HKSAR v. LAM YING KUI

CACC 186 /2025, [2026] HKCA 1363

On Appeal From [2025] HKDC 833

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO 186 OF 2025

(ON APPEAL FROM DCCC NO 850 OF 2023)

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REASONS FOR JUDGMENT

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1.  The applicant pleaded guilty on 22 April 2025 in the District Court before HH Judge A N Tse Ching (“the judge”) to four charges of dealing 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. Together the charges spanned over four years between June 2016 and August 2020. On 22 May 2025, he was sentenced by the judge to a term of 60 months’ imprisonment.

2.  By his Form XI filed on 16 June 2025, the applicant sought leave to appeal against his sentence and was represented at this application (as he was before the judge) by Mr Tsoi SC and Ms Leung.  Ms Fu and Mr Wan, who represent the respondent (as they also did before the judge), opposed the application.

3.  On 24 July 2026, having heard the arguments of counsel, I refused leave to appeal against sentence and said I would hand down my reasons for doing so in due course.  These are my reasons. 

The particulars of the charges

4.  Looked at together, the four charges averred that the applicant, together with Wong Man-kai (“WONG”), had made use of four different bank accounts held either by a limited company, named Kcirnmas International Company Limited (“KCI”), or two sole proprietorships registered in his own name, namely AGL Management Company (“AGL”) and OPM Project Studio (“OPM”), with the Hang Seng Bank Limited (“HSB”) and Bank of China (Hong Kong) Limited (“BoC”) spanning a four-year period, and dealt with different sums of money known or believed to represent proceeds of an indictable offence.  The particulars of the four charges were as follows:

The admitted facts

5.  The case arose from a fraud perpetrated by WONG against his employer, a renovation company called Space Interior Solutions Ltd (“Space Interior”).  The fraud resulted in Space Interior transferring a total of HK$30,434,126.50 (the “Subject Funds”) to the four bank accounts (collectively the “Subject Accounts”) particularised in the four charges. 

6.  At the relevant time, WONG was employed by Space Interior as an account service manager and project manager[1].  Between 20 June 2016 and 13 August 2020, WONG submitted 98 false invoices to Space Interior, fraudulently claiming that works were performed by purported contractors and payments should be made to them, when the claim that such works had been performed was in fact untrue[2]. The false invoices were made in the names of KCI, AGL and OPM and detailed the Subject Accounts, but none of these businesses ever performed any work for Space Interior[3]. As a result, Space Interior was fraudulently induced to issue a total of 76 cheques for the Subject Funds to the Subject Accounts[4]. 

7.  On 11 September 2020, WONG was arrested.  Under caution, he claimed to have told the applicant that he did not have any company bank account and was unable to receive the Subject Funds.  WONG also admitted issuing the false invoices without the applicant knowing their falsity.  On 4 March 2022, WONG absconded from Hong Kong[5].

8.  KCI was a limited company incorporated in Hong Kong on 12 April 2016, with the applicant as a 90% shareholder.  The applicant opened the KCI Savings and Current accounts on 6 May 2016 and was one of the two account signatories with authority to effect transactions[6]. 

9.  AGL and OPM were both sole proprietorships founded by the applicant on 3 January 2011 and 21 June 2019 respectively.  The applicant opened the AGL Account on 7 January 2011, and two bank accounts for OPM on 21 June 2019.  He was the sole signatory of these accounts[7].

10.  Among the three entities, only AGL reported business for profit tax purposes between the financial years 2016/17 to 2019/20, which ranged from HK$97,881 to HK$31,105[8]. 

11.  A fund flow analysis[9] indicated that, in general, after each of the deposits from Space Interior had entered the Subject Accounts, a small portion would remain in the receiving accounts, while the rest would be withdrawn in one or several smaller sums in the following days, either by cash or by bank transfers to other Subject Accounts, or to personal bank accounts belonging to the applicant or WONG.  The proceeds of WONG’s fraud were layered among the Subject Accounts[10].  In total, approximately HK$1.2 million (around 4% of the Subject Funds) was left in the original receiving Subject Accounts, and approximately HK$19 million (around 62% of the Subject Funds) was withdrawn in cash.  Within three days of the respective cash withdrawals, approximately HK$3.5 million in cash was deposited into WONG’s personal accounts.  While transfers from Space Interior between 20 June 2016 and 31 May 2017 were only made to KCI’s bank accounts[11], AGL and OPM, in parallel with the KCI accounts, began directly receiving funds from Space Interior from 20 June 2017[12] and 7 November 2019[13] respectively. 

12.  On 18 September 2020, the applicant was arrested.  He remained silent under caution.  His mobile telephone and a bank card in respect of the KCI accounts were seized from him.  Company chops of KCI, AGL and OPM, as well as a cheque book of the KCI Current Account were seized from his office[14].

13.  The applicant’s telephone contained records of WhatsApp conversations with WONG, showing that they had a mutual understanding that about 5% to 8% of the Subject Funds received would be retained by the applicant, while the rest of the monies would be passed on to WONG[15]. 

The mitigation

14.  It was submitted on behalf of the applicant that he did not participate in, nor did he have knowledge of, the predicate offence.  It was said that he had been used by WONG as a pawn and was less culpable than WONG.  He had committed the offences out of greed and immaturity.  There was no international or cross-border element in the case, not was the arrangement sophisticated.  Moreover, he was of good character.  He indicated his plea of guilty 5 days (or l working day) before the first day of the trial and should receive a 20%–25% discount.  It was submitted that the 3-year interval between the applicant’s initial arrest and formal charge (14 July 2023) constituted a substantial delay.  There being no fault on the part of the applicant, the delay warranted a sentencing discount.  Counsel further invited the judge to consider all the charged conduct as one single course of conduct or arrangement for the purpose of sentencing. 

Reasons for sentence

15.  The judge found that since the applicant knew that the funds came from Space Interior and that WONG was employed by Space Interior, the applicant had every reason to believe that the predicate offences involved a breach of trust[16]. The judge considered that the applicant had turned a blind eye to all the suspicious circumstances. 

16.  The scheme of money laundering was sophisticated.  It involved three companies, five company accounts and the applicant’s personal BOC account with numerous inter-account transfers[17].  The applicant must have provided WONG with at least images of the chops of his companies and five different bank account numbers to receive payments from Space Interior, as well as founded or acquired KCI and OPM for the purposes of committing the present offences[18]. Further, he had layered the money laundering by inter-company account transfers.  The applicant had, therefore, taken an active role in the money laundering scheme[19].

17.  The judge further found that the amount laundered by the applicant was very substantial, and so was the financial benefit he derived from the laundering scheme[20]. The offences spanned some 4 years with 76 deposits and numerous transfers. Moreover, the applicant also committed the offences with an accomplice. 

18.  Bearing these factors in mind, as well as the sentencing considerations set out in HKSAR v Boma[21],the judge adopted 42 months’, 57 months’, 63 months’ and 54 months’ imprisonment as the respective starting points on Charges 1 to 4[22].  For his late pleas of guilty, the applicant was accorded a 20% discount from the appropriate starting point[23].

19.  As for the issue of delay, the judge identified the relevant factors described in Scook v The Queen[24].  Having considered the chronology of events, which was not disputed by the parties, as well as the conduct of the applicant since his arrest, the judge rejected the submission that there had been any unreasonable delay[25].  She also found the applicant had suffered no unfairness because of delay.  There was no other mitigating factor of any weight[26].

20.  Applying the 20% guilty plea discount, the judge sentenced the applicant to terms of imprisonment of 33 months, 45 months, 50 months, and 43 months respectively on Charges 1 to 4[27].

21.  As for the question of totality, the judge found that the amounts laundered in each of the charges were wholly different and distinct, reflecting only the specific amount deposited by Space Interior through WONG’s frauds.  There was no possibility of double counting.  She also found that there was a further agreement between the applicant and WONG to set up and use OPM at a later stage, in addition to KCI and AGL.  The judge rejected the submission that there was only one agreement between them[28].  After considering totality, the judge adopted an overall starting point of 75 months’ imprisonment, which was reduced to 60 months’ imprisonment for the applicant’s pleas of guilty[29]. She achieved that result by ordering the sentences on Charges 1, 2 and 3 to be served concurrently with each other, but for 10 months of Charge 4 to be served consecutively to the sentence on Charges 1, 2 and 3[30]. 

Grounds of appeal

22.  Mr Tsoi has sought leave to appeal on three grounds, as follows:

(i)  The judge erred in treating the applicant as having knowledge or “blind-eye knowledge” of the underlying predicate offence of fraud, which generated the relevant criminal proceeds;

(ii)  The judge erred in using the “breach of trust” feature of the underlying predicate offence of fraud (which had been committed by another person) as an aggravating factor against the applicant in respect of his money laundering charges; and

(iii)  The final sentence of 5 years’ imprisonment upon the applicant’s own guilty plea was manifestly excessive in that insufficient weight was given for the delay in proceedings, and the judge erred in treating “layering” as an aggravating factor. 

The applicant’s submissions

23.  In respect of Ground 1, Mr Tsoi argued that there had been an agreement between prosecution and defence that the applicant only had “reasonable grounds to believe” that he was dealing with the proceeds of crime, but did not have knowledge of the predicate offence; and did not have knowledge of the fact that the proceeds in fact derived from fraud.  There was an insufficient factual and evidential basis for finding that the applicant had “blind-eye knowledge” of the predicate offence.  Accordingly, the applicant did not fall within the first limb of the state of knowledge relevant to sentencing discussed in Boma; at their highest, the facts fell only into to the 2^nd category of recklessness in the second limb. 

24.  In respect of Ground 2, Mr Tsoi submitted that the judge erred in finding that the applicant had turned a blind eye to any “breach of trust” feature of the predicted offence.  Further, it was wrong in principle to sentence the applicant, who was convicted solely on the basis of “having reasonable grounds to believe” as if he had knowledge of the predicate offence; and to use against him an aggravating feature of the predicate crime, namely, that it may have been committed in breach of trust.  Mr Tsoi also argued that that the judge should have given the applicant an opportunity to present evidence at a Newton Hearing before drawing an adverse conclusion of “blind-eye” knowledge.

25.  In respect of Ground 3, Mr Tsoi based his argument on two premises.  First, it was complained that insufficient weight was given to the 33-month period between the applicant’s first arrest in September 2020 and the decision to prosecute him in July 2023.  Mr Tsoi pointed out that the fund flow analysis had not been done by an expert.  Even accepting that the police did interview 24 civilian witnesses in connection with the case, the police would have spent on average nearly one month per witness without any explanation.  Furthermore, it further took more than 9 months for the prosecution to make the decision to charge the applicant.  Given the abundance of information available to the police when the applicant was first arrested, the applicant’s legal right to remain silent, the fact that the applicant had led a normal, law-abiding life between March 2021, when he was initially released, and June 2023, when he was re-arrested, some discount should have been given in respect of delay.

26.  As for the judge’s finding of layering, Mr Tsoi submitted that all transfers were easily traceable back to the applicant.  It is questionable whether the applicant indeed had an intent to disguise and conceal by these transfers and whether that was the only reasonable inference to draw.  Therefore, the facts did not fall squarely into the definition of "layering" as identified in HKSAR v Chan Kim Chung Nelson[31]. [I should perhaps observe here that it was an agreed fact in the Summary of Facts[32] that: “The crime proceeds were layered amongst the Subject Accounts”].

The respondent’s submissions

27.  For the respondent, Ms Fu submitted, in respect of Ground 1, that the applicant’s argument had been premised on a misconception of the judge’s ruling and of the sentencing approach to money laundering.  The judge was well aware of the basis of the plea, but was justified in adopting a starting point which reflected the strong reasonable grounds known to the applicant which suggested that the Subject Funds were tainted.  The concept of “blind-eye knowledge” as explained by the Court of Final Appeal in HKSAR v Harjani Haresh Murlidhar[33] and the reasonable grounds limb of the offence are not mutually exclusive.

28.  As for Ground 2, it was contended that the judge had sufficient grounds to conclude from the close personal relationship between the applicant and WONG that the applicant had knowledge of certain parts of the predicated offence, including its “breach of trust” nature, which was a relevant factor in sentencing.

29.  In respect of Ground 3, the respondent argued there was no basis to find any unreasonable delay so as to justify any specific reduction in the sentence.  In respect of the issue of layering, it was pointed out that the Subject Funds were transacted through multiple bank accounts held by the applicant personally and business entities under his control.  His high level of participation did not entitle him to be regarded as “a person down the chain”, as described in Boma.

Consideration

30.  Almost all of the arguments raised before me were in fact specifically and comprehensively addressed by Mr Tsoi with the judge during mitigation and meticulously dealt with by her in argument.  The applicant may not agree with the way the judge resolved those issues but it cannot be said she has not thoroughly dealt with them, with recourse to relevant authority where necessary, either during a lengthy mitigation hearing or over the course of a 62-page set of Reasons for Sentence.  The exception, perhaps, is the complaint about the judge’s attribution of the applicant’s turning a blind eye to WONG’s breach of trust, but, realistically, that would inevitably follow from the way the judge dealt with the issue of the applicant’s state of mind and his obviously close friendship with WONG over the four years of these offences and his knowledge that WONG worked for Space Interior, from which the 76 invoices emanated and payments were made from WONG’s company to the applicant’s company accounts; and from which the applicant retained some HK$1.5 million.

31.  Ms Fu has argued that there is a whole gradation of mens rea involved in the offence of dealing with property known or believed to represent proceeds of an indictable offence, from mere recklessness to full knowledge and complicity.  The respondent accepted that the applicant came within the category of having reasonable grounds to believe but contended that the circumstances were so close to the borderline with knowledge as to make very little difference. 

32.  The applicant and WONG were friends; he knew WONG was an employee of Space Interior, and that WONG was repeatedly submitting invoices purportedly from the applicant’s companies involving more than HK$30 million; he retained HK$1.5 million for laundering the funds through his own various accounts to which payments were made by Space Interior; and this continued over a period of more than four years.  It must have been obvious that the funds were coming from an indicatable offence committed by WONG against his own company.  In such circumstances, the judge was entitled to make the findings she did.  Ms Fu particularly relied on the Court’s discussion of the state of knowledge in Boma as being applicable to the present situation[34]:

“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.” (Emphasis supplied)

The matter was put in a similar way by the Appeal Committee of the Court of Final Appeal in HKSAR v Liu Tjong Slam[35]:

“It was also accepted that the applicant knew that the money came from the father. Thus, even if his liability were approached on the ‘reasonable grounds to believe’ basis, this would be a case where the lack of actual knowledge arises in a situation close to one of wilful blindness.”

33.  I do not consider there is any reasonable argument that the judge adopted the wrong test, in light of the compelling evidence and inferences that the applicant must, at the very least, have chosen to close his eyes to the blindingly obvious.

34.  Similarly, I do not consider there is any reasonable argument that the judge should not have had regard to the fact that WONG was abusing the trust of his company: again, it would have been blindingly obvious, had the applicant chosen to examine why he was receiving such an extraordinary amount of money for channelling funds through his companies’ accounts over four years following the presentation of false invoices to Space Interior.

35.  I do not consider that Grounds 1 and 2 are reasonably arguable.

36.  As for Ground 3, the “layering” complaint is, with respect, unarguable in view of [17] of the Summary of Facts, coupled with the fact that some of the payments went between different bank accounts in different banks.  Nor is the matter of delay of any significant weight, particularly when it has been properly made clear by the applicant that it is “no part of [the applicant’s] submission that the delay was caused by dilatory or neglectful conduct of [the prosecution]”[36]. One cannot ignore the fact that all law enforcement authorities were significantly handicapped during the period of delay caused by the Covid pandemic; indeed, the courts themselves were effectively closed for a cumulative period of some 18 weeks over two years, which contributed to a significant backlog of court cases in the two years which were to follow.

37.  I do not consider Ground 3 to be reasonably arguable.

38.  At the end of the day, the Court of Appeal will have to ask itself whether, whatever the mechanics of the judge’s reasoning, a starting point of 6 years and 3 months’ imprisonment was manifestly excessive and/or wrong in principle in all the circumstances of the case.  I do not consider it to be reasonably arguable that either the starting point or the resulting sentence were manifestly excessive and/or wrong in principle.

39.  The application for leave to appeal against sentence was accordingly refused.  The applicant is advised that he has the right to renew his application for leave to appeal to the Court of Appeal, but he is also warned that the Court also has the power to order the loss of any time spent in custody pending the determination of the appeal if it were to conclude that there was no justification for renewing the application.

[1]  Appeal Bundle (“AB”), p 8, [5].

[2]  AB, p 9, [6].

[3]  AB, p 10, [7].

[4]  AB, p 9, [6].

[5]  AB, p 10, [8].

[6]  AB, p 10, [9].

[7]  AB, pp 10-11, [10]-[11].

[8]  AB, pp 12-13, [23].

[9]  AB, pp 93-108.

[10]  AB, p 12, [17].

[11]  AB, pp 93-94, Payments 1-9.

[12]  AB, p 95, Payment 10.

[13]  AB, p 104, Payment 54.

[14]  AB, p 12, [19]-[21].

[15]  AB, p 12, [22].

[16]  AB, p 53B-G.

[17]  AB, pp 55B-56E.

[18]  AB, p 59H-P.

[19]  AB, p 56F-K.

[20]  AB, p 56M-S.

[21]  HKSAR v Boma [2012] 2 HKLRD 33.

[22]  AB, p 68B-F.

[23]  AB, pp 68J-69S.

[24]  Scook v The Queen [2008] A Criminal Review 164.

[25]  AB, pp 82M-91C.

[26]  AB, pp 75C-76J.

[27]  AB, p 92B-E.

[28]  AB, p 91J-O.

[29]  AB, p 91P-S.

[30]  AB, p 92G-H.

[31]   HKSAR v Chan Kim Chung Nelson [2012] 2 HKLRD 263.

[32]  AB, p 12, at [17].

[33]  HKSAR v Harjani Haresh Murlidhar (2019) 22 HKCFAR 446.

[34]  Boma, at [40(2)(a)].

[35]  HKSAR v Liu Tjong Slam (Unrep., FAMC 8/2013, 11 July 2013), at [8].

[36]  Applicant’s Submission for Leave, at [47].