HKSAR v. IVANOVS ERIKS

DCCC 1060/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1060 OF 2013

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Reasons for Sentence

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1. The defendant pleaded guilty before me to a single charge of conspiracy to deal 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 and sections 159A and 159C of the Crimes Ordinance, Cap 200. The charge is also commonly known as “money-laundering”.

2. The particulars of  the offence avers that the defendant:

“...between the 25^th day of January 2013 and the 18^th day of June 2013, both dates inclusive, in Hong Kong, conspired with SLEIMAN Mohammad Said, to deal with property, namely a sum of $604,582 United States currency held in the bank account numbered 043-472-0-801108-2 of the Nanyang Commercial Bank Limited in the name of Funding and Guarantees Limited, knowing or having reasonable grounds to believe that the property in whole or in part, directly or indirectly represented the proceeds of an indictable offence.”

The Facts

3. Briefly stated, the underlying offence to which the money‑laundering charge is related is an international commercial fraud.  According to the Summary of Facts which the Defendant has admitted, on 10^th, 14^th, and 15^th May 2013, three victims who are persons-in charge of three overseas companies were respectively told to deposit the payment for goods into the bank account as referred in the charge (“the Bank Account”) by culprits who held themselves out as the companies’ business counterparts. As a result, the three companies were deceived to deposit a total sum of US$237,150 into the Bank Account. Subsequently, they realized that their genuine business counterparts had never requested them to deposit payment into the Bank Account. Reports were then made to the police.

4. Bank records of the Bank Account showed that:

(a) The Bank Account was opened on 25^th January 2013;

(b) The Bank Account was held in the name of Funding and Guarantees Limited;

(c) The Defendant was the sole signatory of the Bank Account;

(d) Between 25^th January 2013 and 18^th June 2013, there were a total of 29 deposits (by CHATS or remittance) amounting to US$604,582 and there were 20 withdrawals amounting to US$491,662; and

(e) Within a day to several days after a deposit in substantial amount was made into the Bank Account, money in the approximate amount was then transferred from the Bank Account to other overseas accounts.

5. Funding and Guarantees Limited was incorporated in Hong Kong on 22^nd January 2013 and the Defendant became the sole director of the company. 

6. On 18^th June 2013, the Defendant was arrested by the police when he and SLEIMAN, the co-conspirator as named in the charge, went to Nanyang Commercial Bank and attempted to withdraw all the money from the Bank Account and closed the Bank Account. As there were already reports made to police in respect of the Bank Account, the Bank decided to report the matter to the police.  After the Defendant was arrested, there were subsequent video interviews conducted during which he made the following admissions:-

(a) In January 2013, whilst he was in the United Kingdom, his friend introduced SLEIMAN to him;

(b) SLEIMAN promised to pay him £600 to £1,000 if he opened a bank account in Hong Kong;

(c) SLEIMAN would provide him the tickets to Hong Kong and would pay for all expenses incurred by him;

(d) He then went to Hong Kong. As instructed by SLEIMAN, he registered a company named Funding and Guarantees Limited;

(e) SLEIMAN then instructed him to open bank accounts under the name of Funding and Guarantees Limited. He tried to open accounts with several banks, but failed. He finally succeeded in opening the Bank Account with Nanyang Commercial Bank;

(f) After he opened the Bank Account, he went to the United Kingdom and passed the password for internet banking and other bank documents to SLEIMAN. SLEIMAN then paid him about €500 to €600;

(g) About five months later, SLEIMAN told him to go to Hong Kong for the purpose of closing the Bank Account. SLEIMAN promised to pay him US$2,500 as reward; and

(h) They then travelled to Hong Kong from the United Kingdom and went to Nanyang Commercial Bank to close the Bank Account together.

The Background of the Defendant

7. The Defendant has a clear record in Hong Kong.  He is 25 years of age and he is still single.  According to his counsel, Mr Whitehouse, the Defendant was born and educated in Latvia. His parents abandoned him at the tender age of 6 and he was raised and brought up by his grandmother. He left school at the age of 18 and had worked as a restaurant waiter. He later left Latvia due to the country’s poor economy and went to Cyprus to look for job opportunity and later became an internet technician. Mr Whitehouse basically repeated to the court what the defendant had told to the police during the investigation of why and how the Defendant flew to Hong Kong on two occasions to open and close the Bank Account. Mr Whitehouse was trying to add that the Defendant was originally told by SLEIMAN to run a trading company in Hong Kong for office equipment.  

8. In mitigation, Mr Whithouse stressed the fact that the Defendant had pleaded guilty and also fully co-operated with the police.  He also urged the court to consider the fact that the Defendant has no actual knowledge of the underlying offence.  He submitted that for money-laundering offence for this present amount, the usual starting point is about 3 years.

9. Finally, Mr Whithouse also submitted to court a letter hand written by the Defendant in English. I am not going into the details of the letter. Suffice it to say that the Defendant had apologized for his misdeeds and expressed his remorse. He put the blame on his co-conspirator, SLEIMAN who had offered the job to him.  He hopes to return to his grandmother as soon as possible who has been depending on him for support.

Sentencing Considerations

10. The court of course has much sympathy for the grandmother of the Defendant.  No doubt they have a close family relationship and being the grandchildren, the fact that the Defendant is now incarcerated here in Hong Kong means that the grandmother would be left without his support both emotionally and financially.  However, the Court of Appeal has in many occasions said that for cases involving serious crime, family circumstances virtually play no part in mitigation.

11. In the past few years, the Court of Appeal has stated the relevant factors for sentencing money-laundering cases.  In a Chinese Judgment, Secretary for Justice v Wan Kwok Keung [2012] 1 HKLRD 201, it has been held that:- 

“12. ‘Money laundering’ is a serious offence for not only does it encourage criminal activities indirectly, but also attempt to legitimise the proceeds of the crime. In order to crack down on serious crimes and to prevent offenders from getting financial gains, it is necessary to deter and prevent the offenders from getting financial gains. It is necessary to deter the commission of the ‘money laundering’ offence.

13. Generally, the sentence for a ‘money laundering’ offence should mainly reflect the amount of the ‘black money’ laundered and not the benefit obtained by the defendant or others, the reason being that it is very difficult to prove the benefit concerned, and in most ‘money laundering’ cases, there may not be evidence to show from what indictable offence the ‘black money’ is in fact derived. Of course if there is information to prove that the ‘black money’ originated from a serious crime, including drug trafficking, kidnap and blackmail, illegal human trafficking and other organised crimes, etc. or the defendant’s benefit is huge, then the sentence should be adjusted upward.

14. This court has, in a number of other similar cases, also listed other factors relevant to the sentence to be imposed including the number of offence, the length of the time the offence lasted, the degree to which the defendant participated in the offence involving the ‘black money’ and whether or not it was an organised and sophisticated crime.”

12. In another case, HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, the Court of Appeal has set out the amounts of the money involved in the sentences imposed in a number of money-laundering cases in the past.  Cheung JA analysed  the results and concluded that the starting point is 3 years or so when the black money involved is between HK$1 million and HK$2 million; 4 years or so when it is  between HK$3 million and $6 million.

13. In HKSAR v Boma Amaso, [2012] 2 HKLRD 33, a more recent case, Stock JA had said that the question of the amount of money laundered is not the be-all and end-all of a case but is a significant feature.  His lordship has also elaborated on the other relevant factors to be considered when the court is tasked to consider the sentence for money laundering offence. Those other significant features includes, inter alia: (at para. 40)

(a) the 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 would be an aggravating feature;

(f) whether there was one transaction 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; and

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

The list was said to be non-exhaustive.

14. In the present case, the nature of the underlying offence is of course serious.  As described by the prosecution in the Summary of Facts, it has originated from international commercial frauds. The victims were buyers in trade.  What the fraudsters did obviously was to deceive the overseas buyers by pretending to be their corresponding sellers and requested them to deposit payments into the designated bank account in Hong Kong.

15. In so doing, the fraudsters must first be able to obtain the details and particulars of the buyers as well as sellers and also the description of the goods and the price information. Thus, it can be seen that the underlying offence was highly sophisticated in its nature. Deceit is practised by the fraudsters behind to achieve their objectives.  It also involved a high degree of planning. The setting-up of a Hong Kong company, for example, and the opening of company account in the Nanyang Commercial Bank to facilitate the withdrawal and transfer of the black money. There were altogether a total of 29 deposits and 20 withdrawals in respect of the Bank Account during a period which is slightly less than six months.

16. Based on the above, the offence was obviously committed by an organized criminal syndicate behind and the operation also involved international dimension as the Defendant is a Latvian coming from Cyprus and SLEIMAM was also coming from the United Kingdom. The Defendant was recruited by SLEIMAN to come all the way to Hong Kong firstly to set up a company and to open a bank account for receiving the black money and subsequently also to withdraw all the remaining balance of the black money and closed the Bank Account.

17. I of course take into account that it was a common ground between both the prosecution and the defence that there was no evidence that the Defendant clearly knew the nature of the underlying offence.  However, that does not mean that his culpability can be thereby significantly reduced although I bear in mind that the defendant is to be sentenced on the facts of the money‑laundering charge only and not the facts of the underlying offence.

18. As commented by Stock VP in Boma (supra) at para 40(2)(a):-

“In such a case it must be recognised that he is nevertheless ‘assisting in the original crime, whether with knowledge or blind‑eye knowledge of it.’: R v Barsa at p 472. The scheme and the purpose of the legislation is to ensure care and honesty in the handling of other people’s money and those who are prepared to handle money on other people’s behalf and turn a blind eye to the source of that money do so at their own risk: see R v Farrow [2007] 1 Cr App R (S) 558, para 24. So the person who is aware of the fact that he is dealing with proceeds of an indictable offence but deliberately chooses not to ask questions is barely less culpable than the person who asks or who is told.”

19. The money laundered in this offence is said to be close to US$604,582 which is equivalent to approximately HK$4.7 million.  The usual starting point is within the range of 4 years’ imprisonment or so if one simply refers to the amount of the black money according to Hsu Yu Yi. Mr Whitehouse has submitted that the starting point should perhaps be 3 years, even after taking into account of the international dimension and other features of the case.  I disagree.  Obviously, the defence only focused on the total sum of US$237,150 which had been paid into the Bank Account by the three overseas companies who were the victims of fraud. Although there is no direct proof as to the source of the balance of the money deposited into the Bank Account, it is not important. In Wan Kwok Keung (supra.), the Court of Appeal expressly observed that in most ‘money laundering’ cases, there may not be evidence to even show from what indictable offence the ‘black money’ is in fact derived. It is not uncommon in many money laundering cases that the nature of the predicate offence is unknown. Generally, the sentence for a ‘money laundering’ offence should mainly reflect the amount of the ‘black money’ launderedso it does not matter whether it is known to the court the origin of the black money. In sentencing this Defendant, the court therefore simply cannot ignore the other amount of deposits into the Bank Account during the same offence period.

20. The role played by the Defendant is pivotal in this case.  Without the co-operation of people like him, it is difficult for the fraudster behind to open a bank account in order to receive the black money and withdraw and transfer the black money out of Hong Kong into the other jurisdictions. Even as the Defendant had sought to explain through his counsel that he was lured by SLEIMAN to go to the United Kingdom to take up the job offer, by the time he was in London to meet up SLEIMAN and he was told that he was going to Hong Kong for just a few days to register a new company and to open a bank account and he was given a return ticket for that purpose, he should be clear that he was not really coming to Hong Kong to run a company trading office equipment anymore. He received a financial reward for that when he returned and he passed the password for internet banking and all the banking documents to SLEIMAN. Five months later, once again he agreed to travel together with SLEIMAN to come to Hong Kong to close the Bank Account in order to earn the quick money.

21. Having considered the above authorities and also after applying the other relevant factors into consideration, I come to the conclusion that the proper starting point should be 4 ½ years.  I will not further discount the sentence just because the Defendant is a foreigner.  He came all the way from London to Hong Kong for the purpose of committing crimes.  Anyone who acts in this way to undermine the laws of Hong Kong deserves no sympathy.

22.  As said by the Court of Appeal in HKSAR v Hong Chang Chi [2002] 1 HKC 295at p 302:-

“It should be made clear to non-residents of Hong Kong, whether from the mainland (or Taiwan) or from far-flung jurisdictions, that if they come here in order to break the law, they will be treated no differently, and certainly no more leniently, than criminals who are normally resident here.”

23. I note also that the Defendant has a good command of English although his native language is Russian. The only effective mitigation therefore is his guilty plea and for which he would be given a full one‑third discount.

24. Based on the above reasons, the sentence is reduced to 36 months’ imprisonment.