HKSAR v. ZHEN RONGYUAN

DCCC 965/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 965 OF 2015

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REASONS FOR SENTENCE

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INTRODUCTION

1.  In a Charge Sheet containing two charges, the defendant was prosecuted with two offences, namely, conspiracy to defraud, contrary to common law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200 (Charge 1), and, in the alternative, 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 (“the Ordinance”) and sections 159A and 159C of the Crimes Ordinance, Cap 200 (Charge 2).

2.  The defendant was brought before the court on 15 January 2016, at which hearing he entered a plea of not guilty to Charge 1 and a plea of guilty to Charge 2.  The prosecution accepted his pleas in full satisfaction of the offences charged; in consequence, the defendant was convicted, on his own guilty plea, of the offence in Charge 2, and Charge 1 was left on court file by operation of the law.

FACTS

3.  On the afternoon of 2 August 2015, Wong Yin-nui, an old lady of 73, received at home a telephone call from a male caller claiming to be her son; he said he was being held captive. Another man took over the conversation and told Madam Wong that her son was the guarantor for a certain person who had failed to settle a debt of $280,000.   When Madam Wong said she did not have so much money to make payment on her son’s behalf, this second man asked her to pay $160,000 first of all.  Madam Wong went, therefore, to the Shek Lei Estate branch of Bank of China and withdrew $50,000.  The defendant approached and gave her a mobile phone.  Madam Wong recognized the person on the other end of the phone to be the second man; he directed her, first, to hand the money over to the defendant, which she did, and secondly, to get ready another $200,000.  Next, Madam Wong proceeded to Chiyu Bank, Yaumati.  Upon arrival, she became suspicious of the incident and asked a staff member of the bank to contact her son for her, and discovered that it was but a scam: her son was never held hostage by anyone.  A report was made to the police.

4.  The police arrived. They kept Madam Wong company outside the bank and waited.  When the defendant appeared, Madam Wong pointed him out to the police.  He was arrested and cautioned.  Under caution, he confessed to having cheated Madam Wong of $50,000 and that he had already remitted $48,000 of the stolen money to the mainland. He said he had only wanted to give the money to his family and had had no intention to cheat anyone.  The balance of the stolen money in the sum of $2,000 was recovered from him. 

5.  In a subsequent cautioned interview, the defendant said he came to Hong Kong to earn quick money at the instigation of an old friend “Ah Cheung”.   He added that after his arrival in Hong Kong, Ah Cheung told him by phone that he had cheated an old lady and had asked her to pay a ransom of $280,000 for the release of her son who was held hostage for an outstanding debt in that amount.  (At the court’s directions, unopposed by Mr Louis Fung for the defence, Mr Simon Kwong PP read out the relevant entries of the transcripts of the interview, which revealed that Ah Cheung had instructed the defendant to collect $50,000 from Madam Wong, saying he would cheat her again.)  As per Ah Cheung’s instructions, the defendant obtained $50,000 from Madam Wong and remitted $48,000 to a mainland bank account, while retaining the balance of $2,000. 

MITIGATION

6.  The defendant, a mainland resident, is 23 years old and has been educated to Secondary Two level.  A factory worker and a single parent, he lives with his own parents, elder sister, and 2-year-old daughter.  In his plea in mitigation, Mr Fung stresses that the defendant has had no previous conviction records in Hong Kong, he was not the mastermind of the scam, he has co-operated with the police in their investigation, and he has pleaded guilty to the offence to show remorse.  Mr Fung indicates to the court that the defendant has no objection to the enhancement of the sentence[1] under section 27(11) of the Ordinance, nor does he contest DCIP Lam Cheuk Ho’s statement dated 1 December 2015 furnished by the prosecution under section 27(2).

7.  In his home-made letter to court dated 24 December 2015, the defendant said he was the sole breadwinner of the family and regretted having committed the present offence out of greediness.  He asked the court to pass a lenient sentence on him so that he could resume looking after his family as soon as possible.    

INFORMATION FURNISHED PURSUANT TO SECTION 27(2) OF THE ORDINANCE

8.  In essence, DCIP Lam’s evidence shows the following:-

(i) Between 2010 and 2014, the number of reported cases of telephone deception varied between about 2,000 and 2,300 a year, but the figure in the first 11 months of 2015 has risen to 2,756 such cases.

(ii) Between 2010 and 2014, in cases where the culprits succeeded in their criminal designs, the victims have suffered a yearly loss ranging between $23m and $45.7m; again the first 11 months of 2015 have seen that figure shoot up to $294.5m.

(iii) In the third quarter of 2015 alone, there have been a total of 1,249 victims of telephone deception cases, almost all of whom were Hong Kong residents, most of them students, housewives, or retirees.

(iv) Before 2011, there have been minimal reported cases in which an offender was involved or supposed to be involved in the physical collection of the victims’ monies (“drop-off” cases).

(v) Between 2011 and 2014, the average number of reported drop-off cases ranged between 2.85 and 3.37 cases every day; and the figure for the first 11 months of 2015 has been 3.33 cases a day.

(vi) The losses occasioned by drop-off cases between 2008 and 2014 have risen from some $3m to about $13m yearly; and the losses in first 11 months of 2015 totalled $11.97m.

(vii) There has been a steady increase in the number of “detected” drop-off cases from 21 in 2011 to 54 in 2014; however, the first 11 months of 2015 has seen a rapid, significant rise in that figure to 76.

(viii) With the exception of several cases, the 188 detected drop-off cases from 2012 up to and including November 2015 have been prosecuted with offences of money laundering or of conspiracy to commit money laundering.

CONSIDERATION OF ENHANCEMENT OF SENTENCE

9.  The offence of “dealing with property known or believed to represent proceeds of an indictment offence” is included in Schedule 1 to the Ordinance[2]; and a specified offence includes a conspiracy to commit a Schedule 1 offence[3].  The conspiracy offence in Charge 2 of which the defendant stands convicted is therefore a specified offence. 

10.  Section 27(2) of the Ordinance provides:-

“(2) The prosecution may furnish information to the court regarding any or all of the following–

(a) the nature and extent of any harm caused, directly or indirectly, to any person by the act in respect of which the person has been so convicted;

…

(c) the prevalence of that specified offence;

(d) the nature and extent of any harm, whether direct or indirect, caused to the community by recent occurrences of that specified offence;

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11.  Section 27(11) provides:-

“(11) Subject to subsections (12) and (13), where a court is satisfied beyond reasonable doubt–

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(b) as to any information furnished under subsection (2) … ,

or where any such matter is agreed by the person convicted, the court shall have regard to such matter when it passes a sentence on the person for the relevant specified offence and may, if it thinks fit, pass a sentence on the person for that offence that is more severe than the sentence it would, in the absence of such matter, have passed.”

12.  The prosecution rely, first, on the facts agreed to by the defendant, with respect to the matter referred to in section 27(2)(a), ie., the harm caused to Madam Wong, and, secondly, on DCIP Lam’s evidence for the purpose of establishing the matters referred to in section 27(2)(c) and (d), namely, prevalence of the specified offence and the harm occasioned to the community.

(1) Harm to the individual under section 27(2)(a)

13.  There are two species of harm to the individual in the present case.  First, Madam Wong was an elderly lady of 73.  She was told that her son was held hostage.  She must have been concerned and emotionally distressed, so much so that she went to the bank to withdraw money to secure her son’s release.  Secondly, she expressed to the fraudster that she did not have the money to meet his demand for payment of $280,000, and has in the end suffered a financial loss in the sum of $50,000. In the absence of any evidence to the contrary, the court is satisfied of these two species of harm having been caused directly to Madam Wong.

(2) Relevance of the telephone deception under section 27(2)(c) and (d)

(2)(A) Section 27(2)(d)

(i) Section 27(2)(d) and the harm referred to in section 27(2)(a)

14.  When the court assesses the nature and extent of the harm to the community under section 27(2)(d), it goes without saying that the harm to the individual referred to in section 27(2)(a) must be taken into account: the individual is a member of the community.  Any contrary interpretation can be dismissed immediately as being so plainly absurd that the legislature could never have intended it.

15.  It is essential, therefore, in the examination of section 27(2)(d), to ascertain the scope of section 27(2)(a) in the first place.

(ii) The expression “act in respect of which” in section 27(2)(a)

16.  When considering the harm to the individual under section 27(2)(a), the court is to have regard to “the act in respect of which the person has been so convicted.”  The focus is, it seems clear, on the relevant act or conduct, rather than the offender’s guilty mind, or the lack of it, for that matter.  The expression “the act in respect of which the person has been so convicted” imports a wider consideration than “the act of which the person has been so convicted,” or “the act constituting the specified offence of which the person has been so convicted.”  It is the view of this court that the harm occasioned to an individual, directly or indirectly, by an accepted aggravating feature inherent in the specified offence must be taken into consideration. 

17.  In the case of a conspiracy to commit money laundering, the nature and seriousness of the predicate offence, if and when known, are important considerations in sentencing[4] and can amount to significant aggravation.  In HKSAR v Yam Kong Lai [5], the Court of Appeal said:

24. It would be quite wrong as a general principle to sentence a defendant on the basis of an offence with which he or she was not charged, though as was pointed out in HKSAR v Xu Xia Li & Anor where the underlying offence is of a particularly serious nature, a defendant’s dealing with the profits of such an offence may well be an aggravating factor. In those circumstances, an enhanced sentence may be required as a matter of policy and general deterrence. (emphasis supplied)

18.  There are no plausible reasons, therefore, why the predicate offence, in other words, the underlying criminal conduct (ie., telephone deception in this case) must be ignored when the court considers “the act in respect of which the person has been so convicted” under section 27(2)(a).  If the underlying criminal conduct is to be so ignored, the legislative intent in providing for enhancement of sentence in money laundering cases by reason of the harm to “any person” would be substantially frustrated.  In this regard, it should be noted that a money launderer may or may not have dealt with the crime proceeds first-hand. Furthermore, the court is required to have regard to harm caused directly or indirectly by the criminal act of the money launderer.  It is the court’s view that the harm suffered by the primary victims in telephone deception cases must be included in the court’s assessment under section 27(2)(a).

(iii) The “harm” referred to in section 27(2)(d)

19.  In view of the above discussion, when considering the harm caused to the community under section 27(2)(d) by reference to the recent occurrences of the specified offence, the predicate offence must be taken into account. 

20.  The wording of section 27(2)(d) itself points strongly in favour of including the predicate offence in the court’s consideration of the direct and indirect harm caused to the community.  Rather than simply “the harm caused to the community by the specified offence”, section 27(2)(d) requires an examination and assessment of the harm caused by “recent occurrences” of the specified offence.  In drop-off cases, the physical collection of the victim’s money is but an integral and essential part of the criminal enterprise.  Money laundering committed in the drop-off mode must involve an antecedent telephone deception having been practised on the victim.  The phrase “the recent occurrences of the specified offence” as it appears in section 27(2)(d) is apt, therefore, to include the underlying telephone deception to which the money laundering relates.

21.  Finally, a money launderer’s interests are better served if in its assessment of the harm caused to the community under section 27(2)(d), the court is restricted specifically to the type of underlying conduct (telephone deception with a drop-off arrangement) from which the crime proceeds originate rather than to the harm occasioned by all money laundering offences, regardless of the various types of predicate offences to which a given money laundering charge may relate.

(iv) Information on telephone deception on drop-off cases

22.  In light of the foregoing discussion, the court can and should, in drop-off cases, take into account information supplied by the prosecution concerning the underlying, predicate offence when assessing the nature and extent of the harm, direct and indirect, “caused to the community by recent occurrences of that specified offence” under section 27(2)(d).

23.  According to DCIP Lam, whose evidence is unchallenged, drop-off cases would necessarily involve an act of money laundering: an offender is tasked to collect the money, as has happened in this case.  In this circumstance, that the cases can be prosecuted otherwise as fraud, conspiracy to defraud, obtaining property by deception, or any other offending is neither here nor there.  Judging from DCIP Lam’s evidence, it is clear that there has been an established practice or prosecutorial preference since 2012 to prosecute drop-off cases on the basis of money laundering.

(2)(B) Section 27(2)(c)

Prevalence of the specified offence

24.  As discussed above, collecting the money from the victim is an integral part of the criminal design in drop-off cases, without or failing which the criminal plot would be incomplete.  Further, there is in recent years an established, ongoing prosecutorial bias to deal with drop-off cases on the basis of money laundering.  In these circumstances, there can be no objection for the court to take into account information concerning telephone deception committed in the drop-off mode, reported and detected, in its consideration under section 27(2)(c) of the issue of prevalence of money laundering offences and conspiracies to launder proceeds of crime committed by drop-off mode.

25.  According to DCIP Lam, there have been more than three reported drop-off cases a day in recent times.

(3) Ruling on the application for enhancement of sentence

26.  The court attaches full weight to the undisputed evidence of DCIP Lam.  In view of the above discussion, the court finds established beyond all reasonable doubt, first, the specified offence in Charge 2 is prevalent within the meaning of section 27(2)(c) and secondly, the nature and extent of the harm, direct and indirect, caused to Madam Wong under section 27(2)(a)  and to the community under section 27(2)(d) are such that an enhancement of sentence pursuant to section 27(11) is called for.  The prosecution’s application for enhancement of sentence is allowed on all three grounds.

REASONS FOR SENTENCE

27.  The paramount sentencing consideration in money laundering cases is deterrence.[6]  Other factors that should be taken into account include the maximum penalty; the amount involved; the nature and extent of the defendant’s participation; the nature and seriousness of the predicate offence (if known); the defendant’s state of knowledge of the predicate offence; the degree of sophistication of the offence; international element, if any; and the duration of the offence.[7]  That said, the Court of Appeal in the case of HKSAR v Boma[8] said:-

“39. We were at one stage of our deliberations minded to provide a suggested starting point for a specified relatively low sum involved in an offence, leaving the courts to use that as a base for other sentences but we at once could conjure a myriad of factual variations which might render even that single starting point unwise with the further risk that it might encourage a rigid mathematical approach and progression without proper regard to other individual relevant factors.”

28.  The maximum sentence for the offence of money laundering is one of 14 years’ imprisonment[9]; a conspiracy to commit money laundering carries the same statutory maximum[10].  

29.  HKSAR v Wu Jianbing[11] was a drop-off case committed by a mainland resident on four victims in Hong Kong.  The defendant was prosecuted with two charges of money laundering and two charges of conspiracy to commit money laundering, to which charges he pleaded guilty.   In allowing the defendant’s appeal against sentence in that case, the Court of Appeal adopted a starting point of three years’ imprisonment for each of the charges, reduced it to 24 months’ imprisonment for the defendant’s guilty pleas, enhanced the sentence by one-third, ie., eight months, pursuant to the Ordinance, and sentenced him to 32 months’ imprisonment.  In addition, the Court ordered that six months of the defendant’s sentence in respect of the fourth charge be served consecutively with the sentence for the third charge, with the remainder to be served concurrently; the final sentence was therefore 38 months’ imprisonment.

30.  In HKSAR v Cen Huakuo[12], an old lady received a telephone call saying that her son was in custody for offences of indecency.  To secure her son’s release, she had to hand over $50,000 at a certain park.  She discovered, however, that her son had never been held captive; a report was then made to the police.  She co-operated with the police in their investigation and went to the park.  The defendant approached her and confirmed – falsely, of course – that her son had been detained.  He gave her a mobile phone, and a male caller kept asking her on the phone why she had not had the money with her.  The police took action and arrested the defendant.  In allowing the appeal against sentence, the Court of Appeal said:-

“18. The applicant did not take part in the deception, he told Madam Chan that her son was being detained, but that only shows his sketchy understanding about the relevant indictable offence and does not mean that he knew the details. When considering the applicant’s knowledge about the relevant indictable offence, the trial judge should not have interpreted the facts in the most unfavorable way against the applicant. …

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25. Taking into account all the circumstances of the case and the requirement that a sentence should have deterrent effect in order to prevent mainlanders from taking part in such an abhorrent and despicable offence like “phone deception” in whatever manner, we are of the view that the appropriate starting point is 3 years’ imprisonment, and the sentence should be enhanced by one-third pursuant to the Organized and Serious Crimes Ordinance.”[13]

31.  In HKSAR v Chen Jianchao[14], the Court of Appeal said:

“21. Not surprisingly, given the applicant’s acceptance of the ‘Summary of Facts’ as the factual basis on which the applicant pleaded guilty to the two charges, no issue was taken with the judge’s findings that the applicant knew the predicate offence in the two charges, in particular that they were deceptions practised on elderly ladies. Beyond, that the judge found only that the applicant knew the amount of monies involved, namely $230,000 and $17,700. He knew of the former because he accepted in the Summary of Facts that he had asked the victim if she had that money available to give him. He knew of the latter because he remitted the monies to a stipulated account. The judge did not make any finding that the applicant was aware of the details of the deception practice in respect of Charge 1.

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35. … The judge was entitled to take into account, as he did, that the applicant was recruited to come to Hong Kong from the Mainland to commit the offences. That was a factor in aggravation in the commission of the offence. Similarly, he was entitled to find that the offences were “pre-planned”. Clearly, there was a degree of organization in the operation, in which the applicant’s role was to collect the money whilst others played other parts: Chan King Fung recruited the applicant and gave him general instructions; the unknown man gave him detailed instructions by telephone about the collection of the monies on both occasions and in respect of the remittance of the monies the subject of Charge 2. …

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36. Having regard to all the circumstances of the commission of the offence, we are satisfied that, although the sentence was at the top end of the appropriate range of sentence, having regard to the particular circumstances of the instant case the judge was entitled to take a starting point for sentence for Charge 1 of 4 years’ imprisonment. … ”

32.  In the present case, there was obviously an international aspect to the offence, the defendant having been recruited in Shenzhen to commit a crime in Hong Kong.  He knew Ah Cheung was in communication with Madam Wong over the phone and that she had been cheated. The irresistible inference must be that the defendant knew this was a case of telephone deception.  The amount involved in the charge was $280,000, $48,000 of which was lost.  The defendant collected the $50,000 from Madam Wong and must have observed that she was an elderly person.  He had the bulk of the money remitted immediately to the mainland.  There was, therefore, clearly a degree of planning and organization in the offence.  In addition, when the defendant turned up at Chiyu Bank, Yaumati, he must have realized that in handing over the mobile phone to Madam Wong to enable Ah Cheung to speak with her, he had assisted Ah Cheung to commit an act in furtherance of the conspiracy.  

33.  In view of the above consideration, the proper starting point in respect of the second charge is one of three years and six months’ imprisonment.  Little in the defendant’s background amounts to valid or strong mitigation.  He is nevertheless entitled to the usual one-third discount for his guilty plea and previous good character; the sentence is reduced to two years and four months’ imprisonment.  

34.  There is no justification not to impose a one-third enhancement of the defendant’s sentence pursuant to section 27(11) of the Ordinance(see HKSAR v Wu Jianbing[15]and HKSAR v Cen Huakuo[16]); the sentence is, accordingly, enhanced by nine months.   

CONCLUSION

35.  For the offence in Charge 2 of which he stands convicted, the defendant is sentenced to a term of imprisonment of three years and one month.