HKSAR v. MU ZHIRONG

DCCC 253/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO.253 OF 2013

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Reasons for Sentence[1]

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1.  The defendant pleaded guilty in front of Judge Sham to one charge of ‘dealing with proceeds of an indictable offence’ and was duly convicted. However, as a result of communication between counsel and the learned judge that took place during mitigation, judge Sham considered that it was better that he did not continue to deal with the defendant’s sentencing. The case eventually came before me.

2.  Particulars of the charge are that the defendant between 18^th June 2010 and 31^st January 2011 dealt in HK$509,826.91, Euro30,000, and US$1,399,432.05, while having reasonable grounds to believe that the money in whole or in part directly or indirectly represented proceeds of an indictable offence.

Summary of facts

3.  The defendant is a mainland Chinese national.

4.  The defendant was at all material times the sole director of a company named “Geneco Consulting & Finance Limited” (“Geneco”). This company was in turn the  registered account holder of a DBS Bank account, with the defendant as the sole authorized signatory. The account was opened on 28^th June 2010 and closed on 18^th February 2011.

5.  During the account’s operation period of 7 months and 3 weeks, there were 10 deposits totaling HK$509,826.91 and 16 transfers or remittances out for the exact same amount; there was one deposit of EUR 30,000 (HK$300,000) and 1 transfer or remittance out for the exact same amount; and there were 50 deposits totaling US$1,399,432.05 (HK$10.85M) and 125 transfers or remittances out for the exact same amount.

6.  The attention of the Hong Kong Police was drawn to Geneco’s DBS bank account after they received report of money being deposited by victims of email frauds into the bank account, the victim companies having been misled via email into believing that the money would be for the purchase of merchandise. Two of the companies so defrauded were respectively based in Lebanon and Mexico. The deposits were made on 27^th and 29^th December 2010.

7.  The defendant was intercepted and arrested upon his arrival in Hong Kong from mainland China. The defendant under caution stated that he came to know a Lebanese friend named Haidar during his business trip in Lebanon in 2009. Haidar paid for the defendant’s accommodation and meals during that business trip. Haidar later requested the defendant to open a company and bank account for him in Hong Kong.

8.  The defendant came to Hong Kong in June 2012 and met up with an employee of Haidar named Davi. Davi arranged for the defendant to set up Geneco through a secretarial company and opened the DBS account. The defendant handed over all the banking documents to Davi. The defendant kept the original copy of the Certificate of Incorporation and the opening mandate of the account and gave the copies of the two documents to Davi. All the related fees for incorporating the company, the opening of the bank account and the defendant’s accommodation in Hong Kong were settled by Davi.

9.  After investigation, the Police decided to charge the defendant with the present offence.

Previous convictions

10.  The defendant is of previously clear record.

Mitigation

11.  The defendant was born in December 1972 in mainland China. He majored in the Arabic language in university. He worked as a teacher between 2002 and 2005. Between 2006 and 2010 he worked as an interpreter in a company in Tianjin. He left the company in 2010 and went to the Middle East to try his luck in business. He came to know the friend in question Haidar when he worked as an interpreter in Lebanon. Mr. Liu told the court that Haidar said he would like to do business with the defendant in the future and so the defendant agreed to set up the company and open the bank account for him in Hong Kong.

12.  Mr. Liu submitted documents to show that the defendant is a charitable person. The defendant’s wife also wrote in mitigation, confirming the defendant as a good husband and father.

13.  Mr. Liu submitted that the defendant did not know about, nor did he take part in any of the email frauds. The defendant did not have any financial gain in helping to set up the company and the bank account. It must of course not be overlooked that the defendant did enjoy a short stay in Hong Kong with his accommodation paid for by Davi. Nevertheless, it is the defendant’s submission that the defendant was told by Haidar that he himself was not able to set up a company in Hong Kong and so the defendant helped him out as a friend.

14.  When the matter was exposed in Hong Kong and reported to the police, the Hong Kong Police Force contacted the defendant via mainland Police. The defendant then cooperated fully and about US$10,000 odd was handed over to the mainland Police. The defendant insisted that he did not know anything about the email fraud and he had no hesitation in coming up with the money which was arranged to be returned to the victims.

15.  The defendant then came to Hong Kong to assist in the investigation voluntarily, to try to clarify matters. His son was just 2 months old at that time. The defendant was eventually charged in Hong Kong and after the defendant had pleaded guilty at the earliest opportunity, he also made non-prejudicial statements to try to assist Police to apprehend those who exploited him.

16.  Mr. Liu pointed out that apart from the international element, there are no other aggravating factors in the present case. Mr. Liu explained in mitigation that at the time of the email frauds being committed, the defendant had already finished his business in the Middle East and was living with his wife back in mainland China. Evidence suggest that the transfers and remittances were all conducted by way of internet banking. All that the defendant did was to open the account and handed over the control of the bank account completely to Davi.

17.  Having heard from Mr. Liu in mitigation, the case was then adjourned for 3 months so that the Police can carry out further investigation into the defendant’s role in the case.

18.  When the case was resumed, the prosecution confirmed that nothing came of the new evidence that had been disclosed by the defendant on the previous occasion and asked the court to proceed to sentence the defendant.

Sentence

19.  The maximum sentence for the present offence is that of a fine of $5 million and 14  years’ imprisonment. There are no sentencing guidelines for this offence.

20.  In the case of HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, the Court of Appeal set out various factors to be taken into account when sentencing for the offence of dealing with proceeds from an indictable offence.

“Sentencing principles

9. There are no sentencing guidelines for the offence of dealing with the proceeds from an indictable offence because the facts vary from case to case. However the following factors are to be taken into account when determining sentence:

(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 pre 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.

(5) The length of time the offence lasted.”

21.  Although there is no evidence of the defendant taking part in any of the email frauds, it cannot be argued that the defendant did not know something was not quite in order when he, a mainland Chinese citizen is asked by a Lebanese whom he had known for just 6 months to set up a company and open a bank account in Hong Kong. It was even more worrying when Davi paid for everything and the defendant handed over control of the company and account to him, thus washing his hands completely of the company and the bank account.

22.  Even if the defendant really did not receive anything in return for his trouble, the defendant’s action allowed the criminals who perpetrated the email frauds to have a bank account to receive their proceeds, without the risk of the funds being traced back to them. Furthermore, as pointed out by the Court of Appeal in Hsu Yu Yi, the amount of money involved is the major consideration and not the amount of benefit received by a defendant in the transaction when considering the appropriate sentence.

23.  The various deposits and withdrawals were made within around 6 months. Apart from the 30,000 Euros which was withdrawn in one go, the 5 odd million Hong Kong dollars and the almost 1.4 million US dollars were withdrawn in 16 and 125 transactions respectively.

24.  Hong Kong as a free market economy would inevitably attract criminals who are keen to exploit the openness and ease of setting up of companies and opening of bank accounts. There are measures in place for the monitoring of suspicious activities by the banks. It is no secret that individuals having a strong connection with countries like Lebanon would find it difficult to open a bank account in Hong Kong and then conduct deposits and withdrawals of large sums of money without attracting any attention. That was why the defendant was recruited to come to Hong Kong to set up the company and to open the bank account.

25.  There is nothing Hong Kong can do about what goes on in other countries, but the court can and will impose sentences against individuals who had chosen to assist in the dealing in proceeds of crime. This sentence must be severe enough to deter.

26.  Bearing in mind the total amount of around HK$11.6 million involved, the international element in the case, balancing them with the fact that it was just a one off action on the defendant’s part and that he has a previously clear record, I will adopt a starting point of 4 and a half years’ imprisonment, discounting it to 3 years’ imprisonment upon the defendant’s plea of guilty.

27.  Since the prosecution had already had the time to consider whether new evidence provided by the defendant would assist in the apprehension of other criminals and had decided that they would not, there is no ground for me to grant the defendant any discount in his sentence on the basis of assistance to the Police. I find that credit for his early indication of a plea is sufficiently reflected in the one third discount for his plea of guilty.

28.  The defendant is therefore sentenced to 3 years’ imprisonment.

[1]Although proceedings were conducted in Cantonese, parties have no objection for the Reasons for Sentence to be in English in order to save the defendant another trip to court.