the defendant had dealt with them. 

65. In the circumstances, I find the prosecution has proved beyond all reasonable doubt that the defendant had committed these 7 charges of money laundering and I shall convict him for all these charges accordingly. 

66. Lastly, I shall also add that even if the defendant’s version was to be believed to some extent, it would even involve a syndicate by all these companies and moneylender referred in lending money unlawfully and at an excessive rate.  Taking the loan agreement D44(3) and (3A) as an example, with the loan of $10,000 for 4 months with interest totalling $528, the agreement stated the interest rate was just at 27.6% per annum, however, the so-called guarantee money, averaged as 30% would mean another $3,000, or at least $1,500 for 15%, the commission, or so-called guarantee money, was clearly just the interest for loan in disguise. The whole arrangement was simply a sham to get round the legitimate maximum lending rate, to extort the borrower with weak bargaining power. I shall therefore also refer these matters to the police and IRD for further investigation of all these parties and witnesses involved, not to mention for any other possible action of tax evasion.

67. So, defendant, you are hereby convicted of all 7 charges accordingly.