HKSAR v. MOULAY DRISS EL ABBASSI

DCCC567/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 567 OF 2012

----------------------

---------------------

Reasons for Verdict

---------------------

1.  The defendant has pleaded not guilty to one count of dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organised and Serious Crimes Ordinance, Cap.455.

2.  Particulars are as follows.

3.  The defendant, between the 11th and 13 January 2012, in Hong Kong, knowing or having reasonable grounds to believe that property, namely a total sum of €2,645,981.78 in an HSBC account in the name of Five Seasons Trading Limited, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence dealt with the said property.

The Prosecution Case

4.  The defendant is a French national whose only connection to Hong Kong is a trading company set up in Hong Kong, Five Seasons Trading Limited (herein referred to as Five Seasons), to which he is the sole owner and director.  The company has an HSBC account in its name to which the defendant is the sole signatory.  The prosecution shows how over €2.645 million was transferred into Five Seasons account between the 11th and 13 January and almost simultaneously transferred out.  The money, proceeds of an indictable offence, came from Altimate Belgium SPRL, a European company.  Movement of money and its origins are not challenged.  Altimate distributes value-added enterprise information technology solutions and operates in eight European countries. 

5.  The chief executive officer, the CEO, is Mr Patrice Theodore Arzillier, PW1 in this case.  On 17 January 2012, PW1 became aware of seven transfers from the company bank accounts totalling €6,044,000. They were arranged by the financial controller on the purported instructions of Mr Arzillier.  She received e-mails with documents attached in PDF files purportedly signed by PW1, Mr Arzillier.  PW1 gave evidence that the signature was not his nor did the instructions come from him.  PW1 made a police report in Belgium on 18 January 2012.

6.  Of the seven transfers, three, between 11 and 13 January, totalling just over €2.645 million, were remitted from Altimate’s account to the HSBC account of Five Seasons in Hong Kong.  The other four transfers were to separate accounts in China or in Hong Kong. 

7.  The bank, BNP Paribas Fortis, ultimately accepted responsibility and refunded the full amount to Altimate.  They had arranged the seven transfers contrary to their mandated instructions from Altimate.  According to the mandate, a transfer of up to €750 could be made by one signature.  For amounts up to €100,000, two signatures were required, and for any amount above €100,000, double electronic signatures were required. These were safeguards to prevent theft or fraud.  The bank did these seven transfers on the back of one signature only.

8.  Immediately prior to the three transfers into the Five Seasons’ HSBC account in Hong Kong the balance of the company’s Foreign Currency Savings account and Hong Kong Dollar Savings account was €2,064.04 and HK$3,452.66 respectively.  Following the three transfers into this HSBC account the moneys were dissipated by way of cash withdrawals or transfers to different bank accounts almost immediately.  They include three telegraphic transfers to different bank accounts in China totalling €1,853,099.68. The defendant also withdrew cash on two occasions totalling €58,000 in person. He also transferred €8,000 to a personal account in Latvia.  In addition, he withdrew a total of HK$25,158.47 in the Philippines via ATM machines. 

9.  A fund flow analysis is attached to Exhibit P36, the admitted facts, and is a record of remittances and withdrawals in this HSBC account between 1 January and 13 January 2012.  All moneys remitted were withdrawn or transferred between the material dates.

10.  An Immigration Department Movement Record pertaining to the defendant between 6 January and 27 March 2012 is also attached to Exhibit P36.  It is also Exhibit P32.  The defendant was arrested on 28 March 2012 at 23.35 pm as he was leaving Hong Kong. 

11.  He made a voluntary video record of interview on 29 March and the disc was exhibited as P35, the transcript 33A, and the certified translation as 34A.  Documents referred to in the course of that interview were produced as Exhibit P28.  In that interview he explained how he came to deal with the moneys transferred from Altimate.

12.  None of the facts I have referred to above are challenged.

13.  PW1 came to Hong Kong to give evidence.  His evidence was essentially not challenged.  He explained how his financial controller received instructions to deal with money she believed came from him.  The bank followed those instructions despite the direct contradiction to mandate terms.  He said his financial controller was duped.  I do not intend to repeat his evidence; there is no need for the purposes of this offence.  There is no challenge his company was the victim of a fraud.  There is no challenge the moneys transferred out were the proceeds of an indictable offence.

14.  Defence cross-examination attempted to illustrate the bank and the financial controller were acting in the belief the transfers were legitimate, as well as suggesting it may be possible the financial controller was in on the scam.  PW1 was of the view that she was innocent.  He was shown Exhibits P1A to 7A and confirmed these instructions to the bank were purportedly signed by him but in fact were not. 

15.  PW1 had never heard of Five Seasons nor did the company do any business in Hong Kong or China.  He was shown Exhibits D1 to D3, three invoices addressed to Altimate from a Sun Yang IT Trading Company Limited for the exact amount of the three sums transferred into Five Seasons HSBC account.  He opined they were fake or false invoices.  Altimate did not have any contract with that company.  Altimate only dealt directly with manufacturers such as IBM, Hewlett Packard or Oracle for example.

16.  PW2, Mr Lai, owned his own firm in Hong Kong and set up the Five Seasons Company for the defendant in 2009.  He is the company secretary and his office address is the registered address of Five Seasons. PW2 is an accountant.  The defendant had sent PW2 documents to open this company and set up a company bank account.  PW2 passed documents to HSBC for the purposes of setting up an account. 

17.  PW2 did not meet the defendant during this process. He first met the defendant on 12 January 2012 when the defendant walked into his office.  His evidence was the defendant spoke English to him and did not have a translator accompany him.  In any event, they just exchanged a few words.  PW2’s staff dealt directly with the defendant.  He did recall the defendant wanting to set up another company in Hong Kong.  PW2 had no recollection of the defendant coming to his office again in February 2012.

18.  PW3, a Miss Leung, was a senior compliance officer of BNP Paribas Hong Kong, who did not give any relevant evidence.  Her bank did report the fraud to the Hong Kong Police.  Whatever happened in Belgium was not within her knowledge.

19.  As a result of the defence showing Exhibits D1 to 3 to PW1, the police checked its details and found the address of this Sun Yang IT Trading Company Limited invoice was actually the address of a hotel. The telephone number of those invoices belonged to a shop called Omega, not a trading company.  PW4 gave evidence of these findings and it was not challenged.

20.  Although four prosecution witnesses were called, in the main the prosecution’s evidence was not challenged.  Witnesses’ evidence was not challenged.

21.  In summary, Altimate was the victim of a scam or a fraud.  Over €6 million was transferred out of its company account.  Just over one-third of this amount in three separate remittances were directed into an account in Hong Kong controlled by the defendant only.  He then dealt with that money swiftly.  He withdrew or transferred it onwards.  All bar one transaction was done by the defendant in person who flew into Hong Kong specifically to deal with these transfers.  He did deal with one telegraphic transfer via the Internet Banking Service whilst he was out of Hong Kong in the Philippines.

The Defendant Elected to Give Evidence

22.  By way of background he explained that he had left school at 16 years old and worked to save enough money to travel to Paris.  There he worked in a McDonald’s but soon found himself with nowhere to live.  He found a bed at a shelter for young workers and has lived there ever since. Exhibit D5 is a statement confirming he has lived there since March 2002 and still resides there.  Exhibit D4 is a document proving he has no criminal record in France.  He has no criminal record in Hong Kong either.

23.  He started a business in 2009 in Paris, a garment shop, manned by two staff, which closed in July this year. 

24.  He also set up a company in Hong Kong to facilitate trade with a supplier in China dealing with car radio, GPS devices and accessories for vehicles.  He met a supplier, a Mr Yang, from Wenzhou, on-line.  For 2½ years he placed orders with this one supplier only.  He sold items to clients in Europe.  He opened a company in Hong Kong because of its low tax or non-existent tax system.  He engaged PW2’s company’s service to assist him to set up a limited company in 2009. 

25.  This supplier, Mr Yang, and the defendant only communicated by or through a “QQ” chat room in the Internet forum or by e-mail.  They had never met face-to-face.  In fact, the defendant’s first visit to Hong Kong was in January 2012.  Other than a name, no further details of this Mr Yang were produced or divulged.

26.  At the end of 2011, this mail order business was not doing well and the defendant told Mr Yang he was going to close this company, that business and his bank account.  Mr Yang told him not to close the bank account or that company yet. 

27.  Not long after this Mr Yang offered the defendant work.  He needed a service company in Hong Kong to facilitate payment, transfers between clients in the USA or Europe, and suppliers in China.  He said transfers between these countries were slow and time-consuming, meaning the banks were exercising due diligence and caution, taking time to complete transactions.

28.  The defendant and Mr Yang would be partners in this business and they would charge a fee of 2 per cent of each transfer.  The defendant was to use his Hong Kong company and HSBC account to receive money and then despatch it to suppliers in China. 

29.  However, the defendant required capital to set up in Hong Kong or close to Hong Kong and money to open a company for this partnership so Mr Yang suggested that at first, without specifying for how many transactions, the defendant could take the 2 per cent all for himself for those expenses. 

30.  The defendant agreed to try this business venture but asked for a French supplier for the first business transaction so he could communicate with the personnel in French.  Mr Yang took his contact telephone number to pass to a client in France, a French client.  Two days later a male from Altimate called the defendant and said Mr Arzillier, the same name as PW1, asked him to call the defendant.  He was to give the defendant some information.  He also said that sending moneys through the defendant’s company would save days and put an end to the penalties Altimate was paying. 

31.  A few days later the defendant realised that this male had not told him the amount to be transferred.  He telephoned back the number displayed on his phone and a female answered, “Altimate Bonjour”, but the defendant did not ask for the male, Jerome or Guillaume, and instead hung up.  He hung up after deciding to ask Mr Yang the amount of transfer instead of the contact person at this French company.

32.  The defendant also asked Mr Yang for documentation and invoices of each transfer to be done.  He wanted proof and always worked with invoices.

33.  After Christmas 2011, Mr Yang sent the defendant an e‑mail and said the first transfer would be the week of 9 January 2012.

34.  The defendant arrived in Hong Kong for the first time on 6 January at 11.12 am and left at midnight to the Philippines.  The Immigration Department records, P32, shows clearly his trips in and out of Hong Kong.

35.  On 10 January, Mr Yang sent the defendant an e-mail telling him the first telegraphic transfer had been made to his account.

36.  He then dealt with this €733,993.92 by remitting €9,500 to a person in China to repay a €10,000 loan he had borrowed in France in order to leave France.  He then remitted €8,000 to his account in Latvia.  €715,308 was then remitted to an account in China.  There was also a remittance of €3,000 to his savings account.  All these transactions were done from the Philippines.

37.  The defendant calculated his 2 per cent, saying it comprised of €9,500 plus €8,000 plus €3,000, which totalled €20,500.  That in fact represents approximately 2.7 per cent, there being an extra €4,000.  He explained that he was entitled to the extra money as an agreed cost between Mr Yang and the manufacturers to set up a company to start this business.  He received an invoice from Mr Yang, D1, via the QQ chat room.

38.  The other two almost identical invoices representing the second and third transfer from Altimate, Exhibits D2 and D3, came on the 12th and 13 January.

39.  Since the first transaction went well the defendant and Mr Yang agreed to continue this partnership.

40.  On 12 January he received €931,993.90 and on 13 January he received €979,993.96, from which he remitted €1,853,099.68 to different bank accounts in China.  From this amount he also withdrew €58,000 in person in HSBC branches in Hong Kong and a total of HK$25,258.47 was withdrawn in the Philippines by way of ATM withdrawals.

41.  Where the second transfer is concerned, a 2 per cent fee ought to be €18,639.87 but he seems to have taken almost 4 per cent. 

42.  He explained he asked Mr Yang for a €20,000 loan and Mr Yang agreed.  Mr Yang agreed it could come from this money from Altimate.

43.  Where the third transfer is concerned, a fee of 2 per cent ought to be €19,599.87 but he seems to have taken more, €20,500. The defendant said he took an extra €900 but did not elaborate on why he was entitled to this.

44.  Mr Yang had given the defendant details of the bank accounts to which he had to remit the moneys received.

45.  He left Hong Kong on 13 January 2012 to the Philippines.  He came back on 17 January but no moneys were received despite Mr Yang’s instructions. Between 17 and 21 January it seemed his account was frozen and he made many inquiries with HSBC at three different branches.  He was not given a definitive answer.  He left Hong Kong for the Philippines again.  He continued to call HSBC from the Philippines to make inquiries about his account.

46.  He came back to Hong Kong for one day on 10 February 2012 to open a bank account for another company he set up but failed. He came in on 28 February 2012, again for one day, and this time succeeded.

47.  He returned again for one day on 6 March 2012 and asked at the Airport branch of HSBC about his account.  He was told his account was affected by administrative reasons.

48.  On 27 March, whilst he was in Hong Kong, he was arrested at the airport for this case.  He gave evidence he had no idea the money was stolen or anything but legitimate.  He thought he had been arrested for some crime he had committed in Belgium.

49.  Whilst he was remanded in Hong Kong his friend in the Philippines flew to France to help the defendant get documents to support his defence and obtained Exhibits D1, 2 and 3.  He could not access the defendant’s e-mail account nor the contents of his QQ chat room.  He could not prove his relationship with Mr Yang with any documentary evidence except for Exhibits D1 to D3.

50.  The defendant did give a voluntary video record of interview and denied knowledge of any money laundering activity.  When questions began after the preamble, the defendant told the police he had a company called PLPM set up for the purpose of transferring money for others, others who want to tax exempt their money.  This is at counter 315D of Exhibit P34A.  He gave similar evidence or version of events in his interview as he did in his oral evidence but in much less detail.  He explained that this was because he was shocked and confused at that time.

51.  In this interview he admits he did not know the origin of the money transferred into his account.  He explained he was told the money was transferred faster when it was France to China via Hong Kong as opposed to directly from France to China.  He believed that the transfers were legitimate.  He was asked to show the police the 2 per cent of the money that was to be his fee.  He at counter 1293 of Exhibit P34A agrees he took 4 per cent of the second transfer but does not explain why.  He says at counter 1270 of P34A that the 2 per cent of the first transfer would have been about €16,000 but he does not say why he took €20,500.  In fact, this question caused great confusion to the defendant and when asked why he did not explain the moneys he took for himself to the police during that interview he said he preferred not to go into detail as he was scared of getting it wrong.

52.  I have not repeated all the details of the defendant’s evidence nor the prosecution’ evidence but I have taken it all into account.  If it is not specifically referred to here, it does not mean I have not considered it in coming to my findings.  It is not practical in the course of these reasons for my verdict for me to cover all aspects of events covered by the evidence without repeating it all.

The Law

53.  The prosecution has the burden of proof to prove all the elements of this offence beyond reasonable doubt.  The defendant has no burden of proof.

54.  The prosecution must prove that the defendant dealt with the proceeds of an indictable offence and at the time of doing so either he knew or he had reasonable grounds to believe that the property, in whole or in part, directly or indirectly, represented a person’s proceeds of an indictable offence.

55.  Dealing is defined in the ordinance, Cap.455, but I do not need to expand on this as the defence do not challenge the fact the defendant was dealing with the proceeds of an indictable offence.  There is no dispute the defendant’s transfers out of his account to himself and various other accounts constitutes dealing with the property.

56.  There is no challenge to the assertion the moneys amount to proceeds of an indictable offence.

57.  If satisfied the defendant dealt with the respective moneys, and I am, then I must then consider whether he knew or had reasonable ground to believe in the nature of these moneys.

58.  Is there evidence to prove beyond reasonable doubt he had knowledge the moneys were proceeds of an indictable offence?  “To know” is given its ordinary, common sense meaning.  And if there is not, the prosecution must prove the defendant had “reasonable grounds to believe” and prove beyond reasonable doubt that, firstly, a common sense right-thinking member of the community would on the evidence believe that the property was the proceeds of an indictable offence, an objective test, and secondly, there must be proof that the evidence was known to the defendant and he was aware of the existence of such evidence, the subjective test.

59.  To put it another way, the question to be addressed is whether the court is satisfied beyond reasonable doubt that the defendant knew of sufficient grounds which if they were known by any common sense right-thinking member of the community would lead that person to believe that the property was the proceeds of an indictable offence.

60.  I will add, reasonable grounds for suspicion are not enough.

My Findings

61.  The defendant is a man of clear record in Hong Kong and in France.  His clear record in his home country and here in Hong Kong is relevant and I bear in mind the likelihood and propensity of such a man committing this offence.  However, he has only ever been in Hong Kong a total of about a week so it is not surprising he has a clear record here.

62.  Defence counsel submitted written final submissions.  He stresses that although he hints Altimate and its staff have aroused his suspicion he does not challenge the property, the moneys represented proceeds of crime.  He casts suspicion on Altimate and a takeover bid proceeding at about the same time and suggests it is relevant.  He expresses wonder at the Financial Controller arranging seven transfers without checking their legitimacy.  He wonders at the bank’s blatant disregard to the mandate of Altimate.  He poses the question, if Altimate and the bank thought or were conned into thinking these seven transfers were legitimate, why should the defendant doubt this?  Why should the defendant not hold the same belief?

63.  Defence counsel stresses the defendant came back to Hong Kong after these three transfers.  He was in contact with PW2’s firm to set up other companies.  He asked the HSBC bank on numerous occasions why his account was frozen or inoperable.  He physically came to Hong Kong to do most of the transfers when he could have done it from the safety of another country via Internet banking.

64.  It was submitted his actions do not fit the profile of a guilty man.  His actions are those of an innocent man, perhaps an innocent victim as well.

65.  Defence counsel submits his record of interview and obvious ignorance of the reason behind his arrest supports his evidence that he had no knowledge or reason to believe the money was dirty money being laundered through his account.

66.  Obviously his actions are relevant and must be taken into consideration.  I am not persuaded by the submission that returning to Hong Kong after the event or making inquiries with HSBC is in itself evidence of innocence.  His actions must be viewed together with all the evidence as a whole.  He may have seemed surprised by his arrest during the course of his record of interview but his lack of clarity when asked a pointed question by the police to demonstrate his 2 per cent fee from the bank records suggests otherwise.

67.  The defendant did give evidence and the question is, is his evidence credible, and do I accept he genuinely believed these transactions and transfers were legitimate?

68.  His credibility is an issue.

69.  From the direct evidence three very large sums of money were transferred into the defendant’s company account in Hong Kong, a fairly inactive and dormant account with little by way of deposits just prior to these transfers.  The defendant until four days before the first transfer had never been to Hong Kong.  He has no connection or nexus to Hong Kong, nor Altimate.

70.  He is told to receive these moneys for a fee of 2 per cent in return for him remitting the money out immediately according to instructions.  These instructions come from a man he has never met, a man who has no means to locate the defendant except by e-mail or a chat site and yet trusts him to handle over €2.6 million without any security measures in place.

71.  The defendant believed the reason behind this set up was genuine and made business sense.  Companies who owed money to clients in China wanting a faster conduit to pay moneys owed, therefore sent it indirectly via Hong Kong.

72.  I have considered the evidence of the defendant’s record of interview when he was arrested and his evidence in the witness box some 8 months later.

73.  Eight months later he is able to articulate and explain why he had received more than the 2 per cent alleged fee from the total amount of money received.  My view is that he has composed answers to fit.

74.  When asked why he received 2 per cent when Mr Yang received nothing according to the terms of this business, he said in the witness box it was just for the first transactions to give him some capital to set up in or near Hong Kong.  He had no idea what his fee would be after that. He did not tell the police this.

75.  When asked why after each transfer what he took for his fee exceeded 2 per cent each time he had an answer for the excess - a loan from a friend in France to be repaid to an account in China, almost in full, €9,500 of a €10,000 loan, the €500 balance was to be paid in France; a loan of €20,000 from Mr Yang to be taken from the money received; a €4,000 agreed start-up fee; an extra €900 for his own use.  All this adds up to 2 per cent plus extra loans and expenses.  He did not tell the police any of this when asked to point out the 2 per cent in the statement of accounts.

76.  The evidence of a male called Jerome or someone with a similar name calling on behalf of PW1 from Altimate is meant to demonstrate the defendant was also duped into believing the transfer was from Altimate and legitimate.  He then said he called the number displayed and hung up on the receptionist of Altimate.  Again that is an attempt to demonstrate the caller was genuinely from Altimate.

77.  I am not convinced by the defendant’s attempts to show he believed the transactions were genuine and made business sense to him.

78.  Despite final submissions by defence counsel and having considered the facts, the money movements, the defendant’s Immigration movements, the evidence of the defendant and evidence such as the fake invoices produced, I am sure the defendant turned a blind eye to the fact that he was dealing with dirty money.

79.  There is not sufficient evidence to convince me the defendant knew he was money laundering, but having regard to the evidence as a whole, much if not all unchallenged, I am sure the common sense right-thinking member of the community would believe the property was the proceeds of an indictable offence.

80.  I asked myself: If Mr Yang existed why would he entrust €2.6 million to the defendant, a man whose business he knew had failed?  A man he knew lived in France and had no connection to Hong Kong?  A man he had never met who could easily disappear with the large sums of moneys that appeared in an account only he controlled?  That is not plausible.

81.  If Mr Yang did exist and he explained the reason for the transfer via Hong Kong and the defendant’s account was because the banks were taking too long to transfer from Europe to China due to bank checks, that in itself should have rang alarm bells and made the defendant suspicious. After all he does mention setting up an account for others to transfer moneys into for tax exemption.  That sounds like tax evasion.

82.  And if Mr Yang did exist and offered the defendant 2 per cent of the moneys received or even 1 per cent for the use of his account and the onward remittance of the balance, that generous benefit should also have raised suspicion.

83.  Therefore I find, the direct evidence which is proved, would alone lead a common sense right-thinking member of the community to believe the proceeds were from an indictable offence.  The sums are vast, transferred into an account where the defendant has no connection with Altimate.  The sums are immediately transferred out within a day.  There is no time to freeze or stop the movement of moneys.  There is no legitimacy in these transactions or genuine business connection on the face of it.  There is so much more than reasonable grounds. 

84.  The objective test succeeds as far as the prosecution is concerned and they have satisfied me beyond reasonable doubt.

85.  I turn to the subjective test.  As I have said, I find after considering the defendant’s evidence the same grounds and evidence were known to the defendant.  Moreover, I find he tried to manipulate his evidence to fit the anomalies present.  He has attempted to show he was duped as well but I find his evidence not credible or reliable.  It is fabricated in a desperate attempt to show he is a victim.  I find he at least turned a blind eye to the obvious and I rejected his evidence.

86.  I am sure the prosecution can also prove beyond reasonable doubt the defendant himself knew all the facts and there is sufficient grounds to lead the defendant to believe the moneys he dealt with were the proceeds of an indictable offence.

87.  The prosecution can prove all the elements of the offence beyond reasonable doubt.

88.  Accordingly, despite his clear record in France and in Hong Kong, I convict the defendant of the sole charge he faces.