HKSAR v. SUBBA WILLIAM AND ANOTHER

DCCC 2/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 2 OF 2015

____________

____________

REASONS FOR VERDICT

1.  The defendants both plead not guilty to two separate charges of dealing with property knowing or having reasonable grounds to believe the property represented the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance.[1]

Introduction

2.  In 1988 Mr Mohammed Abdulqawi Mohammed Saeed set up a company called “Sami Trading Centre” (“Sami Trading”) in Saudi Arabia.  The major business of Sami Trading was garment trading.  In 1990 Mr Mohammed Ahmed Al-alimi Waleed opened a branch of Sami Trading in Yemen called “Al-Alimi Exhibition For Trading”.   

3.  On 28 February 2013, Mr Waleed sent an email requesting Mr Saeed to remit US$140,000 to their supplier Hong Kong G.S. International Co Ltd.  Mr Saeed never received this email and instead received an email on 1 March 2013 asking him to remit US$140,000 to Subba Limited.  On 9 March 2013 Mr Saeed, believing the request was genuine, arranged for US$140,000 to be remitted to Subba Limited. 

4.  The sum of US$139,973 (i.e. US$140,000 less banking charges) was credited to the bank account of Subba Limited on 13 March 2013.  D1 was the sole director and shareholder of Subba Limited and the sole authorized signatory of the bank account.  This sum forms the basis of charge 2 against D1. 

5.  Police enquiries revealed that on 11 March 2013 the sum of US$59,938 (US$60,000 less banking charges) was credited into the same account of Subba Limited.  This sum forms the basis of charge 1 against D1. 

6.  On 14 March 2013 Subba Limited transferred US$120,000 to the Bank of China.  The beneficiary was Yamazaki Global Sources Limited (“Yamazaki”).  D2 was the sole director and shareholder of Yamazaki and a signatory of the bank account at that time.  The transfer of US$120,000 to Yamazaki forms the basis of charge 3 against D2.

7.  D1 was arrested in April 2013.  In a series of video recorded interviews D1 said that the monies were remitted to him pursuant to an agreement he had entered into with a person called Kingslay for the sale and purchase of garments, and that the transfer to Yamazaki was made pursuant to an agreement with Yamazaki to supply the garments. 

8.  D2 was arrested in December 2013.  In a video recorded interview D2 said that he received the sum of HK$418,014 in cash from D1 on the same day the US$120,000 was transferred to Yamazaki, both sums being paid pursuant to an agreement for the supply of garments by Yamazaki to Subba Limited.  The receipt of HK$418,014 cash forms the basis of charge 4 against D2.

Prosecution case

9.  In summary the prosecution case is that the email accounts of Mr Saeed and Mr Waleed had been hacked.  The email dated 28 February was intercepted and replaced with the email of 1 March, as a result of which Mr Saeed was deceived into remitting US$140,000 to Subba Limited. 

10.  The prosecution say that US$139,973 credited to the bank account of Subba Limited was the proceeds of an indictable offence and that D1 dealt with the monies knowing that the money represented the proceeds of an indictable offence or in the alternative dealt with the monies having reasonable grounds to believe the money, in whole or in part, directly or indirectly represented the proceeds of an indictable offence. 

11.  Unlike the sum of US$139,973 the prosecution are unable to show that the sum of US$59,938 was also remitted to the bank account of Subba Limited as a result of fraudulent conduct.  The prosecution case is that D1 dealt with the two sums of money together from which the court can draw the inference that the sum of US$59,938 also represented the proceeds of an indictable offence and that D1 dealt with the money knowing or having reasonable grounds to believe the money, in whole or in part, directly or indirectly represented the proceeds of an indictable offence.

12.  The prosecution case as against D2 is that the US$120,000 transferred to the account of Yamazaki and the HK$418,014 cash given to D2 by D1 were part of the US$139,973 and US$59,938 credited to the account of Subba Limited and therefore represented the proceeds of an indictable offence, which proceeds D2 dealt with knowing that both sums represented the proceeds of an indictable offence or in the alternative dealt with the monies having reasonable grounds to believe the monies, in whole or in part, directly or indirectly represented the proceeds of an indictable offence. 

Defence case

13.  In summary the case of D1 is that he was unaware of any fraud and that the sums of US$59,938 and US$139,973 were received by Subba Limited pursuant to an agreement made for the sale of garments with a male called Kingslay.[2]  Subba Limited then entered into an agreement with Yamazaki for the supply of the garments.  The transfer of US$120,000 to the account of Yamazaki and the cash payment of HK$418,014, were made pursuant to that agreement.  After Subba Limited received the monies Kingslay cancelled the agreement and demanded full refund of the money in cash.  D2 refunded the money to D1, who then repaid Kingslay.  

14.  In summary the case of D2 is that the transfer of US$120,000 and the cash payment of HK$418,014, were made pursuant to an agreement made between Yamazaki and Subba Limited for the supply of garments.  After Yamazaki received the US$120,000 and D1 gave D2 the cash payment of HK$418,014, D1 cancelled the agreement.  D2 then refunded all the money to D1, in cash.  

Evidence

15.  No prosecution witnesses have been called.  The evidence of Mr Saeed and Mr Waleed[3] has been read pursuant to section 65B of the Criminal Procedure Ordinance.[4]  Also read was the evidence of Zulfiqar Ali Hashmi,[5] the sole director of Hashmi Secretarial Services Limited, relating to the incorporation of Subba Limited and the secretarial services provided to Yamazaki; and the evidence of Chan Yu Ting,[6] a secretary of Servcorp Virtual Office relating to the provision of virtual office services on the 19/F of Two International Finance Centre to Yamazaki.

16.  Evidence has been admitted pursuant to section 65C of the Criminal Procedure Ordinance,[7] including company records of Subba Limited and Yamazaki; banking records of Subba Limited and Yamazaki; bankers’ affirmations; movement and immigration records; Inland Revenue Department records; and the arrest of the defendants and seizure of documents. I will refer to the admitted facts as I review the evidence.  A documentary exhibits bundle was prepared for trial.[8]

17.  Also admitted in evidence are five video interviews given by D1[9] and two by D2,[10] the voluntariness and accuracy of which have been admitted together with agreed tables setting out the documents shown during the interviews.[11] In reaching my verdict I have considered the interviews, both the inculpatory and exculpatory parts, in accordance with the principles in R v Sharp.[12] 

18.  D1 elected to give evidence and D2 elected to remain silent.  Neither defendant called any witnesses.  No adverse inference is drawn against D2 for remaining silent.  That is his right.  This proves nothing one way or the other.  The prosecution must prove the charges beyond reasonable doubt.

19.  Admitted in evidence is that the defendants both have a clear record.[13] I direct myself as to good character in accordance with the decision in HKSAR v Tang Siu Man.[14] 

20.  In reaching my verdict I remind myself of the burden and standard of proof and that the burden is on the prosecution throughout.  The defendants have to prove nothing.  I direct myself that I must be sure of the guilt of the defendants before I can convict, the case of each defendant to be considered separately and each charge to be considered separately. 

21.  The main issue to determine is whether D1 and D2 knew or had reasonable grounds to believe that the monies represented the proceeds of an indictable offence or whether the monies were paid pursuant to a genuine agreement for the sale of garments.  If this is true or may be true, it would follow that the defence has raised sufficient doubt in the case and the defendants are entitled to be acquitted.

22.  I remind myself that when drawing inferences from the evidence the inference must be the only reasonable inference to draw from the proved facts.  If from the facts proved there is a reasonable inference to draw against a defendant as well as one in his favour, the adverse inference cannot be drawn.  

23.  I have carefully considered all the evidence together with the submissions of Mr Lee, Mr Tam and Mr Mughal. 

Dealing with property

24.  The actus reus of the offence is dealing with property.  Monies passing through a bank account are clearly property.[15]

25.  Dealing in relation to property is defined in section 2(1) of the Ordinance and includes, (a) receiving or acquiring the property; (b) concealing or disguising the property (whether by concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it or otherwise); and (c) disposing of or converting the property. 

Charges 1 & 2

26.  Admitted in evidence is that on 11 and 13 March 2013 the sums of US$59,938 and US$139,973 were credited to Subba Limited’s US dollar account with the Standard Chartered Bank.[16]

27.  Between 12 and 14 March the sums of US$12,912.96; US$47,000 and US$19,900 were transferred from the US dollar account to the HK dollar account, followed each day by cash withdrawals from that account.[17] Save for the sum of HK$10,534.69, all the cash transferred was withdrawn. On the 14 March 2013 US$120,000 was transferred to Yamazaki,[18] leaving a balance in the US dollar account of US$74.76.

28.  Admitted in evidence is that D1 is the sole director of Subba Limited[19] and the sole signatory of the bank accounts.[20] By allowing the bank account to be used to receive the remittances; transferring the monies to the HK dollar account which were then withdrawn; and transferring US$120,000 to Yamazaki, I am satisfied so I am sure the only inference to draw is that D1 dealt with the sums of US$59,938 and US$139,973.      

29.  In addition in his evidence and in the video recorded interviews D1 admitted he knew the monies were to be deposited in the US dollar account; that he transferred the monies to the HK dollar account; withdrew the sums in cash; and transferred US$120,000 to Yamazaki.  I am satisfied full weight is to be attached to the admissions made by D1.

Charge 3

30.  Admitted in evidence is that on 14 March 2013 the sum of US$120,000 was transferred by Subba Limited to Yamazaki, [21] which sum was then transferred to Yamazaki’s HK dollar account on 16 March.[22] On 16 and 20 March 2013, save for HK$790.00, D2 withdrew all the money in cash.[23]

31.  Admitted in evidence is that in March 2013 D2 was the sole director and shareholder of Yamazaki[24] and a signatory of the bank accounts.[25]  By allowing the bank account to be used to receive the remittance; transferring the monies to the HK dollar account and withdrawing the money in cash, I am satisfied so I am sure the only inference to draw is that D2 dealt with the sum of US$120,000.

32.  In addition in the video recorded interviews D2 admitted he knew US$120,000 was to be deposited in the US dollar account; and that he transferred the monies to the HK dollar account, which he withdrew in cash.[26] I am satisfied full weight is to be attached to the admissions made by D2 that he dealt with the US$120,000 transferred into the US dollar account of Yamazaki.

Charge 4

33.  In the video recorded interviews D2 admitted receiving HK$418,014 in cash from D2.  I am satisfied full weight is to be attached to the admissions made by D2 that he received HK$418,014 in cash from D1.  Also D1 testified that he gave HK$418,014 cash to D2.  I am satisfied so I am sure that by receiving the sum of HK$418,014 the only inference to draw is D2 dealt with the money.

Proceeds of an indictable offence

US$139,973 (US$140,000)

34.  Although the prosecution do not have to prove the property represents the proceeds of an indictable offence, they are able to do so in respect of the sum of US$139,973.     

35.  The details of how Mr Saeed was deceived into remitting the money to Subba Limited are contained in the witness statements of Mr Saeed and Mr Waleed.[27] In summary on 28 February 2013, Mr Waleed sent an email requesting Mr Saeed to remit US$140,000 to their supplier Hong Kong G.S. International Co Ltd, who had supplied garments to Sami Trading for over 10 years.  The beneficiary bank account was Shenzhen Development Bank Co Ltd.  The payment details and proforma invoice of Hong Kong G.S. International Co Ltd are exhibited as P5 (34)[28] and P6 (35-36).

36.  Mr Saeed never received this email.  Instead, on 1 March 2013, Mr Saeed received an email, exhibit P7 (37-42), purportedlysent by Mr Waleed.  At the time Mr Saeed thought the email address was the same as that of Al-Alimi Exhibition For Trading.  Only later did Mr Saeed discover that the email address of the sender was in fact different, by the addition of one extra 2 in the address.[29]

37.  Attached to the email were payment details and a proforma invoice, exhibit P7 (38-40).[30]  These were identical to exhibit P5 and P6 save that the name Hong Kong G.S. International Co Ltd had been replaced with Subba Limited and the beneficiary bank was Standard Chartered Bank, Hong Kong.  Al-Alimi Exhibition For Trading having never authorised payment to Subba Limited, the only inference to draw is that exhibit P7 (38) is a forgery.  

38.  On 4 March 2013 Mr Waleed sent an email, which Mr Saeed received, requesting US$27,130 be remitted to Zhuji Jinxuan Import & Export Co Ltd.[31]  On 6 March 2013 Mr Saeed prepared two telegraphic transfer application forms[32] for the sums of US$140,000 and US$27,130, which he sent by email to Mr Waleed for his confirmation.

39.  Mr Waleed only received the telegraphic transfer application form for the sum of US$27,130.  In respect of the sum of US$140,000 Mr Waleed received a transaction confirmation,[33] purportedly issued by HSBC on 6 March 2013, confirming that US$140,000 had been transferred to Hong Kong G.S. International Co Ltd.  No application having been made by Mr Saeed to transfer US$140,000 to Hong Kong G.S. International Co Ltd, the only inference to draw is that this document is a forgery.  

40.  On the same day Mr Waleed sent an email to Mr Saeed confirming the transaction of US$27,130.  Believing Mr Saeed had already transferred US$140,000 to Hong Kong G.S. International Co Ltd, Mr Waleed also thanked Mr Saeed for making payment. On receipt of this email believing that Mr Waleed had confirmed to proceed with the transactions, Mr Saeed applied for the sums of US$ 140,000 and US$27,130 to be transferred from Sami Trading’s HSBC account in Saudi Arabia.

41.  The transfers were made on 9 March 2013, after which Mr Saeed sent two transaction confirmations[34] by email to Mr Waleed.  Mr Waleed only received the transaction confirmation for the sum of US$27,130.[35]  In respect of the sum of US$140,000 Mr Waleed received a different transaction confirmation, purportedly issued by HSBC on 9 March 2013, naming the beneficiary as Hong Kong G.S. International Co Ltd.[36]  Again no application having been made by Mr Saeed to transfer US$140,000 to Hong Kong G.S. International Co Ltd, the only inference to draw is that this document is also a forgery. 

42.  On 14 March 2013, during a business trip to China, Mr Saeed discovered he had been deceived in remitting US$140,000 to Subba Limited. 

43.  I accept the evidence of Mr Saeed and Mr Waleed.  I am satisfied so I am sure that Mr Saeed was deceived into remitting the sum of US$140,000 to Subba Limited and that the sum of US$139,973 received in the US dollar account of Subba Limited are the proceeds of an indictable offence. 

US$59,938 (US$60,000 less banking charges)

44.  There is no evidence that this sum was also remitted to the bank account of Subba Limited as a result of fraudulent conduct.  As noted earlier the prosecution case is that D1 dealt with the two sums of money together from which the court can draw the inference that the sum of US$59,938 also represented the proceeds of an indictable offence.[37]

Charge 3 – US$120,000

45.  When D1 transferred the sum of US$120,000 to Yamazaki on 14 March 2013, there was only US$120,074.76 in the US dollar account.  The sum of US$59,938 had already been transferred to the HK dollar account together with part of the US$139,973.[38]  The only inference to draw is that the US$120,000 transferred to Yamazaki was part of the US$139,973 and therefore, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence.

Charge 4 – cash HK$418,014

46.  As noted earlier between 12 and 14 March D1 transferred monies from the US dollar account to the HK dollar account.[39] This was followed by the withdrawal of $353,000 and $254,800 from the HK dollar account on 13 and 14 March 2013.[40]  The only inference to draw is that the cash payment of HK$418,014 made on 14 March came from these monies and therefore in whole or in part, directly or indirectly, represented the proceeds of an indictable offence.

Knowing or having reasonable grounds to believe

47.  The mens rea of dealing has two parts “knowing” or “having reasonable grounds to believe”.  The prosecution proceed on both limbs, as against both defendants. 

48.  In HKSAR v Pang Hung Fai,[41] Mr Justice Spigelman NPJ giving the judgment of the Court said, [42]that the better and less complicated test for determining whether the accused had reasonable grounds to believe was that propounded by the Appeal Committee of the Court of Final Appeal in Seng Yuet Fong v HKSAR,[43] where Mr Justice Litton giving the judgment of the Court said,

“To convict, the jury had to find that the accused had grounds for believing; and there was the additional requirement that the grounds must be reasonable: That is, that anyone looking at those grounds objectively would so believe.”

49.  In deciding whether the defendant had reasonable grounds to believe the applicable standard is would those grounds lead to the belief and not could those grounds lead to the belief and in determining whether they would the defendant’s belief, perception or prejudice are to be considered and given such weight as is warranted.[44] 

D1

Background

50.  The defendant gave evidence over eight days.  In summary[45] D1 testified that he came to live in Hong Kong in 1997 and is now the holder of a permanent Hong Kong identity card.  D1 is married with one daughter.   His wife lives in Nepal whilst his daughter lives in Hong Kong. 

51.  D1 studied law in India and in Hong Kong and worked for law firms in Hong Kong between 2004 and 2012.  At the time of giving evidence he was a law student at London University.  Around Christmas 2011 D1 went to London where he met a few people, who inspired him to set up his own business.  D1 then learnt about import & export business and spent HK$50-60,000 setting up his own website.

52.  Admitted in evidence is that D1 is the sole director and shareholder of Subba Limited, which was incorporated on 21 September 2012.[46] Also admitted in evidence is that on 3 December 2012 D1 opened bank accounts on behalf of Subba Limited with the Standard Chartered Bank.[47]

January 2013

53.  Sometime in the second week of January 2013 a man called Kingslay gave D1 a call.  Kingslay asked to meet D1 as he wished to place an order for the supply of garments. The following day D1 and Kingslay met in a Nepalese restaurant in Chungking Mansions.  After formal introduction Kingslay asked questions about D1’s company.  D1 gave his name card and told Kingslay everything about Subba Limited.

54.  Kingslay said that he was the representative of “so and so” companies and showed D1 letter heads of various companies established in the Middle East and the United States.  Although Kingslay tried to conceal the names of the companies on the top of the letter heads this did not cause D1 to be suspicious of Kingslay.  D1 trusted Kingslay, who was friendly and smart and wore a Cartier watch and brand name clothes.

55.  Kingslay said he dealt in garments including ties, ladies dresses and sandals.  D1 told Kingslay he knew a number of suppliers and would discuss with them and get back to Kingslay.  Afterwards D1 met Kingslay many times, each meeting being held in the same restaurant (“the restaurant”) in Chungking Mansions.

56.  About two weeks later, at the end of January, D1 met Kingslay for the second time.  Kingslay said he was closely connected to two companies, who were interested in buying garments.  The two companies wanted to know more about D1’s company and requested to be supplied with the company documents and bank statement.  D1 also asked Kingslay to provide him with the documents of the two companies. Kingslay said he would talk to them about this.  About 1-2 hours after the meeting D1 arranged for someone to deliver copies of the documents to Kingslay.

February 2013

57.  A third meeting took place about 8-10 days before D1 left for India on 24 February.  In this meeting Kingslay gave the name of the two companies who wanted to buy garments: Sami something & Ali Salem.  Kingslay asked D1 to check with his suppliers on the availability and price of the garments.    

58.  After the meeting D1 checked with many suppliers and also asked his staff to help him check on Alibaba.[48] The suppliers did not have all the products requested by Kingslay, therefore D1 telephoned D2, who he knew was running an import & export business.  D1 had known D2 since 2008, when D2 was a client of the law firm where he worked.  D2 informed D1 of the unit price and said there was stock in China.  In cross-examination by Mr Mughal for D2, D1 agreed he knew D2 made frequent trips to China to source suppliers of various products, including garments and that D1 had never introduced D2 to Kingslay.

59.  D1 telephoned Kingslay and informed him of the unit prices.  Kingslay said he would inform his client and get back to D1.  Two or three days later Kingslay told D1 he had good news and asked to meet in the restaurant.  At the meeting Kingslay said he had increased the unit prices, which were accepted by his clients.  Kingslay proposed that he receive 40% of the profit made and D1 receive 60%, which was acceptable to D1.  Kingslay said proforma invoices were now to be prepared and that he would work together with D1.  Finding Kingslay friendly and trusting him fully, D1 agreed and gave Kingslay letterheads of Subba Limited for him to prepare the proforma invoices.   

60.  One or two days later on 20 or 21 February D1 and Kingslay met again in the restaurant when Kingslay showed the format of a proforma invoice drawn up on blank paper. Arrangements were made to sign the invoice on 25 February, after Kingslay returned from Macau and before D1 went to India.[49]  Three to four hours later Kingslay called saying that he had already prepared the invoice because he may not be back from Macau before the 25 February. 

61.  D1 and Kingslay met again in the restaurant when D1 signed the two invoices, exhibit P19 (75-76). D1 asked why the invoices were dated 25 and 27 February.  Kingslay explained that because he may be late back from Macau the invoices were dated in advance.  Kingslay said he needed a few days between the date of the invoice and the signing of the invoice and therefore asked D1 to sign and date the invoices 26 and 28 February.  D1 found nothing suspicious about doing this.  D1 asked Kingslay to provide him with copies of the invoices after he returned from India.  

62.  The next day before leaving for Macau Kingslay telephoned D1 saying that his company wanted to buy 11,000 pieces of men’s T-shirts and that he would prepare another proforma invoice for D1 to sign after he returned from India. 

63.  On 22 February D1 met D2 in the restaurant where they discussed the matter thoroughly.  D2 noted everything down and assured D1 he could supply the garments at the price he had earlier told D1.  D2 said he would prepare the contract papers before D1 went to India on 25 February.  On 22 or 23 February when checking his visa and air ticket D1 realised he was leaving on the 24 February.  D1 therefore telephoned D2, either on the 23 or 24 February, when arrangements were made to meet on the 24 February before D1 went to the airport.  D1 and D2 met in the restaurant where D1 signed the agreement, exhibit P22 (80-82). 

March 2013

64.  D1 returned from India on the 1 March.  The next day D1 met Kingslay in the restaurant where he was given copies of the invoices, exhibit P19.  Kingslay also showed D1 a revised proforma invoice to include the 11,000 men’s T-shirts.  D1 was not quite satisfied that the T-shirts were to be included in the price for the other garments.  However after calculating that a profit of US$10-15,000 could still be made D1 agreed and signed the revised invoice.  Kingslay promised to give D1 a copy in two to three days time, however, D1 never received a copy and did not ask for one.

65.  On 8 March Kingslay called D1 saying he had got the payment and that they needed to meet.  At the meeting Kingslay gave D1 two TT advices, identified as exhibits P11, P12 & P13 (58-60).  D1 wondered why payment was made before signing the contract, however, on checking the TT advices D1 found no problems, the names and the amounts being the same as on the proforma invoices.  During the meeting Kingslay asked for HK$50,000 advance, to pay for his expenses.  D1 withdrew the money from the HSBC a/c of S.William & Co.  No receipt was issued because everything was on trust.  There was also talk in the meeting about samples. 

66.  After the meeting D1 called D2 and told him to issue the invoices.  After office hours D1 and D2 met in the restaurant when D2 gave D1 the invoices, identified as exhibit P20 (77-78).  When D1 noticed the two orders had been mixed up D2 said he would revise the invoices later.  D1 also noticed a slight shortfall in the quantity of ladies dresses.  D2 explained the amount stated in the invoice was all that was in stock.  In cross-examination by Mr Mughal D1 said that he asked to use Subba Limited as the customer because his buyer had not yet signed a contract with him.

67.  In the meeting D1 also told D2 that the buyer had requested to see samples.  Around 10 March D1 went to China to get the samples.  The day before going D2 had given D1 a copy of the packing list, exhibit P21 (79).  In cross-examination by Mr Mughal, D1 said that he was happy with the samples, which he then showed to Kingslay.

Payment

68.  After US$59,938 and US$139,973 was credited to the account of Subba Limited on 11 and 13 March,[50] D1 told D2 he had received payment.  D2 said payment could be by TT or cash because suppliers in China preferred to receive cash.  On 14 March D1 therefore transferred US$120,000 to Yamazaki by TT[51] and later the same day met D2 in the restaurant where he gave him HK$418,014 cash.  D2 issued a receipt, exhibit P22 (83). 

Cancellation

69.  In the early evening on 15 March Kingslay telephoned D1 saying he wanted to cancel. D1 told Kingslay that he had already paid the supplier.  Feeling tense D1 did not talk any more on the phone.  Kingslay, however, continued to call D1 and later around 11 p.m. they met in a Chinese restaurant in Sham Shui Po.  Kingslay said the products were no longer required and that he needed the money back. D1 said he had to speak to his supplier first. 

70.  Around 3-4 p.m. the next day D1 telephoned D2 telling him that the buyer wanted to cancel.  D2 said they needed to meet.  In the evening they met at the restaurant.  At first D2 did not agree to cancel because he said he may have bad relations with his suppliers.  D1 convinced D2 to agree, saying the order was small and promising D2 more business.  D2 then gave D1 HK$818,014 in cash. D1 wrote out a receipt.[52]  On 22 March, in the restaurant, D2 paid the balance of HK$528,920 in cash.  D1 again wrote out a receipt.[53]

Refund to Kingslay

71.  After D2 paid HK$818,014 D1 made cash payments of HK$50,000 and HK$90,000 to a Mr Ali.  Mr Ali had been introduced to D1 by Kingslay, as a person from Sami Trading, who was involved with marketing.  Ali did not show his name card nor did D1 ask for the name card.  D1 gave the cash to Ali because Kingslay said Ali was going to China and needed money.  As the relationship was built on trust D1 did not ask for any receipt for these payments.

72.  The next payment was made on 11 April in the Chatham Road office.  D1 did not have the total amount to pay Kingslay and believed he paid HK$1m something in cash. Prior to the meeting D1 had asked Kingslay to sign a settlement agreement.  Kingslay had written out a letter of cancellation,[54] which he signed at the meeting.  Kingslay also gave D1 a copy of his passport.[55]  D1 noticed the passport number was different in the cancellation letter and asked Kingslay to correct the letter. 

73.  HK$200-300,000 was still outstanding.  D1 asked Kingslay to go to China with him where he would give Kingslay the balance.  D1 explained that he was going to collect repayment of a loan he had made to a business friend in March.  The business friend repaid US$30,000.  This was still insufficient to fully repay Kingslay therefore D1 asked for one to two weeks to pay the balance.  In the meantime on 17 April D1 was arrested.  After D1 was released on bail he spoke to Kingslay once after which Kingslay changed his number. 

74.  When D1 was arrested the police seized various documents from his bag.[56] These included letters from the Standard Chartered Bank requesting the agreement of Subba Limited to return the sums of US$59,938 and US$139,973 and the closing of the bank account.[57]  D1 said he had only read the letter informing him that the account was to be closed. [58]  After reading the letter D1 went to the bank to find out why the account was closed but no one told him the reason.  D1 believed the two letters requesting return of the funds had not even been opened.[59]

75.  At no time did D1 believe the monies were obtained illegally; did not know anything about the email deception; had never seen the proforma invoice[60] purportedly issued by Subba Limited and used in the email deception; and did not authorise anyone to prepare the invoice.

Consideration of the evidence

76.  I have no hesitation in rejecting D1’s evidence.  I do not find his evidence credible, for example I do not find credible D1 entered into an agreement for the sale and purchase of garments with a person called Kingslay and with D2, on behalf of Yamazaki, to supply the garments. 

77.  Throughout his evidence D1 repeatedly stressed that he trusted Kingslay.  Kingslay never gave his full name.  In cross-examination D1 said Kingslay did not give him a name card because he did not have one with him.  In answer to the court D1 said that when Kingslay said he represented “so and so” companies Kingslay did not mention the names of the companies he represented.  In cross-examination D1 said Kingslay never gave him any company documents or authorisation from the two companies who wished to buy the garments.  Asked by Mr Lee whether this concerned him D1 replied that he never thought about this because he wanted to have a relationship with Kingslay.      

78.  I find inherently improbable that anyone would trust, let alone enter an agreement, with a person who did not give his full name; did not give a name card; did not provide any authorisation from the buyers; and showed letter heads of companies he said he represented, whilst at the same time trying to conceal the names of the companies.  That D1 did not find suspicious the concealing of the names of the companies or the lack of any authorisation, beggars belief.  Equally the evidence that D1 trusted Kingslay, a man who he had never met before, because he was friendly and smart and wore a Cartier watch and brand name clothes, also beggars belief.[61]

79.  In cross-examination D1 said that he had never dealt with garments before, having only discussed supplying uniforms to the Nepalese police and army.   D1 said he was not surprised when Kingslay contacted him even though Subba Limited did not advertise the sale of garments.  I find inherently improbable a buyer of garments would approach a company that does not advertise the sale of garments.  I also note that when opening the bank accounts with the Standard Chartered Bank in December 2012, some three to four months earlier, D1 stated that the business activities of Subba Limited were business consultancy (Metal product promoter).[62]

80.  In evidence D1 said he went to China to collect the samples on 10 March.  By this time Sami Trading had already remitted the monies on the 9 March.[63]  The monies from Ali Salem Aladine Est were credited to the bank account of Subba Limited on 11 March. According to the electronic transfer[64] found on arrest of D1, the date of remittance was 6 March.  I find inherently improbable a buyer of garments would agree to purchase garments from a company with whom they have never done business with before without first drawing up an agreement and seeing a sample of the products, let alone pay the full contract price in advance.

81.  I do not find credible that D1 allowed Kingslay to prepare the proforma invoices.[65]  I find inherently improbable that anyone would allow a middleman to prepare invoices on their behalf, let alone a middleman they had never done business with before.  The evidence that D1 found Kingslay friendly and trusted him fully whereby he agreed to give Kingslay letterheads of the company so he could prepare the proforma invoices, beggars belief.

82.  I do not find credible D1’s evidence as to the signature of the proforma invoices.[66]  Not only are the dates of the invoices and the dates of the signatures, all dates when D1 was not in Hong Kong, the signatures purportedly of Kingslay are different.  In cross-examination D1 said he noticed Kingslay sign the invoices with two different signatures.  D1 said he did not find this strange because Kingslay said he used different signatures and D1 himself also used different signatures. Further, only one of the invoices was marked for the attention of “Kingsle”.[67]  In cross-examination D1 said he did not pay attention to this because he believed in Kingslay and that the invoices were not final.  I find D1’s evidence relating to the two invoices unbelievable. 

Video recorded interviews

83.  Further, the evidence Kingslay prepared the proforma invoices also differs from what D1 told the police when interviewed on video.  The defendant gave a total of five video interviews.  The first three interviews[68] were conducted following the arrest of D1 on 17 April (“the April interviews”).  I will refer to these interviews as VRI-1; VRI-2 and VRI-3.[69]  D1 was further interviewed on 18 July (“the July interviews”),[70] in respect of documents he had supplied to the police through his legal representatives.[71]  I will refer to these interviews as VRI-4 and VRI-5.[72] 

84.  D1 explained that because his mind was not working properly, he blamed everyone and did not tell the truth in the April interviews.  This was because he was accused of being a hacker and a thief in front of his daughter.  This injured D1’s feelings, caused him to lose his dignity and feel defamed.  As a result D1 did not call any lawyers even though he knew them.  D1 said his evidence in court was the truth and that he agreed with most parts of the July interviews. 

85.  At the beginning of VRI-1 the defendant confirmed he had received a notice to persons in custody which he said he understood.[73] When asked if he wished to be legally represented D1 replied no need now.[74]  D1 understood the caution administered to him.[75]  The interview lasted two hours and forty minutes.  VRI-2 commenced eleven minutes later when the video disc had been changed.  When asked if there was any problem continuing with the interview, D1 replied that it was okay to continue.  D1 was then reminded that he was still under caution.[76]  

86.  At the beginning of VRI-3 the defendant confirmed he had again received a notice to persons in custody, saying he understood everything in the notice and had signed to confirm.[77] When asked if he wished to be legally represented D1 again replied he did not need any legal representative now.[78]  D1 was again cautioned, which caution D1 understood.[79] 

87.  Whilst accepting a person would be under a degree of stress arising from being arrested and detained overnight, especially a person who had not been in trouble with the law before, I do not find credible D1’s explanation for not telling the police the truth in the April interviews.  D1 was fully explained his rights and said he did not need a lawyer.  If D1 felt he had lost his dignity and was defamed in front of his daughter, all the more reason to contact the lawyers he knew and to tell the police the truth, if he chose to tell them anything.  

88.  In the April interviews D1 did say he was contacted by a person called Kingslay, with whom he entered into an agreement to sell garments.  The particulars of the dealings as told to the police are, however, very different to the evidence given in court.  For example there was only one meeting with Kingslay which took place in the Holiday Inn hotel.[80] In cross-examination D1 said he remembered this incorrectly.

89.  D1 did not tell the police that Kingslay prepared the proforma invoices.  In summary what D1 told the police was that during the meeting in the Holiday Inn Kingslay wrote down on a piece of paper the products that he wanted.  D1 copied the details and afterwards prepared the proforma invoices, with the help of Yamazaki.  D1 then signed on the invoices. Two to three days after meeting in the Holiday Inn D1 arranged for his friend Suman Ale to take Kingslay to the office of Yamazaki so that Kingslay could see the samples.  Suman Ale took the invoices with him for Kingslay to sign.[81] In cross-examination D1 said that he made up Suman Ale and that what Suman Ale did, never happened. 

90.  Further, I note that in the April interviews D1 made no mention of D2.  D1 told the police that Suman Ale knew the owner of Yamazaki; that he contacted Yamazaki through Suman Ale and that he did not know anyone else in Yamazaki.[82]  The first reference to D2 is in the July interviews.   

Cancellation

91.  I do not find credible D1’s evidence that the contract was cancelled and the money refunded to Kingslay and Ali.  In cross-examination D1 said he did not ask Kingslay for written confirmation from the companies verifying the cancellation and that Kingslay was entitled to receive the refund.  I find inherently improbable that any business man would refund a middleman in cash, without any written authorisation to receive the money, let alone to a middleman who they had never done business with before and who suddenly cancelled the contract. 

92.  In cross-examination D1 said he did think about remitting the money direct to the companies.  D1 explained that Kingslay showed him a lot of other opportunities, saying he wanted the cash to invest in China.  The relationship with Kingslay being based on trust was very close and D1 not wanting to “lose” Kingslay gave the cash to him.  I do not find this explanation credible. 

93.  This explanation also differs from what D1 told the police in the April interviews, when no mention was made of the cancellation and refund to Kingslay.   In VRI-1 when asked whether the goods had been delivered, D1 replied that he did not know because he had lost contact with Kingslay but believed that Yamazaki were working on this.[83]  In VRI-2 when asked about the letters from the Standard Chartered Bank, found in his bag on arrest, requesting the agreement of Subba Limited to return the sums of US$59,938 and US$139,973,[84] D1 told the police that the contract was ongoing.  D1 also said the letters had been misplaced; that he had not seen them until the interview and that if he had read the letters the contract should have been terminated.[85] 

94.  I do not find credible D1’s evidence that he only read the letter informing him the account was to be closed [86] and that he had not opened the letters requesting return of the funds.[87]  The letters requesting return of the funds are dated 18 & 19 March whereas the letter advising the account was closed, is dated 9 April.   

95.  The first mention of cancellation is in the July interviews.  According to D1’s evidence the letter of cancellation was signed on the 11 April,[88] six days prior to his arrest.  I find unbelievable that if D1 returned almost all the money on 11 April that he would tell the police in the April interviews that the contract was ongoing. 

96.  I reject D1’s evidence and explanations in the video interviews as to how he dealt with the monies credited to his account.  I reject there was ever any person called Kingslay.  Mr Saeed confirmed that Sami Trading did not have a staff member called Kingsle.[89]Further, the copy of the passport purportedly given by Kingslay,[90]is of a person who was not in Hong Kong between 1 January 2010 and 1 April 2015.[91]  

97.  I reject that D1, on behalf of Subba Limited, entered into any agreement with a person called Kingslay for the sale and purchase of garments particularised in the proforma invoices, exhibit P19 (75-76) and entered into any agreement for the supply of garments with Yamazaki.  In this regard I have taken into account the various matters submitted by Mr Lee in his written submission, including the lack of details on the invoices and packing list and various discrepancies between the invoices.[92]

98.  Specifically, the dates of the two proforma invoices,[93] 25 & 27 February 2013, are dates when D1 was out of Hong Kong, as are 26 & 28 February, the handwritten dates the invoices were signed.[94]  For the reasons already given I do not find credible D1’s evidence about these invoices.[95]    

99.  The agreement between Yamazaki and Subba Limited[96] is said to have been made and issued on 25 February 2013, when D1 was out of Hong Kong.  I do not find credible D1’s evidence both he and D2 signed the agreement on 24 February. 

100.  The packing list states that the customer is Subba Limited.  In evidence D1 explained the name Subba Limited was used because he had not yet signed a contract with the buyer.  This explanation is different to that told by D1 in the video interviews.  In both VRI-2 and VRI-5 D1 said that the naming of Subba Limited as the customer in the Yamazaki proforma invoices and packing list was a mistake made by Yamazaki.[97] I do not find credible D1’s evidence and explanation given in the video recorded interviewsabout the packing list.

101.  I remind myself that the rejection of D1’s evidence is not determinative of the issues in the case.  D1 has to prove nothing.  A case in which defence evidence is called and is not believed is no different from one in which no evidence is called.  In either case the burden is on the prosecution to prove the defendant’s guilt beyond reasonable doubt.

Knowing or have reasonable grounds to believe

102.  Amongst the documents found in D1’s bag on arrest was an application form for the transfer of US$140,000 from Sami Trading to Subba Limited,[98]and a transaction confirmation purportedly issued by HSBC.[99]

103.  Save for the date, the particulars on the application form are identical to the application form submitted to HSBC by Mr Saeed.[100] The application form being a document submitted by Mr Saeed to HSBC, there is no reason whatsoever for D1 to be in possession of a copy of this application form. 

104.  In cross-examination D1 said he did not find strange that the application form was incomplete and unsigned.  I do not find this evidence credible.  I am satisfied so I am sure the only inference to draw is that this was the copy intercepted when Mr Saeed sent the application forms to Mr Waleed for his confirmation.[101]

105.  The transaction confirmation is dated the 6 March and purports to confirm that US$140,000 was transferred to Subba Limited.  The date is the same as the transaction confirmation received by Mr Waleed confirming that US$140,000 had been transferred to Hong Kong G.S. International Co Ltd.[102] No remittance having been made on that date to either Subba Limited or Hong Kong G.S. International Co Ltd, I find this document is also a forgery.

106.  I do not find credible D1’s evidence that Kingslay gave him these documents.  I find inherently improbable that such documents would be given to anyone who was not involved in the fraud. 

107.  I am satisfied so I am sure that the only inference to draw from D1’s possession of these documents is that D1 knew theUS$139,973 represented the proceeds of an indictable offence. 

108.  Having rejected that D1 entered into an agreement for the sale and purchase of garments with Kingslay and entered into an agreement with Yamazaki for the supply of garments to Subba Limited, I find that the agreement, proforma invoices, packing list, receipts and cancellation agreement were all fabricated to conceal the source of the money. I am satisfied so I am sure the only inference to draw is that the documents were fabricated because D1 knew the sums of US$139,973 and US$59,938 represented the proceeds of an indictable offence.

Reasonable grounds to believe

109.  Even if I am wrong and D1 did not know the two sums credited to the account of Subba Limited, represented the proceeds of an indictable offence, I go on to consider whether D1 had reasonable grounds to believe the monies, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence. 

110.  Subba Limited was incorporated on 21 September 2012 with D1 as the sole director and shareholder.[103] The registered office of Subba Limited was Suite 1202, 12/F, One Peking Tower, No. 1 Peking Road, which was the address of a secretarial service company named “Servcorp”.  Servcorp never received any bulky postage or goods on behalf of D1 or Subba Limited.[104] 

111.  On 3 December 2012 D1 opened the bank accounts on behalf of Subba Limited with the Standard Chartered Bank.  D1 was the sole authorised signatory of the bank accounts.[105]  US$59,938 was credited to the US dollar account of Subba Limited on 11 March, at which time the balance in the account was zero.  US$139,973 was credited to the US dollar account on 13 March.  By 14 March all the monies, save for $74.76, was either transferred to the HK dollar account or transferred to Yamazaki.[106] 

112.  US$12,912.96; US$47,000 and US$19,900 was transferred from the US dollar account to the HK dollar account on the 12, 13 & 14 March respectively, followed each day by cash withdrawals from the HK dollar account.[107] Save for the sum of HK$10,534.69, all the cash transferred was withdrawn.  Mr Lee has prepared a very helpful chart showing the fund flow of these monies between the various accounts.[108]

113.  Between January 2013 and the closing of the account in April 2013, save for the sum of US$700 deposited in January 2013, which sum was immediately withdrawn, the only deposits into the US dollar account were the remittances of US$59,938 and US$139,973.[109]  In the same period apart from the transfers from the US dollar account there were very few transactions in the HK dollar account.[110]  Prior to the transfers there had been no activity in the account for almost two months, with a balance of only $209.70 being maintained. 

114.  Having regard to all the circumstances, including:

(a) D1 was the sole director and shareholder of Subba Limited and the sole authorised signatory of the bank accounts;

(b) the receipt of US$59,938 and US$139,973 in the Subba Limited US dollar account on 11 & 13 March 2013 were, except for US$700, the only monies to be deposited into the account, which deposits having rejected D1’s evidence, remain unexplained;

(c) the subsequent transfer and withdrawal of the money in cash on 12, 13 & 14 March;[111]

(d) D1 was found on arrest to be in possession of an unsigned application form for the transfer of US$140,000 from Sami Trading to Subba Limited, and a forged transaction confirmation purportedly issued by HSBC;[112]

(e) D1 did not return the sums of US$59,938 and US$139,973 as requested in the letters from the Standard Chartered Bank;[113] and

(f) the documents purporting to show that D1, on behalf of Subba Limited, entered into agreements for the sale and purchase of garments with a person called Kingslay and entered into an agreement for the supply of garments with Yamazaki, were fabricated to conceal the source of the money;[114]

I am satisfied so I am sure the only inference to draw is that D1 had reasonable grounds to believe both the sums of US$59,938 and US$139,973, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence and that anyone looking at those grounds objectively would believe the monies represented the proceeds of an indictable offence.

115.  In reaching my verdict I have carefully considered everything said by Mr Tam both individually and collectively, including there was no reason for D1, who was earning a decent salary, to quit his job and set up a company just to engage in the alleged offences;[115] that if the documents were fabricated why were there so many discrepancies;[116] if the letter of cancellation was fake there was no reason to write a wrong passport number only to then cross out and amend the number;[117]that after his arrest D1 left Hong Kong and returned the same day;[118] and that carrying documents which would implicate him in the email fraud are not the actions of a guilty man.[119]  

116.  Nothing said by Mr Tam causes me to doubt the only inference to draw is that D1 knew or had reasonable grounds to believe the monies, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence. 

117.  I am satisfied so I am sure there are no material and significant discrepancies, improbabilities or omissions in the evidence, which cause me to doubt the findings I have made.  I am satisfied so I am sure the prosecution have proved all the elements of the charges beyond reasonable doubt, each charge being considered separately.  D1 is convicted of charges 1 & 2.

D2

118.  D2 having elected not to give evidence relies on the explanations given under caution in two video interviews.[120]

119.  D2 was arrested on 16 December 2013 and interviewed the following day.  In summary in the first video interview D2 said he was the sole director of Yamazaki, which he opened in 2011.[121]  There was only little business in 2012 and 2013 and the company made a loss of about one million.[122]  Yamazaki would buy readymade garments and electronic items from China, which would then be sold to other countries.[123]  D2 would work alone, out of a virtual office.[124]

120.  In 2012 a bank account was opened with the Bank of China for the trading business of Yamazaki.  D2 was the only one in control of the bank account.[125]  D2’s cousin Bomzan Prerna was a business partner, however she did not take part in the operation of Yamazaki, being described as a “sleeping partner”.[126]

Transfer of US$120,000 from Subba Limited to Yamazaki

121.  D2 did not know where the US$120,000 came from.[127]

122.  D1 and D2 were friends.  D2 knew D1 was also running a business.   In February 2013, during a discussion in a restaurant in Chungking Mansions, D1 said he had received an order for garments.  D1 said he would need around US$200,000 worth of garments, which D2 will have to supply immediately after D1 had transferred the money into D2’s account.  A verbal agreement was reached for Yamazaki to supply the garments with delivery to Subba Limited in Hong Kong one month after payment. The place of delivery had not however been finalized.  Afterwards D2 prepared the contract.[128] This was the first business dealing between D1 and D2.[129]

123.  D2 knew a lot of factories in China and was therefore able to reach a verbal agreement for a factory in Guangzhou to supply the garments.[130]  In the second video interview D2 said the name of the supplier was Mr Liu, who he had known for many years.  D2 did not however know the name of the company from whom Mr Liu obtained the garments.[131]

124.  D2 also issued the proforma invoices,[132]which he had prepared in his office.[133] In the second interview D2 explained condition 6, “shipping term is FOB Shenzhen China”, was a mistake and that the goods were to be delivered to D1 in Hong Kong.[134] 

125.  A packing list was also prepared.[135] A female part-time worker, who was paid on an hourly basis, prepared the packing list at her home in China.[136]  In the second interview D2 explained the packing list was given to D1 for his information and therefore the description of the garments was simple.  After receipt of the money an original invoice and packing list would be prepared.  D2 also explained the date for shipment 12/03/2013 was a typing error with the correct date for shipment in April.[137]    

126.  On 14 March, in addition to transferring US$120,000 to Yamazaki, D1 also gave D2 HK$418,014 cash, for which D2 issued a receipt.[138]

Cancellation

127.  One day after transferring the money D1 cancelled the order and asked for the money back immediately.  D1 said that his client had cancelled the order and requested a refund.  Not wishing to have a quarrel D2 felt it would be better to return the money to D1.[139] In the second interview D2 said that since people were making it difficult for D1 he decided to refund all the money and not exercise the 10% penalty clause in the invoices because this was law made by him and not the government.[140] 

128.  On 16 March 2013 D2 withdrew $464,790 and on 20 March 2013 withdrew $164,000 & $300,000,[141]to pay the company in China because most companies in China wanted to be paid cash.  D2 did not however pay the company in China because the order was cancelled by D1.  D2 refunded all the money to D1 on 16 and 22 March 2013, for which two receipts[142] were issued.[143] In the second interview D2 explained he did not refund D1 by bank transfer because D1 said he wanted the money immediately and a bank transfer would take time.  D2 did not think about depositing the cash into D1’s account because he was under pressure at that time from his supplier, who was demanding that he collect the goods.[144] 

Consideration of the evidence

129.  I have no hesitation in rejecting D2’s explanations in the video interviews that the monies were received pursuant to an agreement he had reached with D1 to supply garments.  I do not find this explanation credible, which explanation was not made on oath, has not been repeated on oath and has not been tested by cross-examination (see HKSAR v Wong Ka Wah).[145]

130.  I do not find credible that Yamazaki traded in readymade garments.  When D2 opened the Bank of China account in March 2012 he stated in the Account Opening Application Form that the business of Yamazaki was, “Electrical appliances, electrical & wiring equipment”.[146] At the end of the application D2 stated that all the information set out in the application form was true, correct and complete.[147]

131.  I do not find credible D2’s explanation in the first interview that he knew a lot of factories in China and was therefore able to reach a verbal agreement with a factory in Guangzhou.  When asked in the second interview for the name of the supplier D2 could only give the name Mr Liu and did not even know the name of his company.  Further, I find inherently improbable that there would only be a verbal agreement and no written agreement between D2 and his supplier giving details of the garments required including quantity, style and material.[148] 

132.  I do not find credible D2’s explanation that the lack of details in the proforma invoices and packing list was because the documents were supplied for information only and that after the money was received an original invoice and packing list would be prepared.[149]

133.  I do not find credible D2’s explanation that he returned all the money to D1 because he did not want to have a quarrel.  The explanation that D2 did not exercise the penalty clause in the proforma invoices because this condition was law made by him and not by the government, beggars belief.  If D2 was under pressure from his supplier to collect the goods all the more reason to exercise the penalty clause.[150]

134.  D2 also relies on the evidence of D1 in support that there was an agreement for the supply of garments between Subba Limited and Yamazaki.[151]  I have also considered whether D1 may have deceived D2.  For the reasons already given, I reject the evidence of D1.[152] I reject that D1 deceived D2.

135.  I remind myself that the rejection of D2’s explanations in the video recorded interviews is not determinative of the issues in the case.  The defendant has to prove nothing.  A case in which defence evidence is called and is not believed is no different from one in which no evidence is called.  In either case the burden is on the prosecution to prove the defendant’s guilt beyond reasonable doubt.

Knowing or have reasonable grounds to believe

136.  I am satisfied that there was no agreement for the supply of garments by Yamazaki to Subba Limited.  In this regard I have taken into account the various matters pointed out by Mr Lee in his written submission, including that there were two invoices for two orders yet only one packing list; the agreement is said to be made on the 25 February 2013, a date when D1 was not in Hong Kong; and that the invoices lack detail.[153]

137.  I find that the agreement; the proforma invoices; packing list and the receipts were all fabricated to conceal the source of the monies dealt with by D2.  I am satisfied so I am sure the only inference to draw is that the documents were fabricated because D2 knew that the transfer of US$120,000 and the payment of HK$418,014 cash represented the proceeds of an indictable offence. 

Reasonable grounds to believe

138.  Even if I am wrong and D2 did not know the monies represented the proceeds of an indictable offence, I go on to consider whether D2 had reasonable grounds to believe that the monies, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence. 

139.  Yamazaki was incorporated on 19 December 2011.  At the time of the transfer of US$120,000 D2 was the sole director and shareholder of Yamazaki.[154]  The registered office of Yamazaki was Unit B, 3/F, Chun Wah Commercial Building, No. 30 Minden Avenue, Tsim Sha Tsui, which was the address of a secretarial service company named “Hashmi Secretarial Services Limited”.  Hashmi provided corporate secretarial service to Yamazaki but never received any parcels, mail or goods for Yamazaki.[155] 

140.  On 19 March 2012 D2 opened the bank accounts on behalf of Yamazaki with the Bank of China.  D2 was an authorised signatory of the bank accounts.[156] On the 14 March 2013 Subba Limited transferred $120,000 to Yamazaki’s US dollar account.  Prior to the transfer the US dollar account had maintained a zero balance since 21 January 2013.[157] On the 16 March the money was transferred to the Yamazaki HK dollar account, which account had been inactive since July 2012 and had maintained a balance of only $17.80.  The HK dollar equivalent HK$929,580 credited to the account was, save for $790.00, withdrawn by D2 in cash on the 16 and 20 March, leaving a balance in the account of HK$907.08.[158]

141.  Having regard to all the circumstances, including:

(a) D2 was the sole director and shareholder of Yamazaki and an authorised signatory of the bank accounts;

(b) the receipt of $120,000 in the Yamazaki’s US dollar account on 14 March was the only deposit in the account for nearly two months, which deposit having rejected D2’s explanation in the video recorded interviews, remains unexplained;

(c) the subsequent transfer to the Hong Kong dollar account on 16 March, which account had been inactive for about nine months, followed by the withdrawal of the money in cash on 16 and 20 March;[159]

(d) the receipt of HK$418,014 cash from D1 was a substantial sum of money which payment, having rejected D2’s explanation in the video recorded interviews, remains unexplained; and

(e) that the documents purporting to show a genuine agreement for the supply of garments by Yamazaki to Subba Limited, were fabricated to conceal the source of the money;[160]

I am satisfied so I am sure, the only inference to draw is that D2 had reasonable grounds to believe that both sums in whole or in part, directly or indirectly, represented the proceeds of an indictable offence and that anyone looking at those grounds objectively would believe the monies represented proceeds of an indictable offence.

142.  In reaching my findings I have carefully considered everything said by Mr Mughal, both individually and collectively, including that if D1 and D2 were acting in concert they would not make such a glaring discrepancy as dating the agreement on a day when D1 was not in Hong Kong;[161]and that there is no evidence D1 knew the source of the funds was from an email fraud.[162] Nothing said by Mr Mughal causes me to doubt the only inference to draw is that D2 knew or had reasonable grounds to believe the monies, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence. 

143.  I am satisfied so I am sure there are no material and significant discrepancies, improbabilities or omissions in the evidence, which cause me to doubt the findings I have made.  I am satisfied so I am sure the prosecution have proved all the elements of the charges beyond reasonable doubt, each charge being considered separately.  D2 is convicted of charges 3 & 4.