HKSAR v. FERNANDO DA SILVA REIS

CACC 317/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 317 OF 2011

(ON APPEAL FROM DCCC 618 OF 2011)

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REASONS FOR JUDGMENT

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Hon Lunn JA (giving the Reasons for Judgment of the court)

1. The appellant, who appeared in person, was given leave on 17 November 2011 by Hartmann JA to appeal against the sentence of three years’ imprisonment imposed upon him and the money confiscation order made against him on 27 July 2011 in the District Court by District Court Judge Yau. On 26 July 2011, following his plea of guilty, the appellant had been convicted of a single charge (charge 5) of dealing with property knowing or having reasonable grounds to believe that the property was the proceeds of an indictable offence, contrary to section 25 (1) and (3) of the Organized and Serious Crimes Ordinance, Cap. 455. At the hearing, we allowed the appeal, to the extent only that we quashed part only of the order of confiscation made by the judge, namely in respect of monies found on his person at the time of his arrest (items 173, 175-209 on the Exhibit Disposal list). We said that we would give our reasons for judgment in due course. That we do now.

2. At the joint hearing, the appellant’s co-accused pleaded guilty and was convicted of 2 charges of dealing with property knowing or having reasonable grounds to believe that the property was the proceeds of an indictable offence and 2 charges of using a false instrument, namely two different false passports, which he knew or believed to be false with the intention of inducing a bank officer to accept as genuine and to act to his prejudice.  He was sentenced to a total of four years and four months’ imprisonment.  On 17 November 2011, Hartmann JA refused his application for leave to appeal against sentence.

THE CHARGE

3. The Particulars of Offence of charge 5 alleged that between 10 December 2009 and 8 November 2010 the appellant dealt with Hong Kong $4,318,717.16 and United States $2,050.00 knowing or having reasonable grounds to believe that those monies in whole or in part directly or indirectly represented the proceeds of an indictable offence.

THE FACTS

4. The appellant accepted that he had opened no less than 32 bank accounts in 20 false names using 20 false passports which had been provided to him by two men.  He opened the bank accounts in the period 9 December 2009 to 22 July 2010.  The total amount of monies deposited into those accounts was the amount stipulated in the Particulars of Offence.  The appellant was arrested by police officers in the company of his erstwhile co-accused on 8 November 2010 at a branch of the Industrial and Commercial Bank of China in Hankow Road, Tsim Sha Tsui.  He was found to be in possession of over Hong Kong $265,000.00 in cash together with a relatively small amount in cash in RMB, South African Rand, Macau Patacas, United States Dollars and Thai Bhat.  Also, he had an HSBC Premier MasterCard in the name of Paul Ruinaard, one of the persons in whose name he had opened a bank account with the bank.  He accepted that he had used false identification documents in the name of that person to open bank accounts.

5. In two wallets, which he claimed in a subsequent video record of interview had been given to him by his co-accused whilst they were together in a bank in which they were arrested, were found seven bank cards, five of which were in names of persons in respect of whom bank accounts had been opened by his co-accused.  Also, the wallets contained a small amount in cash in Hong Kong Dollars, RMB, Macau Patacas and United States Dollars.

6. The appellant, a national of Mozambique, had entered Hong Kong on 7 November 2010.

7. The appellant accepted in his video recorded interview that he knew that the identification documents which he used to open the bank accounts were false documents.  He said that he earned 12% commission for withdrawals that he made from the various bank accounts that he had opened in the various banks.  Furthermore, he said that he did not know the source of the monies in the accounts.

REASONS FOR SENTENCE

8. In his reasons for sentence the judge noted that the appellant was a married man with three children with whom he lived in Mozambique and that he and his wife were HIV positive.  He noted that the appellant said that appellant operated his own transportation in business in Johannesburg in South Africa.  Further, although the appellant had accepted that he was promised a commission of 12% on the monies he withdrew from the various accounts, he said that he had not received the full amount due to him and could not now recall how much he had been paid.

9. In identifying the appropriate starting point for sentence, the judge said that he had regard to the judgment of this court in HKSAR v Hsu Yu Yi [ 2010] 5 HKLRD 545.  In particular, the judge cited the passage of that judgment, at paragraph 9, in which the factors relevant to sentencing were identified.

10. Having noted the amount of money that had been ‘laundered’ through the accounts opened by the appellant, the judge said:

“ Based on the amount of money being laundered, the length of time involved, the usage of false passport to open the various accounts by D2 (the appellant) and the international element, I will adopt starting point of 4½ years’ imprisonment.”

11. Affording the appellant a discount of one third from that starting point for his plea of guilty, the judge sentenced the appellant to 3 years’ imprisonment.

Confiscation Order

12. Although counsel appearing on behalf of the appellant resisted an application by the prosecution for the forfeiture of monies found in the possession of the appellant at the time of his arrest, the judge ordered the monies forfeited to the prosecution.  No evidence was called. It had been submitted on behalf of the appellant that he had brought some of the monies with him into Hong Kong from South Africa and the balance were monies that he had obtained from pawning items in Hong Kong.  It was submitted that he brought the money into Hong Kong from South Africa in order to make payments in respect of credit cards and insurance policies.  The judge said “I don’t believe a word the defendant said and I refuse the application”.

Grounds of appeal against sentence

13. In his grounds of appeal against sentence the appellant asserts simply, “the sentence was a bit harsh”.  In a letter to the court dated 16 November 2011 the appellant contended that the sentence of imprisonment imposed upon him was high compared with the sentences imposed upon others having regard to the amount of money involved.  He took issue with the judge’s reliance on the total amount of money ‘laundered’ through the accounts as being $4,318,717.16.  He said that the sum of $1,444,608.93 found in one of the bank accounts which he had caused to be opened, apparently a reference to the account with HSBC in the name of Duck-Worth Pernille, had been in that account untouched for months.  He knew nothing about it.  In any event, that money had been recovered by the police.

14. Next, the appellant contended that there was an unjustified disparity in the sentence imposed upon him compared with that imposed upon his co-accused, having regard to the far greater sum of money concerned in the two charges of ‘money laundering’ of which his co-accused was convicted, namely $18,932,202.40 (charge 1) and $2,336,898.58 (charge 2).

15. Finally, the appellant submitted that the decision to confiscate all the money found in his possession “was quite unfair”.  Some of the monies found on him had come from items that he had pawned in Hong Kong.  He had the pawn slips to prove that.  In fact, one of the slips evidenced his pawning of a watch an hour before his arrest.  He had pawned property in order to raise money to pay credit card bills and for insurance policies.

A CONSIDERATION OF THE SUBMISSIONS

16. As the judge noted in Hsu Yu Yi this court, differently constituted, identified factors relevant to sentencing, in cases of this sort (page 551, paragraph 9):

“ (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.

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

17. The matter was addressed again by this court more recently (1 February 2012) in HKSAR v Boma Amaso [2012] 2 HKLRD 33.  There, this court identified “… some of the significant features for which the court should look and take into account” (page 42, paragraph 40):

“ (1) The nature of the predicate offence, if known, and the penalty available for the predicate offence: see R v Karen Monfries[2004] 2 Cr App R (S) 9. So, for example, where the predicate offence is trafficking in dangerous drugs, the offender should expect a sentence significantly greater than where the predicate offence is gambling……..

(2) …..the state of knowledge of the offender. This divides itself in two – knowledge of the nature of the predicate offence, where the predicate offence is known to the court; and knowledge of the fact that the funds are the proceeds of an indictable offence………..

(3) An international dimension will always be a significant aggravating feature; and by international dimension we include money laundered from, or for those operating in, the Mainland.

(4) The sophistication of the offence is always relevant. This will include the degree of planning and whether deceit is practised to achieve the objective.

(5) Where the offence is committed by or on behalf of an organized criminal syndicate, that is an aggravating fact.

(6) It is relevant to take into account whether there is one transaction or many and the length of time over which the offence was committed.

(7) As in the case of Herzberg, it will be an aggravating feature where the offender continues to launder funds after he has discovered as a fact that the funds are the proceeds of an offence or after he has discovered the nature of an offence which is serious.

(8) The sentencing court should have regard to the role of the offender and the acts performed by him. In this regard, the director of a laundering operation or scheme should attract a greater sentence than a person engaged by him although sentences should be sufficient to deter those who might be prevailed upon by directing minds. In the case of a person down the chain, the court will wish to have regard to whether a benefit has been received and if so the nature and size of the benefit. But within the category of persons down the chain there will be gradations of culpability. So for example the drug addict or petty crook who is paid a small sum to open an account and hand over its operation to another with no more participation and no more knowledge than that it is going to be used for some sort of crime is much less culpable than an offender of a different sort not “used” in that way.”

18. Clearly, the judge was correct in identifying the factors to which he had regard in determining the appellant’s culpability, namely:

(i)  the amount of money that went through the accounts;

(ii)  the length of time that the appellant was involved in the enterprise;

(iii)  the use of false passports to open the accounts; and

(iv)  the international element.

The predicate offence was not known.

19. It is clear from the Summary of Facts that the appellant was not only responsible for opening 32 bank accounts but also had done so over a period that extended from10 December 2009 until 27 July 2010.  He had opened accounts with banks in every single one of the intervening months.  As the judge noted, on each occasion the appellant had knowingly used a false passport in order to open a particular bank account.  Those false passports purported to have been issued by South Africa, France and Belgium.  The use of no less than 20 false passports by the appellant in opening bank accounts was a seriously aggravating factor in the commission of the offence.  Clearly, the appellant was acting on behalf of an organised criminal syndicate.

20. The information provided to the trial court addressed the issue of the total amount of money deposited in each of the accounts, but did not condescend to any other details; for example, as to the number and form of such deposits, their individual amounts or as to the withdrawals of money from the accounts.  Nevertheless, there was no dispute that a total of $4,318,717.16 had been deposited in the 32 accounts in the period the subject of the charge.  The judge was correct to have regard to that fact in determining the appropriate sentence.  Whilst it was accepted by the appellant that he did benefit from payments for his role, it was not known to what extent.  On his account he did not receive all of the 12% commission he was promised on withdrawals from the accounts.  But, in any event, the court was not provided with information as to what were the total withdrawals from the accounts.

The submissions of the respondent

21. In advance of today’s hearing, Ms Anna Lai, counsel for the respondent, who was not counsel in the lower court, sought to provide the court with what was effectively a revised version of the Summary of Facts presented to the judge in the lower court in which, inter alia, the missing information was provided.  The attempt to put additional information before the court did not end there.  An entirely new Annex, Annex C, addressed in detail the number and nature of the deposits and withdrawals.  Annex D addressed the appellant’s movements in and out of Hong Kong.  Annex E addressed the dates on which the various accounts were opened and closed.  Clearly, like this court, it was obvious to her that much relevant information had not been placed before the judge.  She has been most industrious in gathering together voluminous relevant information.

22. If the information contained in the revised version of the Summary of Facts was relevant to the sentencing of the appellant, as on its face it was, it ought to have been provided to the trial judge in the Summary of Facts.  It is astonishing that the relevant information identified earlier in this judgment as obviously missing from the Summary of Facts was not provided to the trial judge and it is a little surprising that he did not seek it, so that he was possessed of all the factual information relevant to sentence.  However, that was simply not done.

23. During the course of oral submissions, recognising that it was now too late and impermissible to seek to supplement the inadequate information provided to the judge as to the facts relevant to the commission of the offence by the appellant, Ms Lai withdrew her invitation to the court to receive the new material.  She was right to do so.  The appellant tendered his plea of guilty on the basis of the facts as outlined in the Summary of Facts.

Confiscation order

24. Although the ‘Exhibits Disposal’ order did not contain any reference to the power of the court to make an order of disposal and although the judge made no reference to the ordinance pursuant to which the order was made, Ms Lai suggested that it was clear that the order was made pursuant to section 102(1)(b) and (2)(b)(ii) of the Criminal Procedure Ordinance, Cap. 221, namely that, if it appeared to the court that an offence had been committed in respect of property in the possession of the police, the court had power to make an order for the forfeiture of the property.

A CONSIDERATION OF THE SUBMISSIONS

25. The complaint that the judge erred in having regard to the fact that $1,444,608.93 deposited into one of the accounts opened by the appellant with the use of a false passport remains untouched is no substance.  No issue was taken before the judge that the monies remained in the account untouched.  Notwithstanding that fact, a substantial part of the appellant’s culpability lay in the fact that monies were deposited into an account that the appellant had opened with false documents.  That was the purpose of his opening the accounts.  As noted earlier, the judge was provided with no information as to the amount of monies withdrawn from the various accounts that he had opened.

Disparity in sentence between the appellant and his co-accused

26. In assessing the culpability of the appellant’s co-accused, the judge said that he had regard to the fact that he had used false passports to open bank accounts, which he took to be more serious than allowing the use of his own bank accounts.  In respect of charge 1, in which the appellant’s co-accused was convicted of dealing in property knowing or having reasonable grounds to believe that it represented the proceeds of an indictable offence in the period from 12 June 2009 to 8 November 2010, the judge took a starting point for sentence of five years’ imprisonment.  In doing so, he said that he had regard to the circumstances of the commission of the offence, namely that it “took place over (1 year and 5 months), the slightly higher than normal level of participation by D1 and the international element of the offence.”  The judge did not identify to what he was referring to when he spoke of the level of participation by the appellant’s co-accused.  However, the Summary of Facts stated that the appellant’s co-accused had not only opened those accounts with false passports but also had withdrawn and made remittances from the 44 bank accounts to the full extent of the monies identified in the Particulars of Offence of charge 1.

27. Acknowledging that the amount of money involved in the commission of the offence the subject of charge 2 was “slightly less”, but noting that it involved the same “level of participation and the international element”, the judge took a starting point for sentence of three years’ imprisonment.  For the two charges of using a false instrument, contrary to section 73 of the Crimes Ordinance, Cap. 200, the judge took a starting point for each charge of three years’ imprisonment.

28. For his pleas of guilty, the judge afforded the appellant’s co-accused a discount of one third from the sentences identified as the starting point.  Having regard to totality, he ordered that 12 months of the sentence of imprisonment imposed in respect of charge 2 be served consecutively to that imposed in respect of charge 1.  Noting that he had taken into account the fact that the appellant’s co-accused had used false passport in order to open the bank accounts, no fewer than 22 false passports and 44 bank accounts, the judge ordered the sentences imposed in respect of the charges of using a false instrument to be served concurrently with the other sentences.

29. The judge’s observation that the amount of money involved in charge 2 was “slightly less” than that involve in charge 1 was surprising given that the difference was huge, $18,932,202.00 for charge 1 and $2,336,898.00for charge 2.  Further, charge 1 was concerned with multiple withdrawals of that total sum of money from all 44 accounts by the use of 22 false passports.  By contrast, charge 2 was concerned with one account only in August 2010 and the deposit of a cheque of US$300,000.00, which monies were not withdrawn.  Whilst we are satisfied that the starting point taken for charge 2 was appropriate, equally we are satisfied that the starting point taken by the judge for charge 1 was manifestly inadequate.  In our judgment, in all the circumstances the judge ought to have taken a starting point for sentence for charge 1 of 6 years’ imprisonment.

30. We are satisfied that, in having regard to the totality of sentence, the judge’s order that 12 months of the sentence imposed in respect of charge 2 be served consecutively to the sentence imposed in respect of charge 1, was appropriate.  Accordingly, the total sentence that ought to have been imposed on the appellant’s co-accused was five years’ imprisonment.

31. Although, for the reasons set out above, in our judgment the sentence imposed on the appellant’s co-accused was less than that which the judge ought to have ordered, we are not satisfied that the appellant’s complaint of disparity in the sentences imposed upon him is made out.  We are satisfied that the judge imposed the correct sentence on the appellant.  The fact that the judge erred in imposing too lenient sentence on the appellant’s co-accused does not inure to the appellant’s benefit.

The forfeiture order

32. Whilst it is important that in making an order a court identified pursuant to which power the order is made, and although the judge did not do so, nevertheless it is clear that the judge’s order was made pursuant to section 102(1)(b) and (2)(b)(ii) of the Criminal Procedure Ordinance, Cap. 221.  In granting the appellant leave to appeal against sentence Hartmann JA was, with respect, entirely correct in describing the forfeiture proceedings as “perfunctory”.  From the transcript of those proceedings it is clear that they lasted no more than several minutes.  No evidence was called.  In which context, like Hartmann JA, we note that in dismissing the submissions the judge said that “I don’t believe a word the defendant said”.  He had not said a word.  Further, as noted earlier, when the judge ruled, he said “I refuse the application”.  The application was not that of the appellant to keep property found in his possession.  Rather, it was an application by the respondent to have that property forfeited.

33. The submissions made on the appellant’s behalf, namely that part of the monies found in his possession on his arrest had been brought by him to Hong Kong from South Africa and that the balance came from monies he had obtained in pawning watches and that the proposed paying monies due in respect of insurance policies and credit card bills was not an account that was inherently incredible.  In this court, the appellant produced statements of monies owing in respect of insurance and credit cards, which he said that he had been produced to the judge.  Be that as it may, it is clear that in the circumstances obtaining before the judge, there being a difference of substance between the position of the appellant and that of the respondent, the appropriate course for the court to have taken was to have offered the appellant, and if appropriate the respondent, the opportunity to give and call evidence to resolve the issue by conducting a Newton enquiry.

Conclusion

34. Given that the appellant was not afforded the opportunity to which he was entitled to be heard fully on the issue of confiscation, in respect of certain items only described on the exhibit’s list we quashed the judge’s orders.  The other orders, including that of three years’ imprisonment, stand.