HKSAR v. XIE JING FENG

DCCC 714/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 714 OF 2012

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REASONS FOR SENTENCE

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1.  The defendant pleads guilty to one charge 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, Chapter 455.

2.  Between June 2005 and April 2009 the defendant, who was born in the Mainland and acquired citizenship in Canada in 2002, used nine bank accounts opened in Hong Kong to launder up to HK$71,134,783.68 and US$3,082,895.70.  Neither the defendant nor his wife held Hong Kong identity cards or had the right of residence in Hong Kong. 

3.  In summary the defendant used two bank accounts opened in his name with Hang Seng Bank and HSBC; two accounts with HSBC opened in the name of his wife; two accounts each with Standard Chartered Bank and Wing Hang Bank opened in the name of Civil Finance Limited; and one account with HSBC opened in the name of Power Source Limited.  The defendant was a director and shareholder of both Civil Finance and Power Source. 

4.  The movement of funds deposited and withdrawn from the nine bank accounts and transferred between the accounts are detailed in the facts admitted by the defendant and summarised in the table annexed to the facts.  To be noted is the total amounts of HK$71,134,783.68 and US$3,082,895.70 exclude transfers between the nine accounts. Also to be noted is that substantial dealings were in cash; substantial sums were transferred between the nine accounts and some remittances were made to the USA and to and from Canada; China; Macau and Singapore.

5.  Money laundering is a serious offence for which deterrent sentences are required (see HKSAR v Xu Xia Li & another [2004] 4 HKC 16 at paragraph 18).  In HKSAR v Javid KamranCACC 400/2004 the court, stressing the need for deterrent sentences, said that it was not possible to lay down guidelines, as there is a very wide range of culpability.

6.  A number of significant factors have been identified as relevant in determining the culpability of a defendant, including the nature of the offence that generated the laundered money and the extent to which the offence assisted the crime or hindered its detection; whether the defendant had knowledge of that underlying offence or has turned a blind eye to the source of the money; whether there was an international element to the commission of the offence; the degree of sophistication of the offence and the level of the defendant's participation, including the length of time the offence lasted and the benefit he derived from the offence; and the amount of money involved (see for example Secretary for Justice v Jerome Yuval Arnold Herzberg [2010] 1 HKLRD 502; HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545; and HKSAR v A male known as Boma Amaso [2012] 2 HKLRD 33).

7.  The prosecution have placed no evidence before the court as to the underlying offence. However whether or not the defendant knew the source of the money the courts have emphasised that a defendant is to be sentenced on the facts of the money laundering charge and not on the facts of the underlying offence(see for example HKSAR v Chen Szu Ming CACC 270/2005 and HKSAR v Yam Kong Lai[2008] 5 HKLRD 384). 

8.  In passing sentence I take into account everything said on behalf of the defendant by Mr Hemmings.  I take into account the defendant had no previous convictions although this carries little weight considering the long period of time over which the offence was committed.   

International element

9.  Reference to cases by comparison of the amounts involved is generally not very helpful as the facts of each case vary so much.  Two cases HKSAR v Chen Zhen Chu CACC 433/2006 and HKSAR v Yuan Gui Ying CACC 427/2011, where similar amounts to the present case are involved, have been referred to in mitigation.  Mr Hemmings seeks to distinguish both cases on the basis that the present case does not have a significant international element and therefore a substantially lower sentence is appropriate.  As in the present case both are cases where there was no evidence of the nature of the underlying offence. 

10.  In Chen Zhen Chu over a period of 13 months over 1,500 remittances of up to HK$73 million in the names of 600 odd individuals from two banks in Australia were deposited into 23 accounts opened specifically for the purpose of receiving the remittances.  The monies were then withdrawn and carried by the applicant in cash to the Mainland.  Taking into account the large amount of money; the international element; the carefully planned and well-structured scheme and the opening of a large number of bank accounts the Court of Appeal said a starting point of 7 years and 6 months imprisonment was adequate. 

11.  In Yuan Gui Ying (a case referred by the court to Mr Hemmings) the applicant, a citizen of Canada who had emigrated from Mainland China, used Hong Kong to launder substantial sums of money.  Over a period of up to 10 years the applicant used 18 bank accounts, six of which were in her own name; two in joint names with her daughter and the others in the names of other family members.  Neither the applicant nor her family members had at any material time lived in Hong Kong.  During that period the equivalent of HK$104,606,390 was held in the accounts, which sum embraced transfers between the accounts and therefore if treated as one account the sum was slightly under $63 million. Most of the money was deposited and withdrawn by the applicant in cash.  There were also frequent interbank transfers throughout the period, often by cashier order.  Some of the money was sent to Canada to accounts in the name of the applicant and her husband.

12.  In dismissing the appeal the court said that even with a reduced figure of about $58 million injected into 17 separate bank accounts over a period of six years that a starting point of 7 years imprisonment was not manifestly excessive. 

13.  In seeking to distinguish the cases Mr Hemmings explains that the defendant was much of the time in fact living in Hong Kong and Macau, where his children were being educated.  The defendant had property in both Hong Kong and Macau and set up Civil Finance in Hong Kong and Power Source in Macau, the bank account of which was maintained in Hong Kong.  I am told Civil Finance was a genuine company run on behalf of the defendant by Mr Chan Kar Wah and which at the time employed 8 staff, although I note no tax returns have ever been filed by the defendant or by Civil Finance and Power Source. 

14.  Whilst the immigration records and the passports seen by the court clearly show the defendant frequently visited Hong Kong at all times the defendant entered Hong Kong as a visitor.  Although the defendant may well at times have ‘lived’ in Hong Kong and Macau and with the assistance of Mr Chan ran a business in Hong Kong, the fact remains the defendant was not a Hong Kong resident and had no family roots in Hong Kong.  In this regard I note the defendant last departed Hong Kong on the 19 November 2008, a few days before the search of the officeand residence of the defendant, which was described as two rooms in a Hong Kong Hotel. 

15.  The defendant used Hong Kong bank accounts to launder money and as noted earlier some remittances were made to the USA and to and from Canada; China; Macau and Singapore.  Mr Hemmings submits that some of these remittances are explained by the fact that the defendant had family in Canada, business dealings in China and family and business in Macau. 

16.  I am satisfied that the using of bank accounts opened in Hong Kong for laundering money by a person who is not a Hong Kong citizen, even if at the same time that person is with the assistance of others running a legitimate business in Hong Kong, adds an international dimension to the case.   

17.  I do however accept the submission made by Mr Hemming that Chen Zhen Chu is more serious than the present case in that an elaborate scheme was devised to avoid reporting the remittances in accordance with Australian regulations and that the bank accounts in Hong Kong were set up purely for laundering the money.  To be noted however is that the court did express the view that the seriousness and prevalence of money laundering offences are such that it may be necessary for the courts in future to take a more robust view (see paragraph 64 of the judgment).

The amount of money laundered

18.  The amount dealt with in this case is substantial, the equivalent of about HK$95 million.  The particulars of the charge include “…having reasonable grounds to believe that the said property in whole or in part, directly or indirectly represented the proceeds of an indictable offence”. Mr Hemming says that the defendant does not accept that there were reasonable grounds to believe all the monies represented the proceeds of an indictable offence and that had the defendant gone to trial and given evidence he would have been able to account for up to half of the monies which went through the bank accounts. 

19.  Mr Hemmings explains the defendant accepting that there are reasonable grounds to believe in respect of that part he cannot explain pleads guilty to the charge in order that he can receive credit for pleading guilty.  The defendant does not wish to give evidence to account for part of the monies because in view of the substantial sums involved this would make no difference to sentence.

20.  In my view a court can proceed to sentence the defendant on the whole amount unless there is evidence before the court either in the admitted facts or from the defence to show that the proper basis for sentence is part and not the whole of the monies

21.  Mr Hemmings has referred to the content of the Treasury Accountant’s report.  The Treasury Accountant says that far more money flows through the subject accounts than could be explained by the business.  Excluding interbank transfers, investments, MF accounts, sales of properties, loans, return cheques and error corrections the Treasury Accountant said a total of more than $85 million was received by the subject accounts between August 2004 and November 2008. 

22.  In the absence of any other evidence I am satisfied the defendant should be sentenced on the sum of $85 million. 

Sentence

23.  Taking into account the amount involved being the equivalent of about HK$85 million; nine bank accounts were used by the defendant over a period of almost four years; the international dimension of the case and that the defendant had a clear record at the time, I am satisfied the proper starting point after trial is one of 6 years and 6 monthsimprisonment.  Giving the defendant full credit for his plea of guilty reduces the sentence to 4 years and 4 months imprisonment. 

Possession of a forged travel document

24.  The defendant was arrested in November 2011 for possession of a forged passport for which he was sentenced to 8 months imprisonment.  The defendant was arrested for the present offence upon his release from prison having served that sentence.  Mr Hemmings submits considering the investigation had started in 2008 the defendant could have been charged earlier whilst serving that sentence.  In those circumstances the court would have been required to consider whether to make the sentences consecutive or concurrent or partly consecutive and partly concurrent.  Mr Hemmings submits half the sentence of 8 months would have been made concurrent and therefore asks that I reduce the sentence to be imposed today by 4 months.

25.  In making this submission Mr Hemmings very fairly does not seek to blame the prosecution or submit there has been undue delay in bringing the defendant to court.  Clearly as informed by Mr Parry once the defendant had been arrested time was needed to interview him; complete the investigation and seek legal advice. 

26.  The passport offence is entirely separate and distinct both in time and nature and has no connection whatsoever with the money laundering charge.  Whether or not the defendant could have been brought to court earlier I am satisfied if he had been wholly consecutive sentences would have been imposed making a total sentence of 5 years imprisonment.  I am satisfied a total sentence of 5 years imprisonment properly reflects the defendant’s criminality on these two charges.

27.  Accordingly I find no grounds to further reduce the sentence.  The defendant is convicted and sentenced on the money laundering charge to 4 years and 4 months imprisonment.